TheChek News Flow

Every year, China gets closer to catching the U.S. as the world’s biggest economy. When it comes to their stock markets, however, there’s no contest. Since 1992, China’s GDP has grown 6.5 times as fast as America’s—but U.S. stock returns have been 3.5 times as high.

Indeed, U.S. stocks have dominated global investing, as measured by market capitalization, for most of the past 125 years. For that, you can partly thank New Deal­–era regulations that tamed the Wild West of U.S. markets, making them attractive to risk-averse investors worldwide. And compared with China, where state-owned companies drive the economy, the U.S. gets more growth from publicly traded companies. But supremacy can be fleeting. Just ask Japan, whose markets soared in the late 1980s, only to nose-dive amid asset bubbles and massive overborrowing. In other words: Don’t get too cocky, U.S. stock bulls

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Hotter temperatures in Texas are expected to set new all-time highs for energy use in the month of May, sending electricity prices spiking higher.

The state’s grid operator, the Electric Reliability Council of Texas (ERCOT), predicted demand would jump from 57,486 megawatts on Friday to 71,893 MW on Monday, 72,725 MW on Tuesday, and 74,346 MW on May 24, according to Reuters.

The coming week could see demand topple the current record for May of 71,645 MW set in 2022, while still trailing the all-time high of 85,508 MW set on Aug. 10, 2023.

That’s as weather forecasts for top cities like Houston and Dallas have put high temperatures in the 90s, above seasonal norms, meaning more Texans will crank up their air conditioning.

Expectations for the latest demand surge boosted electricity prices in the spot market, with next-day prices in ERCOT’s north hub soaring to $120 per megawatt hour MWh for Friday from $40 for Thursday, according to LSEG pricing data cited by Reuters.

And for about one hour late Friday, day-ahead prices on ERCOT’s website jumped as high as $688 per MWh, representing an increase of more than 1,600% compared to the prior day.

The Texas power market is deregulated and on its own electricity grid. But the actual price that consumers pay depends on the type of contract they have with their provider. And since February 2021, energy providers have been barred from fully passing along wholesale electricity prices to their residential customers.

Brutal heat waves over recent summers have shattered records for power demand, sending spot prices on wild, sudden swings. In September, Texas power prices surged as much as 20,000%.

Meanwhile, Texas has seen an influx of residents since the pandemic as people fled states like California and New York, where the cost of living is higher, meaning more customers are plugged into the grid.

Texas has also become a hotbed for bitcoin mining, adding to electricity demand, as the state’s deregulated power market and abundance of cheap natural gas became attractive to the energy-intensive sector. The proliferation of data centers and the rise of artificial intelligence technology has also boosted demand.

Across the world, high-speed trains zip from city to city, sometimes topping 250 miles per hour before dropping off hundreds of passengers right in a city’s downtown. However, in the U.S., that vision of efficient, fast, environmentally friendly travel remains a dream.

Japan built high speed trains more than 50 years ago, an engineering marvel then and now. Its bullet trains (a term coined by the Japanese) connect the country’s megalopolises with eye-popping levels of efficiency—the average delay is less than a minute. China has 23,500 miles of high-speed tracks traversing its countryside, linking its coastal megacities like Shanghai and Shenzhen to each other and to its vast interior. European rail connects the continent so well it serves both the backpacking crowd and executives hurrying from one country’s financial capital to another on trains like the London-Paris Eurostar.

The U.S., on the other hand, looks on. Not because we lack the technical know-how to build high-speed rail, but because politicians lack the will to fund it, according to Amtrak CEO Stephen Gardner.

“It’s a financial conversation, not a technical one,” he told Fortune in an interview. “There’s not a technical barrier to building high-speed rail. But what you need is political and financial alignment to make the investment.”

In the U.S., passenger rail is stifled because of its aging infrastructure, a problem only made worse by decades of political disagreements and earlier lobbying from automobile and aviation industries that called for competing investments in their infrastructure. In some stretches of the Northeast Corridor, trains slow to just 30 miles an hour due to Reconstruction-era tracks.

Even $66 billion in federal funding for rail in the 2021 infrastructure package is but a drop in the bucket of what it would take to build high-speed rail. The cost to build a such a network across the U.S. would be approximately $4 trillion, according to the libertarian Cato Institute, which does not support building a passenger rail network on the grounds it would be too expensive.

“We’ve got to decide to do it, that’s really as simple as it is,” Gardner says. “The federal government of the nation has to make a decision. That’s how it happens. That’s how it’s happened everywhere in the world.”

That’s not to say the money from the infrastructure bill is going to waste. On the contrary, it is upgrading passenger rail infrastructure across the entire country, from the Cascades in the Pacific Northwest to Texas and Appalachia. The funds are also going toward a new fleet—both cars and locomotives. Amtrak has already committed $7.3 billion for 83 new trains from the mobility division of the German industrial giant Siemens, with the first set to begin carrying passengers in 2026. Those trains will reach a top speed of 125 miles per hour. A new, faster model of the Acela trains that can travel at 160 miles per hour on some stretches of the Northeast Corridor began test runs in January, according to the New York Times.

Both of those trains are still far slower than those in France, Japan, and China, which has the fastest train in the world, clocking in at 286 miles an hour at top speed. In fact, the new U.S. trains may not even reach their own top speeds that often. Winding tracks mean that trains on the Northeast Corridor travel at an average speed between 70 and 80 miles an hour. To enable true high speed, the U.S. would need to build specially designed tracks that are straighter, a project that would take at least 10 years and possibly up to 30, Gardner says.

Funding these projects is no small feat, either. Every other high-speed rail network in the world was constructed with massive investments from governments that made it a national priority. Governments often have to subsidize investments in train travel because virtually all rail companies are unprofitable, or at least don’t make enough money to regularly fund tens of billions of dollars of capital expenditures. Even China’s vaunted rail system is raising fares as its state-owned operator is saddled with $870 billion in borrowing.

By comparison, the U.S. investment over the years has been “almost a rounding error to the amount that Europe has been investing in its network,” Gardner said.

When asked for more detail on the CEO’s comments, an Amtrak spokesperson provided per-capita spending data from a German trade group. It shows that Europe’s biggest spenders on rail in 2022 were Luxembourg at $625, Switzerland at $489, and Norway at $376. In the U.S., the comparable number was just $39, trailing even Europe’s stingiest spenders, like Spain’s $73 and France’s $50.

Passenger rail vs. freight rail

In addition to undertaking a sprawling infrastructure project like railroad construction, Amtrak also has to deal with stakeholders it doesn’t always see eye-to-eye with. Amtrak has to collaborate, sometimes begrudgingly, with freight rail companies that own about 71% the railroad tracks on which Amtrak runs many of its trains. The two groups have a sometimes tense relationship because Amtrak alleges they do not obey laws meant to give passenger trains the right-of-way over freight trains.

“There has been decades of no enforcement” of those laws, Gardner said.

Amtrak is now gearing up for a fight with freight-rail operators. In recent years Amtrak has become increasingly vocal about what it deems repeated violations by host railroads of these right of way laws, which date back to Amtrak’s inception. After years of frustrations, Amtrak urged federal regulators in 2022 to investigate delays caused by freight traffic and is also lobbying for the right to sue those operators in federal court when it believes they’re not following the law.

When reached for comment, a spokesperson for the Association of American Railroads (AAR) directed Fortune to a May 2023 letter from the trade group accusing Amtrak of substandard performance on its Sunset Limited line that runs from New Orleans and Los Angeles. The spokesperson also referred to a section of the AAR’s website that asked policy makers to ensure expansion of passenger rail “not compromise freight railroads’ ability to serve present or future customers.”

Elsewhere in the country a few private passenger rail companies have also entered the fray in an attempt to compete with Amtrak. Brightline, which claims to be the only private intercity train company in the U.S., broke ground last month on a $12 billion project meant to connect Southern California’s Inland Empire to Las Vegas. Brightline already operates a train route from Miami to Orlando with plans to expand to Tampa Bay by 2026.

The U.S. is too big for high-speed rail everywhere

But all high-speed rail in the U.S., whether it’s Amtrak or Brightline, has to contend with genuine geographical considerations that make it more difficult to execute than in other countries. Namely that the U.S. is a huge country, according to Allan Zarembski, director of the Railway Engineering and Safety Program at the University of Delaware.

Certain train journeys will always be less appealing than flying. Houston to Boston or San Diego to Milwaukee will virtually never make sense by rail, even on a train that goes 286 miles per hour, as the fastest trains in the world do. Those two trips would take six and a half and seven and a half hours respectively, and that’s with no stops, unlikely for a roughly 2,000-mile trip. Because of that, Gardner says he doesn’t see air travel as Amtrak’s main competitor.

“The auto market is the primary market we are competing with,” Gardner says.

High-speed rail is best suited for between cities that are near each other, where a train ride is around the same time as a short flight without the hassle of getting to and from the airport. Rail is also a much more environmentally friendly option than carbon-spewing airplanes. A flight from Washington, D.C. to New York emits between 1.4 to 3.7 times more greenhouse gasses per person than a train, depending on the type of locomotive, according to Amtrak’s analysis. Traveling by car on the same journey produces between 2.2 to 5.8 times more carbon per passenger, driven by the fact that cars carry much fewer people than a train can.

“If we’re going to take on carbon in a meaningful way, you’ve got to achieve more both passenger and goods movement by train,” Gardner says. “There’s no way around that fact.”

What once seemed like an impossibility is now being considered by G20 finance ministers

The global corporate tax reform that came into effect this year was something of a miracle. Less than a decade ago, few would have thought it realistic that most countries in the world would ever agree to close loopholes for corporate taxation, institute a global minimum rate, and decide how to apportion the new tax take — set to be more than $200bn a year — among themselves.

Yet here we are. Some parts of the global corporate tax reform are still to be ratified, but the minimum level is now being widely implemented. And if one miracle is possible, why not two? That is how we should look at recent stirrings of something similar: a multilateral effort to overhaul the flawed system for taxing super-rich individuals.

In February, the economist Gabriel Zucman — a scourge of wealthy tax optimisers everywhere — presented G20 finance ministers with a proposal for a global billionaire’s tax, at the request of Brazil. Brasília, which currently holds the group’s presidency, is keen to move to the next stage of the global tax agenda, which could be to close the loopholes that allow the world’s richest individuals to pay very little tax.

It was the first time the topic had been raised at a G20 meeting, Zucman told me, yet “most ministers who spoke in São Paulo praised Brazil for raising it”. He observed that the wealth of the very richest had grown by 7-8 per cent annually in recent decades — on top of inflation — compared to the 2-3 per cent growth rate of average wealth.

Zucman proposes an annual levy of 2 per cent of the wealth of the world’s roughly 3,000 dollar billionaires. It is not quite a wealth tax as much as a hybrid between a wealth and income tax, premised on the idea that the ultra-rich find it easy to define their revenues out of any taxable categories (by keeping gains inside holding companies, for example).

The goal is to cut through the thickets of legal structures that let the super-rich minimise taxable income under national codes, by positing that these should not give rise to less income tax than 2 per cent of their net worth. Any income and wealth taxes actually paid would be deducted. This would still leave billionaires pulling away from the rest of us.

It may sound pie-in-the-sky — impossibly complicated and politically dead on arrival. But so, initially, did the global corporate tax reform, whose technical challenges were overcome and whose politics took surprising and positive turns. Recall that the political yeoman’s work was done in concert between France and a US led by Donald Trump, surely one of its least multilaterally inclined presidents ever.

Already, there have been notable expressions of political support. France’s finance minister has endorsed the idea, for the G20 and also at the European level. Ministers from not just Brazil, but South Africa, Spain and Germany have written in favour of it. What about the US? Zucman points out that Joe Biden’s latest budget features a billionaire’s tax that is “very similar in spirit” to his own proposal.

My own conversations convince me a second Biden administration would want to double down on its landmark achievements on infrastructure and industrial policy, and this is surely an attractive way to fund that.

That point holds even more strongly in Europe. The EU’s central political economy challenge in the financial sphere is how to square a recognised need for much more investment in defence, infrastructure and green industry with strict national fiscal rules and resistance to more common borrowing by the bloc as a whole. A co-ordinated and hence flight-proof wealth tax will surely be hard to resist, in a bloc where the right to move freely is treaty-guaranteed.

Zucman and his collaborators estimate in their most recent Tax Evasion Report that their proposal would raise about €40bn annually across Europe. Not all of that is in the EU, but for comparison that amount would cover nearly a quarter of the bloc’s budgeted spending for 2024. And this is only from billionaires. Once in place, it is hard to see why fiscally squeezed politicians would decide to spare those with merely hundreds or even scores of billions.

In retrospect, the “profit-shifting” that allowed the severe under-taxation of multinational companies was doomed by two causes: the extreme pressure on public budgets after the global financial crisis and the popular revulsion at corporations not paying their fair share. Both conditions are amply in place today with respect to ultra-rich individuals. A global wealth tax could arrive sooner than you think.

Tit-for-tat investigation into thermoplastics follows a pattern established during the Trump presidency

China has signalled it will retaliate against trade barriers introduced by the US and the EU as it launched an anti-dumping probe into chemical imports.

The Ministry of Commerce announced on Sunday that it is probing imports of polyoxymethylene copolymer, a thermoplastic widely used in the consumer electronics and automotive industries, from the EU, the US, Japan and Taiwan.

Beijing’s move suggests it will take tit-for-tat action against foreign trade barriers, but the narrow investigation into chemicals also highlights the limits on its ability to respond, given the huge trade surpluses it runs with the US and EU.

Its action came after the Biden administration last week unveiled a raft of tariffs on Chinese goods including clean energy technologies and computer chips. The most striking was a quadrupling of tariffs on electric vehicles to 100 per cent, aimed at preventing players such as BYD and Nio from gaining a foothold in the US automotive industry.

The White House said $18bn of goods in “strategic sectors” would be affected by the tariff rises, claiming they would give US companies time to catch up with Chinese rivals in clean energy technology.

In response, China last week vowed to take “resolute measures to defend its rights and interests”. The tit-for-tat action follows a pattern established during the Trump presidency, where Washington introduced tariffs on a wide range of Chinese imports and Beijing responded with targeted action on a narrower range of goods.

Beijing’s probe into the chemical imports will take a year, but could be extended by six months, the commerce ministry said. 

The investigation follows a number of probes by the EU into Chinese government subsidies for manufacturing. 

Brussels began an anti-subsidy investigation into Chinese electric vehicles in October, amid accusations that Beijing was supporting the industry with huge state subsidies and flooding the European market with cheap EVs. The investigation will determine whether Beijing’s policies have “caused economic injury” to European manufacturers.

Chinese-made electric vehicles are forecast to make up a quarter of all battery car sales in the EU this year, up from 19.5 per cent last year, according to analysis from policy group Transport & Environment. 

Beijing’s announcement comes ahead of a July 4 deadline for the European Commission to decide on whether it will impose provisional tariffs or quotas on Chinese EVs. 

The European Commission said on Sunday that it will “carefully study the contents” of Beijing’s investigation into the chemical imports “before deciding on next steps”.

In April, the EU initiated probes into two Chinese solar panel manufacturers that it accused of benefiting from market-distorting subsidies. The European solar industry blames Chinese rivals for undercutting them on price, resulting in huge losses and several plant closures across the continent.

PARIS, May 19 (Reuters) - Bondholders of French IT company Atos (ATOS.PA), opens new tab have rejected a buyout offer from Czech billionaire Daniel Kretinsky, French weekly La Tribune reported on Saturday.

The bondholders were reported to have cited Kretinsky's plan to wipe almost all of the company's debt and fears that he would break up the former blue-chip technology company, shares of which have lost 90% of their value over the past three years after a string of profit warnings, CEO departures and the collapse of potential asset sales.

Kretinsky's offer was made by his EP Equity Investment (EPEI) fund in partnership with British fund Attestor. A spokesperson for EPEI-Attestor said that "EPEI is exclusively concentrated on saving Atos as we believe in our restructuring capacities".

Atos did not respond to requests for comment but has said that it had retained three propositions for restructuring. These included one from French businessman David Layani, who is company's biggest shareholder with an 11% stake, another from Atos bondholders and bank creditors, plus Kretinsky's offer.

The company has said it will make a decision by May 31 before sealing an agreement by July.