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Venezuela said on Thursday it would take over the country’s leading private bank, Banesco, for 90 days and announced the arrest of 11 top executives for “attacks” against the country’s rapidly depreciating bolivar currency.

The detentions came on the heels of last month’s shock arrests of two Venezuelan executives working in the country for U.S. oil company Chevron Corp.

Oil-rich Venezuela is suffering from hyperinflation and a steady collapse of the bolivar currency, which President Nicolas Maduro has attributed to an “economic war,” but critics blame on incompetence and failed socialist policies.

Maduro’s foes say he is cracking down on the business sector to try to shore up support and halt price increases ahead of a controversial May 20 presidential election, which key opposition parties have boycotted as a sham.

Chief Prosecutor Tarek Saab announced the arrests in a televised press conference, but did not provide evidence of wrongdoing or take any questions.

“We have determined the [executives’] presumed responsibility for a series of irregularities, for aiding and concealing attacks against the Venezuelan currency with the aim of demolishing the Venezuelan currency,” said Saab, a former ruling party governor.

State television late on Thursday broadcast a statement announcing the temporary takeover of Banesco, which the government said was designed to ensure the bank continues operating.

The government also said it would be appointing a board of directors led by the country’s vice finance minister, Yomana Koteich.

Banesco’s president, Juan Carlos Escotet, who lives in Spain, earlier blasted the arrests as “disproportionate” and said he was flying to Venezuela to try to free the 11 executives, who include Chief Executive Oscar Doval.

“In the next few hours, I’m taking a plane for Venezuela. We’re going to knock on every door so that this problem is cleared up and they are freed as they deserve to be,” Escotet, who was born in Venezuela to Spanish parents and holds both nationalities, said in a video posted on Twitter.

Escotet has been a frequent target of criticism by ruling party heavyweight Diosdado Cabello, who recently announced that the government was buying Banesco. Escotet denied any sale.

Escotet temporarily excused himself from his role as chairman of Galicia-based bank ABANCA, the bank said in a statement to Spain’s stock market regulator on Thursday.

‘More crisis and misery’

Venezuela’s opposition said the arrests were another sign of Maduro’s turn to authoritarianism.

“The irresponsible government … continues to deny its responsibility in the destruction of our bolivar. Now they’re attacking Banesco. [This] … will only spawn more crisis and misery,” tweeted opposition lawmaker Carlos Valero.

Venezuela maintains exchange controls under which the government is meant to provide hard currency at a steadily weakening official rate, currently 69,000 bolivars per dollar.

But the dollar is fetching around 800,000 bolivars in unofficial trade, which government officials have for years harshly criticized but broadly tolerated.

Hyperinflation has turned once-powerful banks into warehouses of unwanted and mostly useless cash worth a total of only $40 million, according to a recent Reuters analysis of regulatory data.
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A federal grand jury in Detroit has indicted former Volkswagen CEO Martin Winterkorn with conspiracy and wire fraud in the car builder’s scheme to rig diesel emissions tests.

“If you try to deceive the United States, then you will pay a heavy price,” Attorney General Jeff Sessions said Thursday. “The indictment unsealed today alleges that Volkswagen’s scheme to cheat its legal requirements went all the way to the top of the company.”

Winterkorn is alleged to have conspired with other top Volkswagen bosses to defraud the U.S. government and consumers with false claims that the company was complying with the Clean Air Act.

Volkswagen already admitted it installed devices on diesel models designed to turn on pollution control devices during emissions tests and turn them off when the car is driven on actual highways.

Volkswagen was fined $2.5 billion and ordered to recall the affected cars.

Winkerton is the ninth Volkswagen executive or employee to be charged. However, he currently lives in Germany, which has no extradition treaty with the United States, and is unlikely ever to see the inside of the U.S. courtroom.
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The U.S. trade deficit narrowed sharply in March as exports increased to a record high amid a surge in deliveries of commercial aircraft and soybeans, bolstering the economy’s outlook heading into the second quarter.

While other data on Thursday showed a modest increase in new applications for jobless benefits last week, the number of Americans receiving unemployment aid fell to its lowest level since 1973, pointing to tightening labor market conditions.

Wage growth is also rising, with hourly compensation accelerating in the first quarter, more evidence that inflation pressures are building.

“The good news is that we are exporting more, but with the labor markets incredibly tight, labor costs are accelerating as well,” said Joel Naroff, chief economist at Naroff Economic Advisors in Holland, Pennsylvania. “The rise in labor costs will undoubtedly factor into policymakers’ thinking when they meet again in June.”

The Federal Reserve on Wednesday left interest rates unchanged. The Fed said policymakers expected “economic activity will expand at a moderate pace in the medium term and labor market conditions will remain strong.”

The Commerce Department said the trade deficit tumbled 15.2 percent to $49.0 billion in March, the lowest level since September. The trade gap widened to $57.7 billion in February, which was the highest level since October 2008.

March’s decline ended six straight monthly increases in the trade deficit. Economists polled by Reuters had forecast the trade gap narrowing to $50.0 billion in March.

The politically sensitive goods trade deficit with China dropped 11.6 percent to $25.9 billion, which will probably do little to ease tensions between the United States and China.

U.S. President Donald Trump has threatened tariffs on up to $150 billion worth of Chinese goods to punish Beijing over its joint-venture requirements and other policies Washington says force American companies to surrender their intellectual property to state-backed Chinese competitors.

China, which denies it coerces such technology transfers, has threatened retaliation in equal measure, including tariffs on U.S. soybeans and aircraft. A U.S. trade delegation arrived in China on Thursday for trade talks.

Trump, who claims the United States is being taken advantage of by its trading partners, has already imposed broad tariffs on imported solar panels and large washing machines. He recently slapped 25 percent import duties on steel and 10 percent on aluminum.

The Trump administration argues that the perennial trade deficit is holding back economic growth. The government reported last week that trade contributed 0.20 percentage point to the first quarter’s 2.3 percent annualized growth pace. The economy grew at a 2.9 percent rate in the fourth quarter.

Brightening prospects

Prospects for the economy are brightening. In a separate report, the Labor Department said initial claims for state unemployment benefits rose 2,000 to a seasonally adjusted 211,000 for the week ended April 28.

Claims remained near a more than 48-year low of 209,000 touched during the week ended April 21. The labor market is considered to be near or at full employment. The unemployment rate is at a 17-year low of 4.1 percent, close to the Fed’s forecast of 3.8 percent by the end of this year.

The number of people receiving benefits after an initial week of aid dropped 77,000 to 1.76 million in the week ended April 21, the lowest level since December 1973. With labor conditions tightening, wage growth is picking up.

A second report from the Labor Department showed hourly worker compensation accelerated at a 3.4 percent rate in the first quarter after rising at a 2.4 percent pace in the October-December period. It increased at a 2.5 percent rate compared to the first quarter of 2017.

Prices for U.S. Treasuries were trading higher, while the dollar was little changed against a basket of currencies. U.S. stocks were lower.

In March, exports of goods and services increased 2.0 percent to an all-time high of $208.5 billion, lifted by a $1.9 billion increase in shipments of commercial aircraft. There were also increases in exports of soybeans, corn and crude oil. Real goods exports were the highest on record.

Exports to China jumped 26.3 percent in March.

Imports of goods and services fell 1.8 percent to $257.5 billion, in part as the boost from royalties and broadcast license fees related to the Winter Olympics faded. Imports of capital goods fell by $1.5 billion, weighed down by declines in imports of computer accessories, telecommunications equipment and semiconductors.

Imports of consumer goods decreased by $0.9 billion. Crude oil imports dropped by $0.5 billion in March. Imports from China fell 2.1 percent.

Another report from the Commerce Department showed factory goods orders rose 1.6 percent in March after a similar increase in February. The department, however, revised March orders for non-defense capital goods excluding aircraft, which are seen as a measure of business spending plans, to show them falling 0.4 percent instead of dipping 0.1 percent as reported last month.

Orders for these so-called core capital goods rose 1.0 percent in February. Shipments of core capital goods, which are used to calculate business equipment spending in the gross domestic product report, declined 0.8 percent in March instead of the 0.7 percent drop reported last month.

March’s drop in core capital goods orders and shipments suggest business spending on equipment is slowing.
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South Korea is looking into developing and financing economic projects with North Korea that could take effect if a nuclear deal is reached with the United States.

South Korean Finance Minister Kim Dong-yeon said on Wednesday the government was “internally carrying out preparations” to organize, finance and implement possible inter-Korea projects. But he also emphasized that Seoul would first seek support from the international community for any North Korean development projects, and would only proceed if the U.S. -North Korea summit, expected to be held in late May or June, produces a joint denuclearization agreement.

North Korea is under tough sanctions imposed by the U.N. Security Council for its nuclear weapons and missiles tests, including accelerated efforts in the last two years to develop a long-range nuclear missile that could potentially target the U.S. mainland. The international sanctions ban an estimated 90 percent of the country’s external trade.

Seeking sanctions relief is considered a key motivating factor in North Korean leader Kim Jong Un’s diplomatic pivot this year to suspend further provocative missile and nuclear tests, and to engage in talks to dismantle his nuclear arsenal.

But easing sanctions would make it more difficult to enforce the North’s denuclearization promises.

“Once the sanctions are lifted, North Korea will gain autonomy over its trade, and considering its low labor costs and skilled workforce, I think the North Korean economy would gain power again,” said Shin Beom-chul, the director of Center for Security and Unification at the Asan Institute for Policy Studies in Seoul.

U.S. President Donald Trump has insisted he will keep sanctions in place until North Korea completely dismantles its nuclear program.

Infrastructure projects

South Korea, however, is considering a range of economic incentives to encourage Kim to follow through on a nuclear deal with Trump. But these investments are prohibited by the U.N. sanctions and would require a Security Council exemption to proceed.

At the recent inter-Korean summit, Kim and South Korean President Moon Jae-in agreed to increase economic cooperation, in addition to supporting the complete denuclearization of the Korean Peninsula.

Developing modern railways that would connect South and North Korea to Russia and China were specifically mentioned in their joint statement. Other possible projects include improving seaports, as well as building roads and electrical power plants in the impoverished and underdeveloped North.

The cost of these infrastructure projects could cost more than $65 billion, and would require extensive financing, as South Korea currently has only $1 billion in its Inter-Korean Cooperation Fund that was established for this purpose.

If North Korea does give up its nuclear weapons, there will likely be economic aid provided by strategic regional powers, including the U.S., China, Japan and Russia. But South Korea is taking a proactive role to be a major investor in developing the North’s mineral trade and other markets.

“It is expected that South Korea will carry most of the costs. In fact there are many economic resources that are strategically valuable in developing North Korea,” said Joung Eun-lee, a research fellow at the Korea Institute for National Unification.

Peacetime economy

Funding infrastructure projects could also help transition the North to a peacetime economy, even while the trade sanctions remain in place.

The two Koreas have agreed to pursue a peace treaty to replace the armistice put in place at the end of the Korean War in 1953. If implemented, North Korea would likely be expected to significantly reduce its conventional forces that currently include over one million soldiers.

International funding could also be used to provide jobs for former soldiers to work on building roads, bridges and other needed development projects.

“It is not so much the relaxation of the trade sanctions as it is subsidized infrastructure development. That is what North Korea needs upfront,” said Bruce Bennett, a North Korea analyst at the Rand Corporation research organization.

South Korea had invested billions of dollars into North Korean development projects in the past, like the Kaesong Industrial Complex that employed over 5,000 North Korean workers before it was shut down in 2016 following a nuclear test, and the Kumgang Mountain tourism program that ended when a South Korean visitor was shot by a North Korean soldier in 2008.
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A high-level U.S. trade delegation has begun talks with Chinese officials in Beijing as Washington tries to address deep concerns about China’s economic policies. The meeting is seen by some as a positive step, as the two sides attempt to avoid the possible outbreak of a trade war. Analysts say it is unlikely their differences will be resolved during the meetings but a decision to keep talking would be welcome progress.

President Donald Trump said on Twitter U.S. officials are “trying to negotiate a level playing field on trade.”

Raymond Yeung, a senior economist for Greater China at the Australia and New Zealand Banking Group, says if the two sides can at least agree to keep talking with each other that would be big progress.

 

“I think it is too demanding to expect that both sides can come up with an agreement or an announcement or sign a deal,” Yeung said. “But if they are able to promise that they are willing to sit down and continue the dialogue and try and resolve their differences, at least that would signal that the relationship between the two governments is warming up.”

 

Differences over trade policy and market access have been a persistent concern for the United States and other foreign investors in China. In recent weeks, the debate has become even more heated with President Trump threatening to slap a long $50 billion list of tariffs on Chinese goods to punish Beijing for what his administration calls its unfair trade practices: forced technology transfer, intellectual property rights and state subsidies for technology development.

Beijing has denied Washington’s accusations and insists its market is opening. It recently pledged to do away with a 25 percent tariff on imported foreign cars, albeit by 2022. The Chinese government has also responded with threats of its own, saying that if the U.S. presses ahead with tariffs it will respond in kind.

The seven-member U.S. delegation is led by Treasury Secretary Steven Mnuchin and is meeting with a group of Chinese officials led by Chinese Vice Premier Liu He, a close aide to China’s president, Xi Jinping.

 

Although it is difficult to predict how the meetings will turn out, Liao Qun, chief economist at China CITIC Bank International, says it is a positive sign that both sides have a desire to sit down and negotiate. How much can be accomplished, depends on Washington, he says.

 

“It depends on how big Washington’s expectations are and how big its demands for reform and opening up of the Chinese market,” Liao says. “China will make some concessions, but if Washington’s appetite is too big, that will be tough for Beijing to accept.”

Since Xi Jinping rose to power in 2012, China has taken big steps to increase the central government and the communist party’s control over the economy and business, even as Beijing pledges to continue to further open its markets.

 

In 2015, the government unveiled a key policy plan called Made in China 2025, a plan that aims to make China dominant in 10 major next generation industries from robotics to electric cars, artificial intelligence, bio-tech and aerospace, among others. An investigation by the Trump administration into China’s unfair trade practices mentions the policy more than 100 times.

 

The policy clearly sets goals for domestic industries to dominate over foreign players in the Chinese market and globally. Beijing has characterized President Trump’s threats to tax exports and attack the government’s policies as an attempt to contain China and force the Chinese market to become more open, something that officials and state media have repeatedly stressed will never happen.

 

Bridging such a huge gap during two days of talks will be difficult, says Christopher Balding, a professor at Peking University’s HSBC Business School.

 

“I would be somewhat surprised if there was any real change in the negotiating stance of either party. Specifically China, they don’t want to open their markets, that’s the fundamental point,” Balding says.

 

He says the best that could be hoped for is that the two can find enough room to compromise to not go forward with the trade war. But these disputes are unlike any other in recent history, he adds.

 

“This is about how disputes are settled: About how one country views the international system as compared to the other. This is about how one country views how a country should be run and how they have conflicting views of those two things,” Balding says.

 
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The International Monetary Fund censured Venezuela on Wednesday for failing to hand over essential economic data to the fund.

“The [Executive] Board noted that adequate data provision was an essential first step to understanding Venezuela’s economic crisis and identifying possible solutions,” an IMF statement said.

The board is giving Venezuela another six months to comply or face possible expulsion from the IMF.

“The Fund stands ready to work constructively with Venezuela toward resolving its economic crisis when it is prepared to re-engage with the Fund,” the IMF said.

Venezuela has not responded to the IMF’s action. But President Nicolas Maduro’s socialist government has long declined to provide data to the IMF. It regards the IMF as a U.S. tool and part of a Washington-inspired economic war against Venezuela.

Corruption and the collapse of world energy prices has led to an economic calamity in oil-rich Venezuela, including hyperinflation and severe shortages of many basic goods.
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A Chinese company that manufactured Ivanka Trump shoes and has been accused of serious labor abuses is being celebrated in a blockbuster propaganda film for extending China’s influence around the globe.

 

The state-backed documentary “Amazing China” portrays the Huajian Group as a beneficent force spreading prosperity — in this case, by hiring thousands of Ethiopians at wages a fraction of what they’d have to pay in China. But in Ethiopia, Huajian workers told The Associated Press they work without safety equipment for pay so low they can barely make ends meet.

 

“I’m left with nothing at the end of the month,” said Ayelech Geletu, 21, who told the AP she earns a base monthly salary of 1,400 Birr ($51) at Huajian’s factory in Lebu, outside Addis Ababa. “Plus, their treatment is bad. They shout at us whenever they want.”

With epic cinematography, “Amazing China” — produced by China Central Television and the state-owned China Film Group Co. Ltd. — articulates a message of how China would like to be seen as it pursues President Xi Jinping’s vision of a globally resurgent nation, against a reality that doesn’t always measure up.

China’s ruling Communist Party recently announced it would take direct control of major broadcasters and assume regulatory power over everything from film and TV to books and news.

 

As the party deepens its ability to cultivate “unity of thought” among citizens, “Amazing China” demonstrates the scope of China’s propaganda machine, which not only crafted a stirring documentary about China’s renaissance under Xi but also helped manufacture an adoring audience for it.

 

The movie, which weaves together extraordinary feats of engineering and military, environmental and cultural achievements, hit theaters three days before China’s rubber-stamp legislature convened to amend the constitution and allow Xi to potentially rule China for life.

 

The star — duly noted by IMDb.com — is Xi himself, who appears more than 30 times in the 90-minute film.

 

“Amazing China” presents Huajian as an inspiring example of China exporting the success of its own economic miracle by creating transformative jobs for thousands of poor Ethiopians and sharing China’s knowledge, language and can-do discipline to build a new industrial foundation for Ethiopia’s economy.

The company is celebrated as a model of the inclusiveness at the heart of a much larger project: Xi’s signature One Belt One Road initiative, a plan to spread Chinese infrastructure and influence across dozens of countries so ambitious in scope that it’s been compared to the U.S.-led Marshall Plan after World War II.

 

“In opening to the outside world, China’s pursuit is not to only make our lives better, but to make the lives of others better,” the narrator says.

 

In the film, Huajian chairman Zhang Huarong stands before neat rows of Ethiopian workers singing a song about unity, describing himself as a father to his employees, who “like me very much.”

 

But four current and former Huajian employees told the AP their wages were so low that they struggled to pay their bills. They said they had no protective gear, were forced to work 12 hours a day and participate in military-style physical drills, were not permitted to form a union and were regularly yelled at by their Chinese managers.

 

All that made it hard for them to relate to the inspirational video about Huajian circulated by mobile phone with its sweeping shots of a gleaming factory and a soundtrack that repeats in operatic Mandarin: “Huajian has come, Huajian has come … holding the torch of hope.”

 

“If someone complains, he will be accused of disturbing the workplace and will be fired right away,” said Ebissa Gari, a 22-year-old who estimated he earns 960 Birr ($35) a month. “That’s why we keep quiet and work no matter how much we are subdued.”

Getahun Alemu, a 20-year-old who quit Huajian last year to continue his studies, complained of inadequate safety gear.

 

“There are chemicals that hurt our eyes and nose, and machines that cut our hands,” he said. “They have no idea about hand gloves! If you refuse to work without that protective gear, then you will be told to leave the company.”

 

Huajian declined the AP’s requests for comment. Ivanka Trump’s brand said it no longer does business with Huajian and “has always and continues to take supply chain integrity very seriously.”

 

Huajian’s investment in Ethiopia was part of a government-led industrialization drive. In the last few years, Ethiopia’s leaders and business allies came under intense criticism, with more than 300 businesses attacked by protesters who saw them as bolstering a repressive regime.

 

These days, armed soldiers stand guard at the entrance to the Eastern Industrial Zone in Ethiopia’s Oromia region, where Huajian opened its first factory.

 

Six years after the company’s arrival, the dream of turning Ethiopia into a shoe-manufacturing hub remains unrealized, and few harbor illusions about the main incentive for Huajian’s investment in a country where there is no legal minimum wage.

 

“These companies are moving out of Asia and coming to Africa to save labor costs,” said Fitsum Arega, who recently stepped down as head of the Ethiopian Investment Commission to become an adviser to the new prime minister. He praised Huajian for employing more than 5,000 Ethiopians, but said the company “could have done better.”

 

“I’m not saying all employees are happy and there are no abuses here and there,” Arega said, adding that the government pushes companies to protect workers. “There’s a labor law which actually the companies say favors the employees.”

 

The Chinese-owned Eastern Industrial Zone effectively took fertile land from Ethiopian farmers and handed it over to foreign investors — a strategy the Ethiopian government is rethinking, according to Nemera Mamo, a teaching fellow in economics at the University of London.

 

“You can clearly see that these industrial zones are absolutely favorable to the Chinese investors, but not to the local communities or the local private investors,” he said. Huajian workers told the AP they made 960 Birr ($35) to 1,700 Birr ($62) a month. A basic living wage in Ethiopia is about 3,000 Birr ($109) a month, according to Ayele Gelan, a research economist at the Kuwait Institute for Scientific Research.

 

In a post promoting “Amazing China” on its official WeChat account, Huajian claimed to be Ethiopia’s largest exporter — an exaggeration also promulgated by China’s official Xinhua News Agency.

Huajian is Ethiopia’s largest shoe exporter, shipping out $19.3 million worth of goods last fiscal year, according to Ethiopia’s Leather Industry Development Institute. But coffee producer Mullege PLC said it exported $42 million worth of coffee during the same period and that other companies export even more.

 

Huajian’s record within China also has been troubled. In at least five cases since 2015, Huajian sued workers in Chinese court rather than pay compensation mandated by a government arbitration panel. Huajian lost every case, court records show, and the court had to freeze Huajian’s assets to get one worker the 44,174 yuan ($7,000) he was owed.

 

Last year, Huajian found itself entangled in labor and human rights controversies that made global headlines but attracted little attention in China’s official media. Three men working with the New York-based non-profit group China Labor Watch were arrested after their investigation of Ivanka Trump’s suppliers zeroed in on Huajian. The men are out on bail, but remain under police surveillance.

 

China Labor Watch founder Li Qiang said Huajian’s factory in Ganzhou, in southeastern Jiangxi province, had some of the worst conditions he has ever encountered, including excessive overtime, low pay, and verbal and physical abuse.

 

Huajian has called those allegations “completely not true to the facts, taken out of context, exaggerated” and accused the investigators of conducting industrial espionage — a charge that was parroted in China’s party-controlled media.

Wei Tie, the director of “Amazing China,” said he wasn’t aware of the controversy surrounding Huajian until the AP informed him. That’s not too surprising given the years of positive coverage of Huajian in party-controlled media and the fact that many foreign news sites, especially Chinese-language ones, are blocked inside China.

 

Wei said he included the company in the film because it is “introducing China’s experience of prosperity to Africa.”

 

He said he prefers to focus on the good. “What I did was absorb the essence and discard the dross,” he said, citing a longstanding aphorism of Chinese political thought.

 

At first glance, Wei’s selective approach appears to have resonated with Chinese audiences. “Amazing China” smashed box-office records for documentary films, raking in 456 million yuan ($72 million) in its first five weeks, according to ticketing website Maoyan.com. It even thumped “Star Wars: The Last Jedi.”

 

Wei attributed this success to the “spontaneous feeling” of citizens inspired by the arc of tremendous progress they’ve witnessed, a national rejuvenation forged with sweat and skill that he compared to Europe’s Renaissance and the pioneering days of the American republic.

In Shanghai, midday screenings during the week sold out immediately, suggesting either unquenchable public appetite or organized bulk ticket sales.

 

None of the viewers surveyed by AP had purchased their own tickets. Instead, they said they got them from state-run companies, neighborhood committees or government departments that handed them out as part of their “party building work.”

 

Douban, a popular film review website, blocked users from rating and commenting on the movie. The only entries came from official media, which gave it an 8.5 out of 10 ranking. On IMDb.com, a subsidiary of Amazon, “Amazing China” earned only one star.

 

But for some, “Amazing China” is balm for old feelings of inferiority and a welcome reaffirmation that China is ready to resume its rightful place in the community of great nations.

 

“I did not know how good our country is until I watched this movie,” said Zuo Qianyi, a 68-year-old retiree. “I have been to many countries, Britain, Spain, and they are not as good as China, at least not as Shanghai. I am very happy, and I will love my country more.”
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