Long stories short
- Twitter’s board accepted Elon Musk’s $44 billion bid for the platform, which he has said should be “very cautious” about permanently banning users (more below).
- Russia’s foreign minister said Nato was effectively at war with his country by supplying Ukraine with arms.
- British intelligence estimated that 15,000 Russian troops have been killed so far during the invasion of Ukraine.
China Covid syndrome
Lockdowns in Chinese cities are disrupting transport networks within the country and logistics outside it, and causing a global economic fallout that is likely to get worse before it gets better.
Xi Jinping is committed to a zero Covid strategy he cannot abandon without risking mass illness that China’s healthcare system is ill-equipped to handle. The lockdowns and mass testing that are his only alternative are holding down exports, driving up the price of shipping and fuelling domestic unrest.
Shanghai’s 26 million people have been under strict lockdown since late march. According to official figures, 23 other cities and almost 200 million people are under full or partial lockdown, but unofficial estimates put the number closer to 400 million.
There were reports of panic food-buying as mass testing was introduced to control an outbreak in Beijing yesterday, and world markets reacted promptly:
– London’s FTSE 100 index was dragged down by commodities firms such as oil producers and miners, which depend on Chinese demand, while Germany and France recorded similar falls.
– China’s Shanghai Composite Index fell by more than 5 per cent while Hong Kong’s Hang Sen dropped 3.7 per cent overnight.
– Oil prices fell 4.7 per cent on the prospect of falling demand from China, the world’s second-largest economy.
The main issue is trucking. Trucks transport goods between Chinese cities and the country’s ports. China’s trucking sector is under such severe restrictions that booking a vehicle has been close to impossible for weeks. Truck services in and out of Shanghai have dropped by 30 per cent since the lockdown began.
Shipping is feeling the knock-on effects. Authorities in Shanghai are operating the city’s port, the world’s busiest, on a “closed-loop” system by which workers do not leave their work premises after their shift. Despite this, exports from Shanghai fell by about a quarter in the past month and the cost of moving a shipping container from China to the US West coast has trebled since last year.
Air cargo is feeling them, too. Flight activity into Shanghai’s Pudong airport is at just 3 per cent of its level last month, as cargo shipments have been limited to essential goods such as medicine.
Why are the restrictions so severe? Despite the zero-Covid policy, Shanghai’s caseload reached record levels this month as a result of the Omicron variant spreading across the country.
By the last weekly estimates, there were 8,073 new cases and 64 new deaths across China. The numbers are minimal by western standards but Chinese authorities fear that because of the country’s previous lockdowns the population has limited natural immunity to the virus. They also know that
- while China’s population has mostly been vaccinated, the jabs were Chinese – and much less effective than those used in Europe and the US;
- per capita, China has only a sixth of the US’s ICU bed capacity and a fifth as many nurses;
- 50 million Chinese people over 60 have not been fully vaccinated.
China could have licensed the highly effective BioNTech mRNA vaccine, but hasn’t. For most of the past two years Beijing has used what seemed to be an effective zero covid strategy for a propaganda bonanza promoting the idea of Chinese competence and exceptionalism as inherently superior to western trial and error.
There’s no indication when China’s cycle of lockdowns will end. As long as it continues, supply chains from the “factory of the world” to the rest of the world will be disrupted, causing shortages of critical components and driving up prices. A Chinese lockdown is, through the global economy, a cost of living crisis for everyone else.
At home, despite censorship, the opening line of “Can You Hear the People Sing” from Les Miserables is going viral.
CAPITAL ECONOMY, BUSINESS AND FINANCE
Deripaska raids explained
US Federal authorities suspect the Russian oligarch Oleg Deripaska has been evading sanctions. The US sanctioned him in 2018 – four years before the UK – for his ties to Vladimir Putin, alleging in court that Deripaska held and laundered assets on behalf of Putin. The FBI raided his mansion in Washington DC last October, seizing fine artworks, sunglasses, hiking boots, housewares, financial records, telephone bills and other documents. The agency didn’t provide an explanation for the raids, but Bloomberg reports that the purpose was to collect information that may determine whether and how Deripaska moved money around.
CULTURE soCIETY, IDENTITY AND BELONGING
The latest Fantastic Beasts film, a spin-off from the Harry Potter franchise, is unlikely to earn back even half its budget at the US box office, according to Forbes and Variety. The Secrets of Dumbledore, which cost $200 million to make, earned a disappointing $43 million on its opening weekend and just $14 million on its second. Its rivals? The Bad Guys and Sonic the Hedgehog 2. Warner Bros has put the brakes on the franchise, weighing up box office figures before greenlighting the fourth and fifth films planned for the series. Secrets has grossed $280 million worldwide so far but will need to reach at least $400 million for Warner Bros to break even, because marketing and distribution costs typically match production budgets. To compare: the last Harry Potter film, The Deathly Hallows Part II, grossed $1.3 billion. The new release’s difficulties have been put down to controversies over Johnny Depp’s casting in the first two films, supporting actor Ezra Miller being arrested for the second time after throwing a chair at a woman in Hawaii, and a boycott by fans over J.K. Rowling’s position on transgender rights. To note: cinema takings generally are still struggling to return to pre-pandemic levels.
TECHNOLOGY AI, SCIENCE AND NEW THINGS
Musk Twitter attack
Twitter’s board agreed to a takeover offer of $44 billion from Elon Musk that will take the company private. The board first sought to fend off Musk, but changed its mind after the Tesla boss revealed details of his offer – a mixture of cash and loans against his Tesla shares, with Morgan Stanley and other firms’ backing. Musk’s interest in Twitter has already boosted its stock price by more than a fifth in a month, delivering huge gains for other investors, but as the world’s richest man he says money doesn’t matter to him. Instead, he wants to “unlock” Twitter’s “extraordinary potential” as a more open and inclusive “arena for free speech”. Whether this will mean ending Donald Trump’s hitherto permanent ban from the platform for incitement to violence in the days before last year’s Capitol insurrection remains to be seen, but US conservatives are broadly delighted by the takeover, and liberals dismayed.
What you can do with $44 billion:
- Meet President Biden’s request for $13 billion to vaccinate and treat Covid globally, three times over.
- Pay most of the UK’s council tax bills for 2021.
- Buy 62 superyachts as super as Roman Abramovich’s flagship, the 162-metre Eclipse.
What you can’t:
- Buy Netflix, currently valued at $91 billion.
- Buy the International Space Station, estimated to be worth $100 billion.
- Pay for the world to reach net zero by 2050, currently costed at $275 trillion.
The 100-year life health, education AND GOVERNMENT
Children and hepatitis
Conversations about the impact of Covid on children tend to focus on lost education and mental health. But it’s possible lockdown could have put children at risk of contracting hepatitis (inflammation of the liver). 169 cases of a previously unknown hepatitis strain have been reported by the World Health Organization across 11 countries, 114 of them in the UK. 17 of the children had severe enough illness to require a liver transplant and most are under ten years old. Usually the UK sees a handful of unknown hepatitis strain cases a year. Common exposure, Covid vaccines and Covid alone have been ruled out as causes. Instead, the current theory is that lockdown has led to low-threshold immunity in young children. So when these children caught an adenovirus strain (a range of viruses that can cause cold and flu symptoms) it developed into more severe illness. The good news: doctors are sharing knowledge on what to look for (jaundice) and one of the best ways to stop the spread of adenoviruses is handwashing.
Our planet CLIMATE AND geopolitics
Voters for net zero
Onward, a centre-right think tank, found that the UK’s Conservative party could lose more than 1.3 million voters if the government scraps its net zero target. Its research is based on nationally representative polling conducted during February and April that found nearly half – 46 per cent – of voters would be less likely to vote for a party that pledged to get rid of the net zero target. Among those who voted Conservative in 2019, 51 per cent say they would not vote for a party that got rid of the target. The finding suggests there’s little evidence for assumptions that the Conservatives’ working-class voters are sceptical about the benefits of net zero.
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Paul Caruana Galizia
With additional reporting by Phoebe Davis and Ed Barnes.
Photographs Getty Images, Warner Bros
in the tortoise app today
Life under Shanghai’s lockdown
China is powering on with its zero-Covid policy as cases rise, more cities go into lockdown, and thousands are moved into special quarantine facilities. What does this mean for the people living there?