For two years, the stock market has been largely able to ignore the lived reality of Americans during the pandemic — the mounting coronavirus cases, the loss of lives and livelihoods, the lockdowns — because of underlying policies that kept it buoyant.
Investors can now say goodbye to all that.
Come 2022, the Federal Reserve is expected to raise interest rates to fight inflation, and government programs meant to stimulate the economy during the pandemic will have ended. Those policy changes will cause investors, businesses and consumers to behave differently, and their actions will eventually take some air out of the stock market, according to analysts.
“It’s going to be the first time in almost two years that the Fed’s incremental decisions might force investors or consumers to become a little more wary,” said David Schawel, the chief investment officer at Family Management Corporation, a wealth management firm in New York.
At year’s end, the overarching view on Wall Street is that 2022 will be a bumpier ride, if not quite a roller coaster. In a recent note, analysts at J.P. Morgan said that they expected inflation — currently at 6.8 percent — to “normalize” in coming months, and that the surge of the Omicron variant of the coronavirus was unlikely to lower economic growth.
16 percent gain during the first year of the pandemic. The index hit 70 new closing highs in 2021, second only to 1995, when there were 77, said Howard Silverblatt, an analyst at S&P Dow Jones Indices. Shares on Friday fell slightly.
The market continued to rise through political, social and economic tensions: On Jan. 7, the day after a pro-Trump mob stormed the U.S. Capitol, the S&P set another record. Millions of amateur investors, stuck at home during the pandemic, piled into the stock market, too, buying up shares of all kinds of companies — even those that no one expects will earn money, like the video game retailer GameStop.
What to Know About Inflation in the U.S.
Wall Street also remained bullish on business prospects in China despite Beijing’s growing tension with the United States and tightening grip on Chinese companies. Waves of coronavirus variants, from Delta to Omicron, and a global death toll that crossed five million did not deter the stock market’s rise; its recovery after each bout of panic was faster than the previous one.
“2021 was a terrific year for the equity markets,” said Anu Gaggar, the global investment strategist for Commonwealth Financial Network, in an emailed note. “Between federal stimulus keeping the economy going, easy monetary policy from the Fed keeping markets liquid and interest rates low, and the ongoing medical improvement leading to surprising growth, markets have been in the best of all possible worlds.”
400 private companies raised $142.5 billion in 2021. But investors had sold off many of the newly listed stocks on the New York Stock Exchange or Nasdaq by the end of the year. The Renaissance IPO exchange-traded fund, which tracks initial public offerings, is down about 9 percent for the year.
Shares of Oatly, which makes an oat-based alternative to dairy milk, soared 30 percent when the company went public in May but are now trading 60 percent lower than their opening-day closing price. The stock-trading start-up Robinhood and the dating app Bumble, two other big public debuts, were down about 50 percent for 2021.
supply chain disruptions stemming from the pandemic. Prices for used cars skyrocketed amid a global computer chip shortage. As Covid-19 vaccination rates improved, businesses trying to reopen had to raise wages to attract and retain employees. Consumer prices climbed 5.7 percent in November from a year earlier — the fastest pace since 1982.
But even when “inflation” had become a buzzword worthy of a headline in The Onion, the stock market appeared slow to react to price increases.
“The market is on the side that inflation is transitory,” said Harry Mamaysky, a professor at Columbia Business School. “If it’s not and the Fed needs to go in and raise interest rates to tame inflation, then things could get a lot worse in terms of markets and economic growth.”
And that is what the Fed has signaled it will do in 2022.
When interest rates go up, borrowing becomes more expensive for both consumers and companies. That can hurt profit margins for companies and make stocks less attractive to investors, while sapping consumer demand because people have less money to spend if their mortgage and other loan payments go up. Over time, that tends to deflate the stock market and reduce demand, which brings inflation back under control.
loss of purchasing power over time, meaning your dollar will not go as far tomorrow as it did today. It is typically expressed as the annual change in prices for everyday goods and services such as food, furniture, apparel, transportation costs and toys.
What causes inflation? It can be the result of rising consumer demand. But inflation can also rise and fall based on developments that have little to do with economic conditions, such as limited oil production and supply chain problems.
Is inflation bad? It depends on the circumstances. Fast price increases spell trouble, but moderate price gains could also lead to higher wages and job growth.
Can inflation affect the stock market? Rapid inflation typically spells trouble for stocks. Financial assets in general have historically fared badly during inflation booms, while tangible assets like houses have held their value better.
Mr. McBride said the values of many stocks were being supported by extremely low yields on Treasury bonds, especially the 10-year yield, which has held to about 1.5 percent.
“If that yield moves up, investors are going to re-evaluate how much they’re willing to pay for per dollar of earnings for stocks,” he said. Even if corporate profits — which were strong in 2021 — continue to grow in 2022, he added, they are unlikely to expand “at a pace that continues to justify the current price of stocks.”
quicken the pace of pulling back on that aid, set to finish in March.
“The nightmare scenario is: The Fed tightens and it doesn’t help,” said Aaron Brown, a former risk manager of AQR Capital Management who now manages his own money and teaches math at New York University’s Courant Institute of Mathematical Sciences. Mr. Brown said that if the Fed could not orchestrate a “soft landing” for the economy, things could start to get ugly — fast.
And then, he said, the Fed may have to take “very aggressive action like a rate hike to 15 percent, or wage and price controls, like we tried in the ’70s.”
By an equal measure, the Fed’s moves, even if they are moderate, could also cause a sell-off in stocks, corporate bonds and other riskier assets, if investors panic when they realize that the free money that drove their risk-taking to ever greater extremes over the past several years is definitely going away.
Sal Arnuk, a partner and co-founder of Themis Trading, said he expected 2022 to begin with something like “a hiccup.”
“China and Taiwan, Russia and Ukraine — if something happens there or if the Fed surprises everyone with the speed of the taper, there’s going to be some selling,” Mr. Arnuk said. “It could even start in Bitcoin, but then people are going to start selling their Apple, their Google.”
Almost as soon as Eryn Yates made it through her first trimester of pregnancy last spring, she started shopping for her dream nursery.
But getting the items she wanted turned into a nightmare.
The crib that she had ordered from Crate & Barrel arrived within weeks, but the rocking chair from Pottery Barn Kids was back-ordered for months, and then lost somewhere in transit. The delivery of the dresser she was going to use as her changing table was repeatedly postponed until West Elm informed her that it would be delivered in late April or May 2022 — more than six months after her daughter’s birth.
“I definitely thought that we were ahead of the game since we started ordering everything so early,” said Ms. Yates, 27, who lives in Winter Garden, Fla., and works in health care. “I was wrong.”
Global supply chain disruptions wrought by the pandemic have snarled the delivery of items as varied as medical devices, toys and Grape-Nuts. But perhaps no delays have provoked more familial angst in the last two years than those for baby items.
more than 3.6 million births in the United States in 2020.
The result of the baby-supply upheaval — besides higher prices and an ever-bustling hand-me-down market — has been an injection of new stress and uncertainty into an already emotionally delicate time. Expectant parents are scrambling to get items before they bring their babies home, and retailers and manufacturers are racing to reassure them that their goods will come, and devising hasty solutions if they won’t. Message boards on sites for new parents teem with complaints over back orders and repeated shipment delays. Retailers have become accustomed to soothing anxious parents-to-be.
“These are pregnant women that are all having their babies,” said Lauren Logan, the owner of the Juvenile Shop, a family-run baby retailer in the Sherman Oaks neighborhood of Los Angeles. “They are hormonal, but they are pregnant — they want their stuff. I don’t blame them. I want their stuff for them.”
traced to the outbreak of Covid-19, which triggered an economic slowdown, mass layoffs and a halt to production. Here’s what happened next:
A reduction in shipping. With fewer goods being made and fewer people with paychecks to spend at the start of the pandemic, manufacturers and shipping companies assumed that demand would drop sharply. But that proved to be a mistake, as demand for some items would surge.
Demand for protective gear spiked. In early 2020, the entire planet suddenly needed surgical masks and gowns. Most of these goods were made in China. As Chinese factories ramped up production, cargo vessels began delivering gear around the globe.
Then, a shipping container shortage. Shipping containers piled up in many parts of the world after they were emptied. The result was a shortage of containers in the one country that needed them the most: China, where factories would begin pumping out goods in record volumes
Demand for durable goods increased. The pandemic shifted Americans’ spending from eating out and attending events to office furniture, electronics and kitchen appliances – mostly purchased online. The spending was also encouraged by government stimulus programs.
Strained supply chains. Factory goods swiftly overwhelmed U.S. ports. Swelling orders further outstripped the availability of shipping containers, and the cost of shipping a container from Shanghai to Los Angeles skyrocketed tenfold.
On the receiving end are customers who don’t need another source of anxiety. First-time parents often research heavily before selecting strollers, cribs, car seats and other wares. And out-of-stock items can crimp registries; Babylist says new parents often select 100 to 200 items.
After Gina Catallo-Kokoletsos, 33, and her husband finally agreed on a crib from Pottery Barn Kids, her father placed the order as a gift in July. Originally, the crib was supposed to ship in October, giving just enough time before the couple’s baby was due in November. But when Ms. Catallo-Kokoletsos checked in September, she saw that the shipment date had been pushed to January.
“I called them, and they were like, ‘Oh, yeah, it’s going to be delayed.’ And I said, ‘Well, my baby is due before that,’” said Ms. Catallo-Kokoletsos, who lives in Chico, Calif., and works at an animal shelter. She ended up canceling the order and choosing a crib from a small company she had never heard of. That crib arrived on time, but other items on her baby registry, including a rocking chair, went out of stock before she could get them.
“I knew none of it was the end of the world,” she said. “It just kind of gets frustrating after a while.”
Further complicating matters for some expectant parents are deeply ingrained beliefs about buying or receiving items before their babies are born.
Joelle Fox, 35, a naturopathic physician in Scottsdale, Ariz., who is expecting a baby boy in January, said she was wary of ordering anything in part because of a custom among many Jewish people of not having baby things in the house until the baby arrives.
“It’s kind of a tradition that women have done, and I was kind of following that,” she said, adding that she also wanted to research items carefully to make sure they were not harmful. But the supply chain issues compelled her to start buying some items for the nursery at the end of October, a decision that she said prompted “a lot of emotions.”
Even still, she said, the dresser she ordered from Wayfair is not supposed to ship until mid-January. “That has definitely put a bit of a damper on everything, because I can’t get the room completely set up,” she said.
At around 36 weeks pregnant, Ms. Yates in Florida, whose daughter was born in October, gave up on receiving the West Elm dresser and bought one from Ikea. She cut off its legs and replaced them with metal ones that matched the crib she had bought.
She had less luck with her Pottery Barn Kids chair, which she had ordered in June. After it failed to arrive, she felt so desperate that she emailed corporate customer service and copied the chief executive. By the time she was told in October that the chair had been lost, the color and fabric she wanted were no longer available. The company ended up sending her a loaner chair, in a different color, “so I at least had something in the room for me to use.”
Ms. Yates said that she was sympathetic to the companies’ struggles, but that the ordeal still had left her in tears.
“I was not a very emotional pregnant woman — I had a very short temper, rather than being a crier,” she said. “But when it came to the nursery, I cried a lot, because I had this picture of exactly what I wanted, and then it just felt like one thing after another.”
LONDON — Deborah Tudhope was growing anxious. An American lawyer living in London, she was hoping to fly back to the United States in two weeks to see her 96-year-old mother, who lives in a retirement home in Maine. But the Omicron-driven travel restrictions announced on Thursday by the White House have her worrying that the trip may not happen.
Ms. Tudhope, 72, has had to reschedule her required coronavirus test for the day before her flight, which the airline had already pushed back a day. With the rules seemingly shifting by the hour, she said she faced multiple hurdles: getting out of Britain, getting into the United States and visiting her mother in the home.
“I don’t know how this whole thing is going to work out,” said Ms. Tudhope, who described herself as disheartened, if not surprised, by the turmoil. “But I did make sure the flights are re-bookable.”
Such private dramas are playing out all over the world, as thousands of people — Americans living abroad and foreigners hoping to visit the United States — grapple with the new complexities of holiday travel in the age of Covid.
Biden administration shortened the time frame for international travelers to the United States to take a Covid test within a day before departure, regardless of vaccination status.
That has left would-be travelers nervously calculating whether they will get test results back in time to make their flights or worrying that their home countries could impose more stringent travel bans while they are away.
new pandemic strategy that includes hundreds of family-centered vaccination sites, booster shots for all adults, new testing requirements for international travelers and insurance reimbursement for at-home tests.
Shifting views on boosters among experts. For months, many public health experts have opposed plans to roll out Covid booster shots to all adults. But as Omicron gains ground, researchers are changing their minds, and now believe that the shots may offer the best defense against the new variant.
Officials in Italy said the country was well-prepared to handle a surge in tests for passengers bound for the United States. In the weeks since the government began requiring frequent, negative tests for all unvaccinated Italian workers, pharmacies have processed up to one million rapid tests a day.
“The prospect of more rapid swabs for travelers to the U.S. is not a problem for pharmacies here,” said Marco Cossolo, president of Italy’s largest association of private pharmacies, Federfarma.
South Korea built up the capacity to administer an average of 68,000 P.C.R. tests a day in November, according to Seung-ho Choi, the deputy director of risk communication at the Korea Disease Control and Prevention Center. Results almost always come within 24 hours, he said, though travelers catching early-morning flights when clinics are closed might have to seek out hospitals that administer tests.
Britain is among several countries that have recently required tests for incoming travelers within a day or two after arriving. Randox Laboratories, a British company that provides Covid tests for travel, said on Thursday that since the changes were announced for travelers entering Britain last weekend, it had ramped up P.C.R. testing capacity to its pandemic peak of 180,000 tests per day.
That would also help with processing tests for travelers to the United States, the company said.
For Europeans with ties to the United States, the new rules are merely the latest wild card in a life already lived perpetually in flux.
“What a nightmare — enough!” said Alice Volpi, 28, when told of the impending American restrictions.
An Italian who was living in New York at the outset of the pandemic, Ms. Volpi recounted how she could not return home to Italy for several months because of her country’s travel ban. When she finally got home, a travel ban imposed by the United States prevented her from returning to see her boyfriend in New York.
“The most frustrating part is that you can never make a plan more than one week in advance because everything can change every day,” said Ms. Volpi, who insisted she would press on with plans to visit her boyfriend at Christmas. “That doesn’t allow me to be serene.”
For some Americans living abroad who fear that borders may close again if Omicron proves to be a lethal threat, the solution is to move up their travel timelines. The testing requirements are stressful, they said, but not as much as the possibility that the Biden administration might eventually cut off travel pathways completely.
“That’s what I’m most worried about — not getting to see my family,” said Sarah Little, 25, who moved from New York to London in September to study. She had originally planned to fly home closer to Christmas, but is now trying to book a flight early next week.
“It would just be devastating if I couldn’t get home,” Ms. Little said.
Gaia Pianigiani and Emma Bubola contributed reporting from Rome; Saskia Solomon and Isabella Kwai from London; Aurelien Breeden from Paris; John Yoon from Seoul and Sheryl Gay Stolberg from Washington.
TOKYO — With the emergence of the new Omicron variant of the coronavirus late last week, countries across the globe rushed to close their borders to travelers from southern Africa, even in the absence of scientific information about whether such measures were necessary or likely to be effective in stopping the virus’s spread.
Japan has gone further than most other countries so far, announcing on Monday that the world’s third-largest economy would be closed off to travelers from everywhere.
It is a familiar tactic for Japan. The country has barred tourists since early in the pandemic, even as most of the rest of the world started to travel again. And it had only tentatively opened this month to business travelers and students, despite recording the highest vaccination rate among the world’s large wealthy democracies and after seeing its coronavirus caseloads plunge by 99 percent since August.
Now, as the doors slam shut again, Japan provides a sobering case study of the human and economic cost of those closed borders. Over the many months that Japan has been isolated, thousands of life plans have been suspended, leaving couples, students, academic researchers and workers in limbo.
United States, Britain and most of Europe reopened over the summer and autumn to vaccinated travelers, Japan and other countries in the Asia-Pacific region opened their borders only a crack, even after achieving some of the world’s highest vaccination rates. Now, with the emergence of the Omicron variant, Japan, along with Australia, Thailand, Sri Lanka, Singapore, Indonesia and South Korea, are quickly battening down again.
outbreak of the Delta variant.
Japan is recording only about 150 coronavirus cases a day, and before the emergence of the Omicron variant, business leaders had been calling for a more aggressive reopening.
“At the beginning of the pandemic, Japan did what most countries around the world did — we thought we needed proper border controls,” Yoshihisa Masaki, director of communications at Keidanren, Japan’s largest business lobbying group, said in an interview earlier this month.
But as cases diminished, he said, the continuation of firm border restrictions threatened to stymie economic progress. “It will be like Japan being left behind in the Edo Period,” Mr. Masaki said, referring to Japan’s isolationist era between the 17th and mid-19th centuries.
Thailand had recently reopened to tourists from 63 countries, and Cambodia had just started to welcome vaccinated visitors with minimal restrictions. Other countries, like Malaysia, Vietnam and Indonesia, were allowing tourists from certain countries to arrive in restricted areas.
Wealthier Asian countries like Japan resisted the pressure to reopen. With the exception of its decision to hold the Summer Olympics, Japan has been cautious throughout the pandemic. It was early to shut its borders and close schools. It rolled out its vaccination campaign only after conducting its own clinical trials. And dining and drinking hours remained restricted in many prefectures until September.
Foreign companies could not bring in executives or other employees to replace those who were moving back home or to another international posting, said Michael Mroczek, a lawyer in Tokyo who is president of the European Business Council.
In a statement on Monday, the council said business travelers or new employees should be allowed to enter provided they follow strict testing and quarantine measures.
“Trust should be put in Japan’s success on the vaccination front,” the council said. “And Japan and its people are now firmly in a position to reap the economic rewards.”
Business leaders said they wanted science to guide future decisions. “Those of us who live and work in Japan appreciate that the government’s policies so far have substantially limited the impact of the pandemic here,” said Christopher LaFleur, former American ambassador to Malaysia and special adviser to the American Chamber of Commerce in Japan.
But, he said, “I think we really need to look to the science over the coming days” to see whether a complete border shutdown is justified.
Students, too, have been thrown into uncertainty. An estimated 140,000 or more have been accepted to universities or language schools in Japan and have been waiting months to enter the country to begin their courses of study.
Carla Dittmer, 19, had hoped to move from Hanstedt, a town south of Hamburg, Germany, to Japan over the summer to study Japanese. Instead, she has been waking up every morning at 1 to join an online language class in Tokyo.
“I do feel anxious and, frankly speaking, desperate sometimes, because I have no idea when I would be able to enter Japan and if I will be able to keep up with my studies,” Ms. Dittmer said. “I can understand the need of caution, but I hope that Japan will solve that matter with immigration precautions such as tests and quarantine rather than its walls-up policy.”
The border closures have economically flattened many regions and industries that rely on foreign tourism.
When Japan announced its reopening to business travelers and international students earlier this month, Tatsumasa Sakai, 70, the fifth-generation owner of a shop that sells ukiyo-e, or woodblock prints, in Asakusa, a popular tourist destination in Tokyo, hoped that the move was a first step toward further reopening.
“Since the case numbers were going down, I thought that we could have more tourists and Asakusa could inch toward coming back to life again,” he said. “I guess this time, the government is just taking precautionary measures, but it is still very disappointing.”
Mr. Dery and Ms. Hirose also face a long wait. Mr. Dery, who met Ms. Hirose when they were both working at an automotive parts maker, returned to Indonesia in April 2020 after his Japanese work visa expired. Three months before he departed, he proposed to Ms. Hirose during an outing to the DisneySea amusement park near Tokyo.
Ms. Hirose had booked a flight to Jakarta for that May so that the couple could marry, but by then, the borders were closed in Indonesia.
“Our marriage plan fell apart,” Mr. Dery, 26, said by telephone from Jakarta. “There’s no clarity on how long the pandemic would last.”
Just last week, Mr. Dery secured a passport and was hoping to fly to Japan in February or March.
Upon hearing of Japan’s renewed border closures, he said he was not surprised. “I was hopeful,” he said. “But suddenly the border is about to close again.”
“I don’t know what else to do,” he added. “This pandemic seems endless.”
Reporting was contributed by Hisako Ueno and Makiko Inoue in Tokyo; Dera Menra Sijabat in Jakarta, Indonesia; Richard C. Paddock in Bangkok; John Yoon in Seoul; Raymond Zhong in Taipei, Taiwan; and Yan Zhuang in Sydney, Australia.
Before Zhang Gaoli was engulfed in accusations that he had sexually assaulted a tennis champion, he seemed to embody the qualities that the Chinese Communist Party prizes in officials: austere, disciplined, and impeccably loyal to the leader of the day.
He had climbed steadily from running an oil refinery to a succession of leadership posts along China’s fast-growing coast, avoiding the scandals and controversy that felled other, flashily ambitious politicians. He became known, if for anything, for his monotone impersonality. On entering China’s top leadership, he invited people to search for anything amiss in his behavior.
“Stern, low-key, taciturn,” summed up one of the few profiles of him in the Chinese media. His interests, Xinhua news agency said, included books, chess and tennis.
Now the allegation from Peng Shuai, the professional tennis player, has cast Mr. Zhang’s private life under a blaze of international attention, making him a symbol of a political system that prizes secrecy and control over open accountability. The allegation raises questions about how far Chinese officials carry their declared ideals of clean-living integrity into their heavily guarded homes.
entrusted with overseeing China’s initial preparations for the 2022 Winter Olympics, which is now being overshadowed by the furor.
About three years ago, after stepping down, Mr. Zhang called the head of a tennis academy to summon Ms. Peng to play tennis with him at a party-owned hotel in Beijing, called the Kangming, that plays host to retired officials, according to her post.
Later that day, she said, he forced her to have sex in his home. They resumed a relationship, but he insisted it remain furtive. She had to switch cars to be able to enter the government compound where he lives in Beijing, she wrote. He warned her to tell no one, not even her mother.
With rarely a word or hair out of place, Mr. Zhang has seemed an unlikely protagonist for a scandal that has rippled around the world. He belongs to a generation of officials who rose after the upheavals of the Cultural Revolution, taking on the self-effacing ethos of collective leadership under Hu Jintao, who preceded the country’s current leader, Xi Jinping.
faltered under debt and inflated expectations, but Mr. Zhang moved upward into the central leadership in 2012. He became executive vice premier: in effect, China’s deputy prime minister.
“I hope that all the party members, officials and members of the public in this city will continue to exercise strict oversight over me,” Mr. Zhang said in 2012 as he left Tianjin for Beijing.
negotiated oil deals with Russia’s president, Vladimir V. Putin, and promoted Mr. Xi’s Belt and Road Initiative.
met with Thomas Bach, the president of the International Olympic Committee, as Mr. Bach was visiting the city.
It was Mr. Bach who on Sunday held a video call with Ms. Peng intended to reassure athletes and others worried about her disappearance in the days after her post appeared.
Earlier in Mr. Xi’s term, lurid reports about officials’ sexual misdeeds at times surfaced in state media, disclosures intended to signal that he was serious about purifying the party.
Mr. Xi’s priority now appears to be fending off any odor of scandal tainting the party’s top echelons. References to Ms. Peng’s account were nearly wiped off the internet inside China. A Chinese foreign ministry spokesman, Zhao Lijian, suggested that the attention around Ms. Peng had become “malicious hype.” Official media have not shown or reported on Mr. Zhang since Ms. Peng went public; nor have they directly challenged her account.
“Even to deny her allegations would be to give them a level of credence that you couldn’t then roll back,” said Louisa Lim, a former journalist who long worked in China and the author of “The People’s Republic of Amnesia.”
When Mr. Zhang retired in 2018, he dropped from public view, as is the norm in Chinese politics. Retirement often comes with perks like high quality health care, housing and travel within China, but also some monitoring.
“Once you retire, your movements are reported to the party’s department of organization,” said Minxin Pei, a professor of government at Claremont McKenna College in California who studies the party.
In her post, Ms. Peng seemed to indicate that she and Mr. Zhang had recently had a disagreement, and that he had once again “disappeared” as he did before. She wrote, though, that she expected that her account would have little effect on Mr. Zhang’s eminence.
“With your intelligence and wits,” she wrote, “I am sure you will either deny it, or blame it on me, or you could simply play it cool.”
HAMILTON, N.J.–(BUSINESS WIRE)–Total construction starts pushed 16% higher in October to a seasonally adjusted annual rate of $1.01 trillion, according to Dodge Construction Network. Nonresidential building starts gained 29% and nonbuilding moved 52% higher in October, while residential starts lost 8%. The month’s large gains resulted from the start of three large projects: two massive manufacturing plants and an LNG export facility. Without these projects, total construction starts would have fallen 6% in October.
“Economic growth has resumed following the third quarter’s Delta-led slowdown. However, the construction sector’s grip on growth remains tenuous,” stated Richard Branch, Chief Economist for Dodge Construction Network. “Long term, construction starts should improve, fed by an increase of nonresidential building projects in the planning pipeline and the recent passage of the infrastructure bill. Both will provide meaningful support and growth to construction in the year to come. This expectation, however, must be tempered by the significant challenges facing the industry: high prices, shortages of key materials, and the continued scarcity of skilled labor. While healing from the pandemic continues, there’s still a long road back to full recovery.”
Below is the breakdown for construction starts:
Nonbuilding constructionstarts rose 52% in October to a seasonally adjusted annual rate of $268.4 billion. This increase was solely due to the start of an $8.5 billion LNG export facility, which lifted the utility/gas plant category significantly. However, even without this project, the utility/gas plant category would still have registered a strong gain because of the very low level of activity in September. The public works side of nonbuilding construction was more dismal. Miscellaneous nonbuilding starts fell 43% over the month, and highway/bridge and environmental public works starts lost 14% and 16% respectively. Year-to-date, total nonbuilding starts were 2% higher through October. Environmental public works were 23% higher, and utility/gas plant starts are up 14%. At the same time, highway and bridge starts were 7% lower, miscellaneous nonbuilding fell 13%, and utility/gas plant starts fell 10% during the first ten months of the year.
For the 12 months ending in October 2021, total nonbuilding starts were 1% lower than the 12 months ending in October 2020. Environmental public works starts were 22% higher but highway and bridge starts were down 7%. Utility and gas plant starts were down 10% and miscellaneous nonbuilding starts were 7% lower on a 12-month rolling basis.
The largest nonbuilding projects to break ground in October were the $8.5 billion Venture Global LNG Export facility in Plaquemines Parish, LA, the $484 million Moses-Adirondack SMART PATH 1&2 Lines rebuild project in the Lewis and St. Lawrence counties of New York, and the $454 million RiverRenew tunnel in Alexandria, VA.
Nonresidential building starts shot 29% higher in October to a seasonally adjusted annual rate of $357.2 billion. The catalyst for the increase was a large gain in the manufacturing sector as two very large projects kicked off. If not for these projects, total nonresidential building starts would have been down 3% over the month. In October, commercial starts lost 4%, with only hotels posting a gain. Institutional starts gained 4%, with all categories rising. In the first ten months of 2021, nonresidential building starts were 11% higher. Commercial starts increased 9%, manufacturing starts were 94% higher (39% without the large projects this month), and institutional starts were up 3%.
For the 12 months ending in October 2021, nonresidential building starts were 4% higher than in the 12 months ending in October 2020. Both commercial and institutional starts were up 2%, and manufacturing starts moved 24% higher in the 12 months ending October 2021.
The largest nonresidential building projects to break ground in October were the $6.0 billion first phase of the Taiwan Semiconductor plant in Phoenix, AZ, the $1.3 billion Methanex Methanol plant in Geismar, LA, and the $550 million second phase of the Loews Hotel and Convention Center in Arlington, TX.
Residential building starts fell 8% in October to a seasonally adjusted annual rate of $388.6 billion. Single family starts gained less than one percent, while multifamily starts fell 24%. Through the first ten months of 2021, residential starts were 21% higher than in the same period one year ago. Single family starts gained 22% and multifamily starts grew 10%.
For the 12 months ending in October 2021, total residential starts were 20% higher than the 12 months ending in October 2020. Single family starts gained 23% and multifamily starts were up 11% on a 12-month sum basis.
The largest multifamily structures to break ground in October were the $286 million first phase of the Archer Towers in Jamacia, NY, the $120 million residential portion of a mixed-use building on 3rd Ave in Bronx, NY, and the $106 million Su Development Yesler Terrace Housing Block in Seattle, WA.
Regionally, total construction starts improved in the South Central and West regions, while slipping in the Northeast, Midwest, and South Atlantic regions.
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President Biden and China’s leader, Xi Jinping, pledged at a virtual summit to improve cooperation, but offered no breakthroughs after three and a half hours of talks.
In separate statements after the talks ended, each side emphasized the points of contention that mattered most: lists of mutual grievances that underscored the depth of the divisions between them.
Mr. Biden, the White House said, raised concerns about human rights abuses and China’s “unfair trade and economic policies.” Mr. Xi said that American support for Taiwan was “playing with fire,” and warned that dividing the world into alliances or blocs — a pillar of the new administration’s strategy for challenging China by teaming up with its neighbors — would “inevitably bring disaster to the world.”
In advance of the meeting, White House officials had signaled that there would be no concrete agreements or initiatives, or even an effort to put out a joint statement — usually a pre-negotiated statement on areas of agreement or projects to tackle together.
The two leaders nevertheless expressed a willingness to manage their differences in a way that avoided conflict between the world’s two largest powers. That alone could lower temperature of a relationship that has at times this year threatened to overheat.
“It seems to me we need to establish some common-sense guardrails,” Mr. Biden said, using a phrase his administration has often cited as a goal for a challenging relationship. Addressing Mr. Xi directly, he added: “We have a responsibility to the world, as well as to our people.”
Although the two leaders have spoken by telephone twice this year, the conference was intended to replicate the more thorough discussion of issues of previous summits between the United States and China — something that was not possible because health and political concerns have kept Mr. Xi from traveling since January 2020.
Both men were accompanied by a phalanx of senior aides — the Americans in the Roosevelt Room at the White House and the Chinese inside a chamber in the Great Hall of the People in Beijing. In brief remarks at the beginning of the meeting, each struck a conciliatory tone, flagging areas of disagreement but also pledging to work together.
Mr. Biden, seated before two large screens, noted that the two have “spent an awful lot of time talking to each other” over the years, dating to when Mr. Biden was vice president and Mr. Xi was a rising power in the Chinese leadership. Mr. Xi said he was prepared to move relations “in a positive direction.”
“Although it’s not as good as a face-to-face meeting, I’m very happy to see my old friend,” Mr. Xi said.
Mr. Biden emphasized the need to keep “communication lines open,” according to a White House statement, as the two countries confront disagreements over issues like the future of Taiwan, the militarization of the South China Sea and China’s exploitation of vulnerabilities to bore deeply into the computer networks of American companies, especially defense contractors.
The call, which was initiated at Mr. Biden’s request, reflected his administration’s deep concern that the chances of keeping conflict at bay may be diminishing. Mr. Biden has repeatedly suggested that it should be possible to avoid active military engagement with China, even as the United States engages in vigorous competition with Beijing and continues to confront the Chinese leadership on several significant issues.
The statements hinted at some discussion of “strategic” issues, a phrase that appeared to encompass the nuclear strategies of both nations, but American officials declined to detail those discussions. Some issues that had been the source of speculation before the summit did not come up, including disputes over visas and an invitation to attend the Winter Olympics in Beijing, which begin in February.
Reporting and research by Steven Lee Myers, David E. Sanger, Claire Fu and Li You.
China’s leader, Xi Jinping, urged the United States not to test his country’s resolve on the question of Taiwan, an island democracy Beijing claims is part of its territory.
“We are patient and are willing to strive for the prospect of peaceful reunification with the utmost sincerity,” Mr. Xi told President Biden, according to a readout on the meeting released by Chinese state media. “But China will have to take resolute measures if the ‘Taiwan independence’ separatist forces provoke, compel or even cross the red line.”
In vivid language that has come to define Beijing’s strident rhetoric, Mr. Xi criticized politicians in the United States who he said sought to use the island’s status as leverage over Beijing — a trend he described as dangerous. “It is playing with fire, and if you play with fire, you will get burned,” the Chinese readout cited Mr. Xi as saying.
No issue between the United States and China is more contentious than the fate of Taiwan, which functions as an independent nation in all but official recognition by most of the world.
The People’s Republic of China has claimed Taiwan since the defeated Nationalist forces of Chiang Kai-shek retreated there in 1949, but in recent months Beijing has grown increasingly vocal in criticizing U.S. efforts to strengthen the island’s democracy and its military defenses.
Beijing’s assertive language is often coupled with displays of its growing military prowess. It has menaced Taiwan with military exercises simulating an amphibious assault and air patrols that have swept through the island’s air defense identification zone. Many military analysts, including some in the Pentagon, believe that the maneuvers by an increasingly well-equipped Chinese military could be a prelude to an invasion.
The Biden administration, like the Trump administration before it, has warned China that its military operations and threats are dangerous. The United States, which withdrew its official recognition of Taiwan as a condition of re-establishing relations with China in 1979, has responded by stepping up diplomatic efforts to bolster President Tsai Ing-wen of Taiwan.
That has included visits by officials and lawmakers, as well as weapon sales.
China says those efforts stoke popular sentiment in Taiwan to formally declare independence, which Beijing has warned would lead to war. Wariness in China intensified when President Biden answered a question at a televised town hall last month by declaring, imprecisely, that the United States was committed to Taiwan’s defense in the case of an attack.
It was unclear whether President Biden and Mr. Xi directly discussed the question of how the United States would respond, militarily, should Beijing attack Taiwan.The White House’s readout about the virtual meeting only described President Biden as affirming the United States’ position on Taiwan. The statement used longstanding language that acknowledges but does not recognize Beijing’s claim on Taiwan while indicating Beijing should do nothing to change the status quo.
Beijing is likely to be skeptical of the Biden administration’s intentions. “China’s view is that the United States plays rhetorical games on the Taiwan issue, saying that there is one China and that it does not support Taiwan independence, while it makes actual deals with Taiwan,” said Wu Xinbo, director of the center for American studies at Fudan University in Shanghai. “I think this is still a major divergence point in bilateral relations.”
Reporting and research by Steven Lee Myers and Li You.
From China’s perspective, the virtual meeting itself amounts to a vindication of its strategy to wait out the new administration.
After the tumult of the Trump years, China’s leaders hoped to reset the relationship with the United States when President Biden took office in January. When that didn’t happen, officials seemed surprised, then angry.
Senior officials lashed out as Mr. Biden’s national security team challenged China on a variety of issues — from Taiwan to the western Chinese region of Xinjiang, where the State Department has declared a genocide of Uyghurs and other predominantly Muslim ethnic minorities is underway. In a speech in Beijing in July celebrating 100 years of the Chinese Communist Party, China’s leader, Xi Jinping, warned: “The Chinese people will never allow foreign forces to bully, oppress or enslave us. Whoever nurses delusions of doing that will crack their heads and spill blood on the Great Wall of steel built from the flesh and blood of 1.4 billion Chinese people.”
What Beijing did not do was compromise on any of its policy and behaviors that have stoked exactly those divisions, including menacing military patrols and exercises around Taiwan. Instead, it squeezed concessions out of the United States.
Those included the release in September of Meng Wanzhou, an executive of the telecommunications giant Huawei who had been detained in Canada in 2018 on an American arrest warrant. Beijing, infuriated by the detention at the time, retaliated by essentially taking two Canadians hostage.
China continues to warn the United States of its red lines, especially over the fate of Taiwan, but the tone of various public statements has mellowed considerably. That is also in China’s interest heading into the Winter Olympics in Beijing in February and the 20th National Congress of the Communist Party in November.
“I think that both countries want to bring down the temperature,” said Ali Wyne, an analyst focused on U.S.-China relations with the Eurasia Group, a consultancy based in Washington. “They both recognize that threshold between intensifying competition and unconstrained rivalry is tenuous.”
— Steven Lee Myers
President Biden and Xi Jinping, China’s top leader, made no apparent progress on trade issues at their virtual summit, but they struck a hopeful note about the potential for future deals.
Some of the differences were on display in the accounts the two sides released after the meeting. Mr. Biden repeated U.S. calls for China to live up to its agreement early last year to import more American goods, a senior administration official said. An official Chinese statement did not mention the agreement publicly, but it said Mr. Xi described the bilateral trade relationship as “mutually beneficial” while calling for trade not to be politicized.
There was no announcement of multi-billion-dollar commercial purchases of American products of the sort that Donald J. Trump, the former president, had sought from China. Trade officials from both sides would hold more talks, the senior administration official said.
The softer tone of the rhetoric on both sides in recent weeks and at the virtual summit has nonetheless inspired some optimism, particularly in China, on economic issues.
“I think gradually trade disputes will be resolved,” said Chen Dingding, a professor of international relations at Jinan University in Guangzhou. “We’ll see some concrete measures very soon.”
Wide differences between the two countries remain, including about the commitments the two sides made in striking their trade war truce early last year. That truce, dubbed the Phase 1 trade agreement, called for China to buy $380 billion worth of American goods by the end of 2021. But based on China’s purchases through September of this year, the country is on track to buy only three-fifths of that, according to data compiled by the Peterson Institute for International Economics in Washington.
China has bought large quantities of American corn, pork and other farm goods, but far fewer manufactured goods and far less fossil fuels than were called for by the Phase 1 agreement. That is partly because China has not placed large orders lately for Boeing jets, as air travel slowed during the pandemic. China has also been cautious about signing long-term agreements to buy American natural gas.
China is reportedly close to allowing Boeing 737 Max jets to return to its skies after crashes about three years ago in Ethiopia and Indonesia. The Federal Aviation Administration approved the plane late last year, and it has since been widely used elsewhere without incident.
China’s statement did not mention jetliners, but did say that Mr. Xi had called for closer cooperation on natural gas, although there were no details.
There have also been some hints of compromise on the American side. Katherine Tai, the U.S. trade representative, announced last month that the Biden administration would restart a Trump-era procedure for excluding a few specific products from tariffs. The exemptions are for products that American companies can prove that they genuinely need and cannot readily purchase elsewhere.
China was allowed to retain some tariffs on U.S. goods under the Phase 1 agreement, but has already issued exemptions for most of its tariffs.
Mr. Biden’s economic deputies are traveling elsewhere in Asia this week, strengthening ties to counterbalance the Chinese relationship. Ms. Tai and Commerce Secretary Gina M. Raimondo are touring the region, meeting with economic officials in Japan, Singapore, Malaysia, South Korea and India.
— Keith Bradsher
When President Biden connected with the Chinese leader, Xi Jinping, on a video call late Monday, each did so from two of the best-known rooms in their respective country’s statecraft.
Despite the physical distance from which the two talked, the choice of setting underscored the importance of the meeting and the attention to diplomatic protocol, even in an era of Zoom calls and coronavirus.
President Biden called from the Roosevelt Room, a famed meeting area in the White House, which President Nixon in 1969 renamed for Presidents Theodore Roosevelt and Franklin Roosevelt. Today, the room is frequently used to announce nominations and as a preparatory room for delegations before meeting the president.
Mr. Xi dialed in from the East Hall in China’s Great Hall of the People, a room featuring a large mural of a mountain landscape with a poem from Mao Zedong, the founder of the People’s Republic of China. That room is perhaps best known as the place where new members of the country’s Politburo Standing Committee are announced. The Great Hall of the People is a cavernous structure of ornate rooms built alongside Tiananmen Square in Beijing; it is where the Chinese Communist Party and China’s government stage their most important meetings.
In a video broadcast before the meeting, Kang Hui, an anchor for China’s state television broadcaster, pointed out that the East Hall has been the site of many high-profile state visits, and more recently has been the staging ground for Mr. Xi to virtually connect in meetings with other leaders and major conferences.
With strict protocols and lengthy quarantines in place to prevent the spread of Covid-19 across China’s borders, Mr. Xi has not left the country in almost two years.
— Paul Mozur and Elsie Chen
During the summit, President Biden was candid about his concerns about the state of human rights in China, administration officials said.
Xi Jinping, China’s most authoritarian leader in decades, has been accused of overseeing a widespread rollback of individual freedoms across the country. According to the official readout from the Chinese government, he defended Beijing’s political model and said that while China was willing to discuss human rights, it would not be lectured by outsiders. “We do not approve of interfering in other countries’ internal affairs through human rights issues,” he told Mr. Biden.
China has drawn scrutiny from Western democracies over its crackdown in Xinjiang, where the authorities have rounded up and detained Uyghurs and other Muslim minorities in large numbers, and in Hong Kong, where a harsh national security law has undone many of the city’s democratic traditions.
The Biden administration has stuck by the Trump administration’s accusations of genocide in Xinjiang, and more recently, also raised concerns over the fate of Zhang Zhan, a citizen journalist whose family and friends say is critically ill in prison. Ms. Zhang is being held for documenting the chaos of the early days of the outbreak of the coronavirus in Wuhan.
President Biden has worked quickly to enlist allies to join his campaign to pressure China on issues such as human rights and trade. The U.S. Secretary of State, Antony Blinken, said this year that Beijing was routinely undercutting Hong Kong’s autonomy, and that the Biden administration would push back against what he described as coercion from China.
Mr. Xi has previously dismissed what Beijing sees as sanctimonious preaching.
When the United States imposed sanctions on Chinese officials over Hong Kong and Xinjiang, Beijing retaliated with its own penalties. Beijing has also responded to the recriminations with its own criticisms. Chinese diplomats and state media hit out at the United States over the chaotic withdrawal from Afghanistan.
It remains to be seen how firmly Mr. Biden will push Mr. Xi on human rights. In the first face-to-face meeting of American and Chinese officials of Biden’s administration in Alaska, the raising of such issues led to mutual denunciations, setting the tone for a testy relationship.
— Paul Mozur
Climate policy is the rare area where the United States and China at least appear to be on the same page. At the United Nations climate summit in Glasgow this month, the two countries — the biggest polluting nations — signed a surprise pact to do more to cut emissions this decade.
During the summit on Monday, they reiterated their commitment to the issue, with the United States in its readout saying that the “two leaders discussed the existential nature of the climate crisis to the world.”
But much remains unclear about how the two governments will work together. The Glasgow pact was short on specifics, including any commitment from China on when it will start reducing the amount of carbon dioxide and other gases it generates by burning coal, gas and oil. Beijing has said only that it will do so by 2030.
China’s top leader Xi Jinping said climate policy could become a “new highlight” of cooperation with the United States, according to China’s statement on the summit. But Mr. Xi also reiterated Beijing’s position that China, as the world’s largest developing nation, had different responsibilities to uphold when it came to climate change than the developed countries that pumped out more carbon dioxide over the past century.
China’s mighty manufacturing sector makes it the planet’s No. 1 emitter, responsible for around a quarter of all global emissions. It is also the reason Beijing’s leaders cannot dial back emissions easily or quickly.
Electricity demand is still growing rapidly in China. And the world still depends on Chinese factories to produce electronics, toys, exercise equipment and much else.
Mr. Xi has announced steps to reduce China’s use of coal, the dirtiest fossil fuel. But the country still has extensive plans for building coal-fired power plants and for mining more coal, a need that has been highlighted by recent power shortages caused partly by a lack of coal. China already digs up and burns more of the fuel than the rest of the world.
Although China has been racing to put up wind and solar projects, it has not been able to shift from coal toward natural gas, which emits less carbon dioxide when burned, as quickly as the United States.
— Raymond Zhong
Lurking beneath the many tensions between Beijing and Washington is the question of whether the two countries are slipping into a Cold War, or something quite different.
One of the few areas of agreement between Xi Jinping, China’s leader, and President Biden is that letting relations devolve into Cold War behavior would be a mistake of historic proportions.During the talks, Mr. Xi implicitly criticized Mr. Biden’s efforts to shore up alliances of democratically minded countries to counter China, saying that “ideological demarcations” would “inevitably bring disaster to the world,” according to an official readout of his comments at the meeting. “The consequences of the Cold War are not far away,” the statement said.
Mr. Biden has insisted that the United States is not seeking a new Cold War. His national security adviser, Jake Sullivan, said last week, “we have the choice not to do that.” The summit meeting between the two leaders is part of a White House effort to make sure that the right choices are made — and that accidents and misunderstandings do not propel either country in the wrong direction.
There are many reasons to argue that what is happening today is quite different from the Cold War. The amount of economic interchange, and entanglement, between the United States and China is huge; with the Soviet Union it was minuscule. Both sides would have a huge amount to lose from a Cold War; Mr. Xi and Mr. Biden both know that and have talked about the risks.
Other deep links — the mutual dependencies on technology, information and raw data that leaps the Pacific in milliseconds on American and Chinese-dominated networks — also never existed in the Cold War.
“The size and complexity of the trade relationship is underappreciated,” Mr. Biden’s top Asia adviser, Kurt M. Campbell, said in July as part of his argument of why this moment significantly differs from the Cold War of 40 years ago.
Still, with his repeated references this year to a generational struggle between “autocracy and democracy,” Mr. Biden has conjured the ideological edge of the 1950s and ’60s. And so has Mr. Xi at moments, with his talk about assuring that China is not dependent on the West for critical technologies, while also trying to make sure that the West is dependent on China.
Without question, the past several months have resounded with echoes of Cold War behavior: the Chinese air force running sorties in Taiwan’s air identification zone; Beijing expanding its space program, launching three more astronauts to its space station and accelerating its tests of hypersonic missiles meant to defeat U.S. defenses; and the release of a top Huawei executive for two Canadians and two Americans in what looked like a prisoner swap.
At the same time, the United States announced that it would provide nuclear submarine technology to Australia, with the prospect that its subs could pop up, undetected, along the Chinese coast. It did not escape Chinese commentators that the last time the United States shared that kind of technology was in 1958, when Britain adopted naval reactors as part of the effort to counter Russia’s expanding nuclear arsenal.
— David E. Sanger
That the summit was taking place virtually, not in person, was a concession to China’s leader, Xi Jinping.
The White House had hoped that he and President Biden would meet at the Group of 20 gathering in Rome last month, but Mr. Xi did not attend. He has not left China since Mr. Biden took office in January — in fact, not since January 2020, when the coronavirus was beginning to spread from China.
The ostensible reason for remaining home still seems to be Covid-19, but some experts have speculated that Mr. Xi could not afford to be away before an important political gathering that ended last week.
He used that forum to solidify his stature within the Communist Party, bolstering his case for what is widely expected to be a third five-year term as China’s paramount leader, beginning next year. With the coronavirus still a threat, it is conceivable that Mr. Xi might stay home until the party’s national congress next November.
That reflects more than just internal political machinations. It is in keeping with China’s increasing insularity, forged by a growing confidence — hubris, some might say — that the country under Mr. Xi’s leadership is the master of its own destiny, less dependent on the rest of the world for validation as its economic and military might solidifies.
Still, Mr. Xi’s absence has coincided with the withering of China’s international standing, with public sentiment in many countries turning against the country’s behavior at home and abroad. He faced sharp criticism for submitting a letter to the climate talks in Glasgow and for joining India in watering down the final statement to reduce pressure on cutting the use of coal.
— Steven Lee Myers
Ever since President Nixon stunned the United States in 1971 by announcing that he would travel to China, meetings between American and Chinese leaders have become milestones in a relationship fraught with hope.
In the five decades that have followed, the relationship between the two countries has lurched between cooperation and confrontation. In 1979, Mao Zedong’s successor, Deng Xiaoping, met President Carter in Washington to normalize diplomatic ties and end years of mutual hostility.
That was followed by meetings with Ronald Reagan in 1982 and George H.W. Bush in February 1989 — that one just months before Deng ordered a brutal military crackdown on student protests around Tiananmen Square in Beijing.
Mr. Bush responded to the massacre by suspending all official contacts with the Chinese, but a month later surreptitiously dispatched his national security adviser, Brent Scowcroft, to keep open channels with a country then allied with the United States’ efforts to contain its Cold War rival, the Soviet Union.
There was not another official visit until 1997, when President Clinton played host to Jiang Zemin, who emerged as the country’s leader after Deng’s death, which officials hoped would usher in a new era of openness.
After a while, meeting with Chinese leaders and senior officials became a goal in itself of American foreign policy. The idea was that regular meetings would entwine the Chinese economy with the world’s.
In 2006, President George W. Bush and Hu Jintao announced the creation of a strategic economic dialogue, where officials from both sides could meet regularly to resolve proliferating trade disputes.
When President Obama came to office, the strategic economic dialogue in 2009 became the strategic economic and security dialogue, reflecting emerging conflicts over China’s expansionism in the South China Sea.
A criticism of both the George W. Bush and Obama administrations was that the Chinese smothered the Americans with talk, while doing as they pleased — whether cyberattacks, ormilitarization of artificial islands in the South China Sea.
U.S.-China summitry may have peaked in 2017. President Trump invited Xi Jinping to his Mar-a-Lago resort in April, where he informed him over “the most beautiful chocolate cake you’ve ever seen” that the United States had bombed Syria.
The two leaders met again that November, when Mr. Trump traveled to Beijing, becoming the first foreign leader to dine in the Forbidden City. “You’re a very special man,” he told Mr. Xi, banking on flattery to win over the Chinese leader. It didn’t.
— Steven Lee Myers
The long-smoldering clash between China and the United States over the future of technology hit a rare moment of accord in September, when the Justice Department helped broker a deal that led to the release of a senior executive at the Chinese telecom equipment maker, Huawei.
The two countries have been struggling to find any more common ground in that area.
President Biden has done little to roll back measures put in place under the Trump administration aimed at limiting China’s access to American technology. U.S. officials fear China will use American software and equipment to build government-supported rivals and develop tools to strengthen its surveillance state, including advanced computers, artificial intelligence and facial recognition systems.
Huawei itself remains a point of contention. American authorities helped secure the release of Meng Wanzhou, the Chinese executive who was detained in Canada. But they are still restricting Huawei’s accessto critical American semiconductors and software, crimping its business.
While parts of the Biden Administration have called for improving economic ties, many American lawmakers are pushing for even tougher measures on Chinese technology firms. Mr. Biden has invoked competition with China to help pass his infrastructure bill, which seeks to bolster American technology competitiveness.
On China’s side, the country’s drive for self-reliance will likely take precedence over taking steps to regain access to American technology. Beijing is unlikely to back away from its tough limits on the flow of data or free expression online. Those positions have effectively locked most major foreign internet firms out of China. One of the last, LinkedIn, said last month it would shut down there.
At one particularly tense moment, in October 2020, American intelligence reports detailed how Chinese leaders had become worried that President Trump was preparing an attack. Those concerns, which could have been misread, prompted Gen. Mark A. Milley, the chairman of the Joint Chiefs of Staff, to call his counterpart in Beijing to assure otherwise.
“The Taiwan issue has ceased to be a sort of narrow, boutique issue, and it’s become a central theater — if not the central drama — in U.S.-China strategic competition,” said Evan Medeiros, who served on President Obama’s National Security Council.
China’s ambitious leader, Xi Jinping, now presides over what is arguably the country’s most potent military in history. Some argue that Mr. Xi, who has set the stage to rule for a third term starting in 2022, could feel compelled to conquer Taiwan to crown his era in power.
Mr. Xi said Saturday in Beijing that Taiwan independence “was a grave lurking threat to national rejuvenation.” China wanted peaceful unification, he said, but added: “Nobody should underestimate the staunch determination, firm will and powerful ability of the Chinese people to defend national sovereignty and territorial integrity.”
Few believe a war is imminent or foreordained, in part because the economic and diplomatic aftershocks would be staggering for China. Yet even if the recent flights into Taiwan’s self-declared air identification zone are intended merely as political pressure, not a prelude to war, China’s financial, political and military ascendancy has made preserving the island’s security a gravely complex endeavor.
Until recently, the United States believed it could hold Chinese territorial ambitions in check, but the military superiority it long held may not be enough. When the Pentagon organized a war game in October 2020, an American “blue team” struggled against new Chinese weaponry in a simulated battle over Taiwan.
VILNIUS, Lithuania — It was never a secret that China tightly controls what its people can read and write on their cellphones. But it came as a shock to officials in Lithuania when they discovered that a popular Chinese-made handset sold in the Baltic nation had a hidden though dormant feature: a censorship registry of 449 terms banned by the Chinese Communist Party.
Lithuania’s government swiftly advised officials using the phones to dump them, enraging China — and not for the first time. Lithuania has also embraced Taiwan, a vibrant democracy that Beijing regards as a renegade province, and pulled out of a Chinese-led regional forum that it scorned as divisive for the European Union.
Furious, Beijing has recalled its ambassador, halted trips by a Chinese cargo train into the country and made it nearly impossible for many Lithuanian exporters to sell their goods in China. Chinese state media has assailed Lithuania, mocked its diminutive size and accused it of being the “anti-China vanguard” in Europe.
In the battlefield of geopolitics, Lithuania versus China is hardly a fair fight — a tiny Baltic nation with fewer than 3 million people against a rising superpower with 1.4 billion. Lithuania’s military has no tanks or fighter jets, and its economy is 270 times smaller than China’s.
met with Secretary of State Antony Blinken, who pledged “ironclad U.S. support for Lithuania in the face of attempted coercion from the People’s Republic of China.”
European Council on Foreign Relations indicate that most Europeans don’t want a new Cold War between the United States and China. But they also show growing wariness of China.
“There is a general shift in mood,” said Frank Juris, a researcher at the Estonian Foreign Policy Institute who tracks Chinese activities in Europe. “Promises have not materialized and countries are tired of being constantly threatened with the whip.”
That whip is now being brought down hard on Lithuania, a member of the European Union and also NATO.
Particularly galling for Beijing was Lithuania’s announcement in July that it had accepted a request by Taiwan to open a “Taiwanese representative office” in Vilnius.
by Lithuania’s Defense Ministry Cyber Security Center was yet another provocation. The hidden registry found by the center allows for the detection and censorship of phrases like “student movement,” “Taiwan independence,” and “dictatorship.”
The blacklist, which updates automatically to reflect the Communist Party’s evolving concerns, lies dormant in phones exported to Europe but, according to the cyber center, the disabled censorship tool can be activated with the flick of a switch in China.
The registry “is shocking and very concerning,” said Margiris Abukevicius, a deputy defense minister responsible for cybersecurity.
The maker of the Chinese phones in question, Xiaomi, says its devices “do not censor communications.”
In addition to telling government offices to dump the phones, Mr. Abukevicius said in an interview that ordinary users should decide “their own appetite for risk.”
The Global Times, a nationalist news outlet controlled by the Chinese Communist Party, derided the Lithuanian report as a “new trick” by a small “pawn” in Washington’s anti-China agenda.
China has steadily ramped up pressure on Lithuania, last month recalling its ambassador from Vilnius and urging Lithuania’s envoy in Beijing to go home, which she did. It halted a regular cargo train to Lithuania, though it still lets other trains transit through the Baltic country filled with Chinese goods destined for Germany.
While not announcing any formal sanctions, China has added red tape to block Lithuanian exporters from selling goods in China.
Lithuania’s economy minister, Ausrine Armonaite, downplayed the damage, noting Lithuania’s exports to China accounted for only 1 percent of total exports. Losing that, she said, “is not too harmful.”
A bigger blow, according to business leaders, has been the disruption in the supply of Chinese-made glass, electronic components and other items needed by Lithuanian manufacturers. Around a dozen companies that rely on goods from China last week received nearly identical letters from Chinese suppliers claiming that power cuts had made it difficult fulfill orders.
“They are very creative,” said Vidmantas Janulevicius, the president of the Lithuanian Confederation of Industrialists, noting that the delays were “targeted very precisely.”
Lithuania has made “a clear geopolitical decision” to side decisively with the United States, a longtime ally, and other democracies, said Laurynas Kasciunas, the chairman of the national security and defense committee. “Everyone here agrees on this. We are all very anti-communist Chinese. It is in our DNA.”
Tomas Dapkus in Vilnius, Monika Pronczuk in Brussels, and Claire Fu contributed reporting
TOKYO — With the world’s oldest population, rapidly declining births, gargantuan public debt and increasingly damaging natural disasters fueled by climate change, Japan faces deep-rooted challenges that the longstanding governing party has failed to tackle.
Yet in choosing a new prime minister on Wednesday, the Liberal Democratic Party elected the candidate least likely to offer bold solutions.
The party’s elite power brokers chose Fumio Kishida, 64, a stalwart moderate, in a runoff election for the leadership, seeming to disregard the public’s preference for a maverick challenger. In doing so, they anointed a politician with little to distinguish him from the unpopular departing leader, Yoshihide Suga, or his predecessor, Shinzo Abe, Japan’s longest-serving prime minister.
Elders in the party, which has had a near monopoly on power in the decades since World War II, made their choice confident that, with a weak political opposition and low voter turnout, they would face little chance of losing a general election later this year. So, largely insulated from voter pressure, they opted for a predictable former foreign minister who has learned to control any impulse to stray from the mainstream party platform.
slowly emerges from six months of pandemic restrictions that have battered the economy.
Taro Kono, an outspoken nonconformist whose common touch has made him popular with the public and with rank-and-file party members. Mr. Kishida prevailed in the second round of voting, in which ballots cast by members of Parliament held greater weight than ballots cast by other party members.
He will become prime minister when Parliament holds a special session next week, and will then lead the party into the general election, which must be held by November.
In his victory speech on Wednesday, Mr. Kishida acknowledged the challenges he faces. “We have mountains of important issues that lie ahead in Japan’s future,” he said.
They loom both at home and abroad. Mr. Kishida faces mounting tensions in the region as China has grown increasingly aggressive and North Korea has started testing ballistic missiles again. Taiwan is seeking membership in a multilateral trade pact that Japan helped negotiate, and Mr. Kishida may have to help finesse a decision on how to accept the self-governed island into the group without angering China.
As a former foreign minister, Mr. Kishida may have an easier time managing his international portfolio. Most analysts expect that he will maintain a strong relationship with the United States and continue to build on alliances with Australia and India to create a bulwark against China.
But on the domestic front, he is mostly offering a continuation of Mr. Abe’s economic policies, which have failed to cure the country’s stagnation. Income inequality is rising as fewer workers benefit from Japan’s vaunted system of lifetime employment — a reality reflected in Mr. Kishida’s campaign promise of a “new capitalism” that encourages companies to share more profits with middle-class workers.
close to 60 percent of the public is now inoculated. But Mr. Kishida has offered few concrete policies to address other issues like aging, population decline or climate change.
In a magazine questionnaire, he said that he needed “scientific verification” that human activities were causing global warming, saying, “I think that’s the case to some extent.”
Given the enduring power of the right flank of the Liberal Democratic Party, despite its minority standing in the party, Mr. Kishida closed what daylight he had with these power brokers during the campaign.
He had previously gained a reputation as being more dovish than the influential right wing led by Mr. Abe, but during the leadership race, he expressed a hawkish stance toward China. As a parliamentary representative from Hiroshima, Mr. Kishida has opposed nuclear weapons, but he has made clear his support for restarting Japan’s nuclear power plants, which have been idled since the triple meltdown in Fukushima 10 years ago.
And he toned down his support for overhauling a law requiring married couples to share a surname for legal purposes and declared that he would not endorse same-sex marriage, going against public sentiment but hewing to the views of the party’s conservative elite.
“I think Kishida knows how he won, and it was not by appealing to the general public, it was not by running as a liberal, but courting support to his right,” said Tobias Harris, a senior fellow at the Center for American Progress in Washington. “So what that’s going to mean for the composition of his cabinet and his priorities, and what his party’s platform ends up looking like, means he could end up being pulled in a few different directions.”
resigned last fall because of ill health. He had led the party for eight consecutive years, a remarkable stint given Japan’s history of revolving-door prime ministers. When he stepped down, the party chose Mr. Suga, who had served as Mr. Abe’s chief cabinet secretary, to extend his boss’s legacy.
Sanae Takaichi — a hard-line conservative who was seeking to become Japan’s first female prime minister — to revitalize his base in the party’s far right, analysts and other lawmakers said he helped steer support to Mr. Kishida in the runoff.
As a result, Mr. Kishida may end up beholden to his predecessor.
“Kishida cannot go against what Abe wants,” said Shigeru Ishiba, a former defense minister who challenged Mr. Abe for the party leadership twice and withdrew from running in the leadership election this month to support Mr. Kono.
“I am not sure I would use the word ‘puppet,’ but maybe he is a puppet?” Mr. Ishiba added. “What is clear is he depends on Abe’s influence.”
During the campaign for the party leadership, Mr. Kishida appeared to acknowledge some dissatisfaction with the Abe era with his talk of a “new capitalism.” In doing so, he followed a familiar template within the Liberal Democratic Party, which has been adept at adopting policies first introduced by the opposition in order to keep voters assuaged.
“That’s one of the reasons why they have maintained such longevity as a party,” said Saori N. Katada, a professor of international relations at the University of Southern California. “Kishida is definitely taking that card and running with it.”
Makiko Inoue, Hikari Hida and Hisako Ueno contributed reporting.