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GENEVA — Switzerland’s watch fair rivalries are set to continue as two of Geneva Watch Days’ founding members — Bulgari and Breitling — voiced their commitment to continuing the late-summer event, shutting down rumours that they would defect to the larger Watches and Wonders fair next year.

The Swiss watch fair landscape has been redrawn in recent years: Following the collapse of Baselworld during the pandemic, Watches and Wonders (Switzerland’s biggest fair, formerly known as SIHH) has sought to consolidate its position as the main gathering for brands, dealers, and collectors. But in addition to some major brands continuing to back Geneva Watch Days, alternative watch gatherings both in Switzerland and abroad have proliferated, suggesting that the industry’s calendar is being durably transformed.

The watch fair rivalry, as well as the growing number of smaller fairs and events outside Switzerland, show how the Swiss industry — which for decades moved more-or-less in lockstep to help hard luxury conquer new markets around the globe — is becoming more fiercely competitive as brands fight for market share. Last week, Rolex acquired a major Swiss-based multi-brand dealer, Bucherer, as the turf war for retail locations and the marketing spotlight continue to heat up.

“We can continue to grow faster than the industry [average] for the next 15, 20 years without being part of Watches and Wonders,” Bulgari chief executive Jean-Christophe Babin told the Business of Fashion. “As long as I will be at the helm of Bulgari, it will be like that.”

Breitling’s chief executive Georges Kern said that after discussions with Watches and Wonders, his conditions had not been met. “We were accepted for 2024, but we still decided not to go,” Kern said. “I would [participate] if the concept were more flexible and easier to use for all participants. And the governance has to be more ecumenical.”

Babin and Kern have continued to be vocal critics of the show, citing a governance structure dominated by Richemont, Rolex and Patek Philippe. Bulgari’s LVMH sister brands TAG Heuer, Hublot and Zenith have all joined Watches and Wonders, but the luxury group is still not represented on the board of the foundation that organises the fair.

“We can accept not to decide everything, but we cannot accept to decide nothing,” Babin said. The 64-year-old industry veteran said the show was too expensive and that the format of high-cost brand booths, formal presentations and paid-for public days was outmoded, adding that the offer made to Bulgari by the organisers to exhibit was “insulting”, “humiliating” and “a polite way to turn you away.”

“We want to have a fair share of space,” he said. “We cannot have 10 percent of Cartier.” He also said that making members of the public pay to enter the event was “stingy”.

A “Fair” Alternative

Geneva Watch Days was created in 2020 in response to Covid and the cancellation of the spring fairs. Babin was its main architect, collaborating with Kern and Patrick Pruniaux, the chief executive of Ulysse Nardin and Girard-Perregaux, to craft a “21st century concept” of an industry gathering.

Exhibiting brands pay fees between 10,000 and 100,000 Swiss francs depending on their size to cover central costs — chiefly a pavilion on Lake Geneva’s waterfront that’s free to enter for members of the public. Otherwise, brands operate independently, setting up in hotel rooms, boutiques, restaurants or other spaces around the city. Babin pointed out that his event has been endorsed by the Canton of Geneva, while Watches and Wonders has not.

Babin said he was confident Geneva Watch Days, originally a Covid stop-gap, would be back next year. “The organisers of the traditional fairs do not like the idea that a brand alone can gather a few other brands, and organise for a fraction of the cost a fair which is attracting a lot of retailers and media, and that’s growing year after year.”

This year’s event attracted around 40 retail partners, roughly a third more than in 2022, and according to Kern, was expected to record around 8,000 visitors including 600 members of the international press. The pavilion also hosted a series of panel events and an auction to raise money for the Geneva Watchmaking School.

As for costs, Babin said he had invested around 1 million Swiss francs ($1.13 million) exhibiting at Geneva Watch Days, adding to the 1.5 million spent by the brand to stage a separate event at a Geneva hotel during Watches and Wonders earlier this year. He estimates participating in Watches and Wonders would have cost as much 8 million Swiss francs. “We invest the differential in media and other events during the course of the year,” he said.

Speaking at Breitling’s Geneva boutique last week, Kern agreed that Geneva Watch Days was a more efficient use of his budget. “It’s cost maybe two or three hundred thousand,” he said. “It’s peanuts. And it’s super efficient, super effective, and we have the same impact as we would have at a big fair.”

Growing Membership

While Geneva Watch Days remains much smaller than Watches and Wonders (which claims to have reached more than 600 million people on social media from the hashtag #watchesandwonders), brands like Breitling get a bigger share of the spotlight at the more intimate event.

Kern said he expects Geneva Watch Days to continue to grow thanks to its decentralised concept. “Many bigger brands want to come next year,” he said. “They don’t want infrastructure, they want to go into the hotels. It works because we do it ourselves. We don’t have any organising committee that we have to pay.”

The late August timing also appeals to some members rather than April, when Watches Wonders (and formerly Baselworld) typically take place. Watches and Wonders precedes the quieter summer season, whereas Geneva Watch Days leads into a busy sales period that covers Thanksgiving, Diwali, Christmas and Chinese New Year, Babin said. “Here, we get much better energy behind those novelties, because they are fresh.”

“It’s back to school,” Pruniaux echoed. “In any given year, we have between six to nine launches, so we need different timings.”

Not everyone is on board with the changing calendar, however. Edouard Meylan, chief executive of the independent watch brand H. Moser & Cie, said he “pushed hard” to have the event in November, when the Only Watch charity auction and prestigious Grand Prix d’Horlogerie de Genève (GPHG) take place.

“Geneva has two main watch weeks. One during Watches and Wonders [in April] and another for the GPHG and Only Watch,” Meylan said. “We would have all the biggest collectors coming… I think we would all benefit.”

Events Abroad

Supporters of Geneva Watch Days’ more intimate, decentralised format are weighing whether to take the concept on the road, travelling to other watch hotspots.

“There is a consensus in the industry that it’s good to have a fair outside of Switzerland,” Pruniaux said. “This model works because it’s in Geneva and a lot of brands can be involved at minimal cost. Now the question is could it be replicated elsewhere with the same cost-efficiency?”

Kern said he believed it could, but not yet. “We’ve been openly discussing going to China, but we should first consolidate Geneva with more, bigger brands,” he said.

Far-flung showcases are already populating the watchmaking industry’s calendar: Watches and Wonders will host an event in Shanghai later in September, with 10 brands slated to participate.

In November, brands including Rolex, Audemars Piguet and Chopard will head to the Middle East for the return of the biannual Dubai Watch Week, which is organised by retailer Seddiqi. Luxury conglomerate LVMH has staged a roving watch fair of its own, presenting new collections for its brands like Bulgari, TAG Heuer and Hublot in Dubai and Singapore in recent years.

Those events come in addition to a faster pace of single-brand presentations, as watch brands increasingly seek to create memorable marketing moments and deeper connections with collectors and the press. Glitzy events like Louis Vuitton’s most recent presentation at the Musée d’Orsay (during Paris Haute Couture Week) and Omega’s collection launch in Mykonos are becoming more commonplace.

In the digital age, “people still want to meet and talk about watches,” Kern said.

Washington has tracked about 100 incidents involving Chinese nationals trying to access American military and other installations

WASHINGTON—Chinese nationals, sometimes posing as tourists, have accessed military bases and other sensitive sites in the U.S. as many as 100 times in recent years, according to U.S. officials, who describe the incidents as a potential espionage threat.

The Defense Department, FBI and other agencies held a review last year to try to limit these incidents, which involve people whom officials have dubbed gate-crashers because of their attempts—either by accident or intentionally—to get onto U.S. military bases and other installations without proper authorization. They range from Chinese nationals found crossing into a U.S. missile range in New Mexico to what appeared to be scuba divers swimming in murky waters near a U.S. government rocket-launch site in Florida.

The incidents, which U.S. officials describe as a form of espionage, appear designed to test security practices at U.S. military installations and other federal sites. Officials familiar with the practice say the individuals are typically Chinese nationals pressed into service and required to report back to the Chinese government.

These cases at times occur in rural areas where officials indicate there is little tourism far from a commercial airport.

Concern over the base intrusions comes amid rising U.S.-China tensions, which spiked after a Chinese balloon overflew the U.S. earlier this year carrying what officials said was surveillance equipment. The incidents also cast a light on concerns that Beijing is using nontraditional means to gather intelligence on U.S. soil, whether through proximity to bases or through Chinese-produced commercial equipment that could be used to spy.

Officials at the White House and the Department of Homeland Security declined to comment, and the Pentagon only responded broadly to the issue. Government officials referred queries to the Federal Bureau of Investigation, which said it wouldn’t comment on the issue.

The Chinese Embassy in Washington challenged the U.S. view of the incidents. “The relevant claims are purely ill-intentioned fabrications,” said Liu Pengyu, a spokesperson with the embassy. “We urge the relevant U.S. officials to abandon the Cold War mentality, stop groundless accusations, and do more things that are conducive to enhancing mutual trust between the two countries and friendship between the two peoples.”

The incidents are concerning enough that Congress might look at legislation on the issue, according to Rep. Jason Crow (D., Colo.). Crow, a member of the intelligence committee, said lawmakers are concerned that some of these cases fall between the cracks, because most trespassing laws are state and local, and not federal.

“We need to work closely with our state and local partners to train them and equip them,” he said. “Right now, they don’t know how to deal with it.”

Some incursions are benign, such as those involving people who say they are following Google Maps to direct them to the nearest McDonalds or Burger King, which happens to be on a nearby military base. Others appeared to be more troubling, people familiar with the review said.

Officials described incidents in which Chinese nationals say they have a reservation at an on-base hotel. In a recent case, a group of Chinese nationals claiming they were tourists, tried to push past guards at Fort Wainwright, Alaska, saying they had reservations at a commercial hotel on the base. The base is home to the Army’s 11th Airborne Division, which is focused on Arctic warfare.

These cases at times occur in rural areas where officials indicate there is little tourism far from a commercial airport. The individuals use what appears to be scripted language when confronted by security guards, according to officials familiar with the tactics. When stopped, the Chinese nationals say they are tourists and have lost their way.

The problem of low-level Chinese intelligence collection like this is well known in intelligence circles, said Emily Harding, a senior fellow at the Center for Strategic and International Studies in Washington and a former deputy staff director at the Senate Select Committee on Intelligence. It is a numbers game, she said.

“The advantage the Chinese have is they are willing to throw people at collection in large numbers,” she said. “If a few of them get caught, it will be very difficult for the U.S. government to prove anything beyond trespassing, and those who don’t get caught are likely to collect something useful.”

Harding said that because most incidents in the U.S. can be pursued only as trespassing, the Chinese government gives a collective shrug for those who do get caught. That would be unlikely if an American were to be caught inside China, she said.

“The latter is unlikely to get what we would consider a fair trial,” Harding added.

The base penetrations are considered a concerning and growing trend, U.S. military and other officials said.

In some cases, individuals did gain unauthorized access to a base, “often by speeding through security checkpoints,” said Sue Gough, a Pentagon spokeswoman.

“These individuals are often cited criminally, barred from future installation access and escorted off-base,” she said.

Gough declined to comment on any specific incidents, citing security concerns.

The Pentagon said it has conducted several base security reviews since 2018, some of them in concert with other agencies. A review done late last year focused on the physical security of the roughly 1,400 gates at the U.S. military’s bases, as well as other aspects of base security.

“The results of the reviews have and will continue to inform changes to the protective posture of our bases,” Gough said.

Every day, there are more than 10,000 “controlled turnarounds” of individuals who arrive at military-base gates. They are mostly drivers who are confused about where they are supposed to go, and are turned around without incident. Some of those warrant additional checks and some trigger an investigation. “The incidents are generally low-level, and so far none of them indicate espionage,” Gough said of those turnaround cases.

However, there are other incidents serious enough to raise concerns with U.S. officials. There are repeated cases in which Chinese nationals have been found taking pictures at a U.S. Army range, according to people familiar with the matter. They often start off at nearby White Sands National Park, where visitors like to barrel down the sand dunes on rented slides, but then leave that area and cross into the adjacent missile site, the officials said.

In some cases, the individuals have used drones to bolster their surveillance efforts.

There have been repeated incidents at an intelligence center based in Key West, Fla., starting some years ago, where Chinese nationals, saying they were tourists, were found swimming in the waters near the military facility and taking pictures, according to officials familiar with the matter.

In at least one instance, an incursion there resulted in arrests and prosecutions that were made public. In 2020, three Chinese citizens were sentenced to about a year in prison after pleading guilty to illegally entering the naval air station in Key West, and taking photos by either walking around the fence line and entering it from the beach, or driving in and ignoring orders to turn around.

In another incident, Chinese nationals appear to have been found scuba diving off Cape Canaveral, home to the Kennedy Space Center. The area is the launch site for spy satellites and other military missions. A spokesman for Homeland Security Investigations’s Tampa, Fla., field office said the incident was part of a continuing investigation and declined to comment further.

U.S. officials also describe incidents around the White House in which Chinese nationals posing as tourists leave the designated tour area to take pictures of the grounds, including communications gear and the positions of security guards, before being shooed away by the Secret Service.

In 2019, a Chinese woman was sentenced to eight months in prison after being convicted of unlawfully entering former President Donald Trump’s Mar -a-Lago estate in Florida. She entered the estate carrying two passports, four cellphones and other electronics.

In many cases, those who have trespassed on bases, apparently deliberately, have simply been detained briefly and then escorted out of the country, officials familiar with the incidents said.

No cases appear to have resulted in espionage charges, but in a 2019 incident, two Chinese diplomats were expelled from the country on suspicions of espionage after they improperly drove, with their wives, onto Joint Expeditionary Base Little Creek, Va., a highly sensitive U.S. military facility where U.S. Navy SEALs train.

Base officials pulled a firetruck into the road to stop the vehicle, officials said. China denied the diplomats were involved in espionage.

Combination of stronger US economy in 2023 and stickier inflation trigger downgrades for next year

Persistently higher interest rates in major economies mean global growth is likely to slow next year after outperforming expectations so far in 2023, economists say.

Output will expand 2.1 per cent in 2024, according to an aggregation of forecasts by the consultancy Consensus Economics, down from the 2.4 per cent the economy is expected to log this year.

Economists have upgraded their expectations of this year’s performance by 1 percentage point since the start of the year because of unexpectedly strong consumer demand and labour markets.

Part of the 2024 slowdown will be the result of “some basic arithmetic effects”, of better output this year flattening growth next, said Simon MacAdam, senior global economist at Capital Economics. However, he added that economists had also “genuinely become more downbeat about prospects in 2024”.

The caution centres on the belief that persistently high demand will keep inflation higher for longer, forcing rate-setters in advanced economies to keep borrowing costs elevated well into next year.

“Services demand continued largely unabated, the labour market has stayed strong, wages have continued to rise,” said Nathan Sheets, chief economist at US bank Citi. “Some of the weakness [anticipated for this year] is being pushed in to 2024.”

In many countries, including the US, “there will be a recession, it’s just going to come later”, said Sheets.

Until a few months ago, the Federal Reserve was expected to begin cutting rates this year. However, the strength of the US economy has meant there is a small possibility that rate-setters could increase borrowing costs another quarter point further, to a target range of between 5.5 per cent and 5.75 per cent in September. Economists now expect the first rate cut to come in the spring of next year.

The now strong chance that the US economy will avoid a recession this year “means the Fed will keep rates higher for longer to fully quell inflation, resulting in slower growth in 2024”, said Mark Zandi, chief economist of Moody’s Analytics.

He added that the European economy has also navigated this year “somewhat better than feared”, apart from Germany, which means the European Central Bank and the Bank of England will also likely keep rates higher for longer.

The ECB has raised its deposit rate from minus 0.5 per cent in June 2022 to the current 3.75 per cent and is now not expected to begin cutting for most of next year.

The BoE is expected to increase borrowing costs by another half percentage point to 5.75 per cent by the end of the year and is not thought likely to begin cutting until the second half of 2024.

China’s economic slowdown after the post-pandemic rebound also contributed to economists’ pessimism for 2024. Christian Keller, head of economics research at Barclays, described the country’s slowdown as “structural”.

“The direction for 2024 seems quite clearly for a further global slowdown,” Keller added.

Higher US interest rates meant economists, on average, expected US growth to slow to 0.6 per cent in 2024, from 1.9 per cent this year.

The UK and the eurozone are likely to maintain their pedestrian pace in both years, while China is set to struggle with structural problems and a downturn in manufacturing and exports.

The economies of many emerging markets, such as Brazil and Mexico, have also surprised analysts on the upside this year, while robust domestic demand is set to support India’s healthy economic growth into 2024.

Utilita says Ofgem’s planned capital buffer requirement will make ‘survival in the market difficult’

A leading British household energy supplier is seeking to overturn planned new rules aimed at boosting suppliers’ financial resilience following a series of collapses.

Utilita, which has about 800,000 customers, argues that regulator Ofgem’s planned capital buffer requirement will make “survival in the market difficult” for challenger suppliers and should be quashed.

It has asked the Competition and Markets Authority for permission to appeal against the rule in what will be a major test of the regulator’s efforts to reform the market.

The new requirement “puts fundamentally resilient supplier . . . in an unsustainable position, for minimal (if any) regulatory benefit”, the company said in papers submitted to the CMA and published last week.

Ofgem announced new financial resilience measures in July as part of its efforts to prevent a repeat of the collapses of 30 suppliers in late 2021 and early 2022 that followed a sharp rise in wholesale gas prices.

The market rout added £94 to every British household’s energy bills last year to cover the costs of rescuing customers from failed suppliers, and led to criticism of Ofgem for failing to regulate the market properly.

Under the changes due to come into force in March 2025, suppliers will be expected to hold a capital buffer of £115 per customer, known as the “capital target”.

If the company’s buffer falls below this threshold, it will have to submit a plan to the regulator setting out how it will recover, and it could be prevented from taking on new customers or paying dividends until it does so.

Utilita argued that it had “limited options” to raise extra finance to meet the capital target because general market challenges make equity investment difficult while the type of debt that meets Ofgem’s requirements “is very unlikely to be commercially available”.

Restricting companies’ ability to take on new customers or pay dividends if they fall below the threshold would make it even harder for them to raise the cash to recover, Utilita said.

The company added that the requirement put challengers such as Utilita at a disadvantage to rivals that are part of larger energy groups and have access to financial guarantees or loans from parent companies.

“The decision [on the capital target] will make survival in the market difficult for the very challenger entities which drive innovation,” it said. Hampshire-based Utilita is majority owned by its founder and chief executive, Bill Bullen.

Utilita argues it is a resilient company even without the new rules, as most of its customers are on pre-payment meters and it manages its exposure to wholesale prices surges.

“Utilita, and suppliers like it, (a) need less reserve capital to operate resiliently; but (b) cannot readily raise more capital than they need,” it said.

Ofgem has until September 7 to respond to Utilita’s application. The CMA is due to decide this month on whether to grant Utilita permission to appeal.

In a statement to the Financial Times, Ofgem said its new rules would “ensure that companies are more resilient to any sudden changes in market conditions”.

It added: “Reasonable profits are essential for a sustainable energy sector, but all suppliers must prioritise financial resilience”.

Utilita confirmed it had requested permission to appeal, but declined to comment further.

Why the electric vehicle battery race needs a recycling revolution

Uncertainty over which cells will power tomorrow’s cars among factors complicating efforts to reuse raw materials

From east Asia to Europe and North America, companies along the battery supply chain are investing billions of dollars in recycling capabilities as they confront projected shortages of the raw materials that will power the next generation of electric vehicles.

But as carmakers, battery producers and miners develop their own recycling capacity or partner with specialists in an effort to make supply chains more secure, greener and ultimately more profitable, fundamental aspects of the nascent industry are yet to be worked out.

“Right now everyone is concerned about how we can set up all the battery factories that we need,” said Andreas Breiter, who runs McKinsey’s Center for Future Mobility in North America. “But in 10 years or so, the question will be what we do with all these batteries once they come back.”

It remains unclear which battery chemistry will prevail in the global race between Chinese producers CATL and BYD and their Korean and Japanese rivals, making it hard to know which recycling processes will be required.

Uncertainty also hangs over future regulation, materials prices, recycling technologies and even who will own an EV battery at the end of its life — all of which will have a bearing on the industry’s development and the viability of specific business models.

“There is a sense of disorder in the industry because no one has lived through this before,” said Simon Linge, chief executive of battery materials producer and recycler Lithium Australia. “There will be people who are not even being spoken about today who in five or 10 years’ time will emerge as major players in the market.”

Battery recycling, which typically involves smelting, chemical treatment or both, also has its own environmental impact and recyclers face a challenge in demonstrating that their output will remain both greener and more economically attractive than mined materials, given advances in cleaner extraction techniques.

With few EV batteries having reached the end of their lives, the principal sources of feedstock for recyclers remain cells from consumer products such as laptops and “scrap” from battery plants.

Production scrap will account for 53 per cent of the feedstock for battery recyclers in 2025, according to McKinsey projections. But that will fall to 43 per cent by 2030, 14 per cent by 2035 and just 6 per cent by 2040 as more and more EVs are sold — the International Energy Agency forecasts that the global fleet will surge to 350mn vehicles by the end of this decade.

“We see manufacturing scrap as the number one driver for recycling volume this decade,” said Tim Johnston, chair of Li-Cycle, a New York-listed battery recycler backed by commodities group Glencore. “End-of-life batteries is next decade.”

The coming transition presents a dilemma for recyclers because the logistics and business models for recycling scrap and end-of-life batteries are very different.

For recyclers focused on production scrap, it makes sense to set up facilities next to battery plants to circulate materials straight back into the production process.

In North America, where battery production is being turbocharged by US president Joe Biden’s flagship climate legislation, that has led to a series of partnerships between battery makers and recyclers.

Redwood Materials, a recycling start-up founded by former Tesla chief technology officer JB Straubel, announced a deal last year with the EV maker’s battery partner Panasonic to supply nickel-rich cathode materials for the Japanese cellmaker’s new Kansas plant.

Similar partnerships have been agreed between Canada-based Li-Cycle and Korean battery producer LG Energy Solution, and between Massachusetts-based recycler Ascend Elements and Korean battery maker SK.

End-of-life batteries, on the other hand, need to be collected from vehicles and assessed for safety and performance before being disassembled and undergoing the recycling process.

With cellmakers, car manufacturers and individual consumers all likely to stake a claim to ownership of a battery, it is unclear how recyclers will secure stable supplies.

One model is to have the battery manufacturer, carmaker or a third party own the battery throughout its life. A battery manufacturer could lease the battery to a carmaker, then a consumer, and then reuse or recycle it after it can no longer power a vehicle.

Sam Abuelsamid, analyst at Guidehouse Insights, said the model was “kind of like securitising loans — you’re securitising the battery”, and that it might prove a natural fit for carmakers, who already operate captive finance arms that lend customers the money for new vehicles.

In China, where the EV, battery, and recycling markets are all more mature than in the west, CATL has formed a so-called closed loop partnership allying its recycling subsidiary Brunp with Chinese recycling group GEM and Mercedes-Benz China to recycle end-of-life batteries.

That offers a potential model by which carmakers — some of which harbour their own battery production ambitions — and recyclers work together to secure end-of-life batteries to create their own closed loop systems. In the US, Redwood Materials is building closed loop partnerships with Volkswagen, Ford, Volvo and Toyota.

But some industry executives, noting the logistical challenges of attempting to oversee the collection, assessment, transportation and dismantling processes as well as the recycling itself, are sceptical that the closed loop system will prove attractive in the long term.

The model is complicated further by the fact that a battery no longer suitable for use in a vehicle still has the potential to be used for other purposes, ranging from lighting streets and homes to powering appliances or offering energy storage.

“It is absurd and against any logic not to try to make the best use out of used EV batteries, knowing the effort, R&D, energy, materials and investment involved in developing them,” said José María Cancer Abóitiz, head of insurer Mapfre’s Mobility Lab.

Noting that the recycling market is already “much less structured” than the rest of the battery supply chain, Mathias Miedreich, chief executive of Belgian recycler Umicore, predicts the market will bifurcate as recyclers build separate supply chains for scrap and end-of-life batteries.

“It’s a question for companies like us where to put your battery facilities,” said Miedreich. “Should you put it close to the battery world or should you put it close to where the [car manufacturers] develop their circular loop? It could be that two ecosystems are forming.”

The industry will also be shaped by technological developments and politics in Europe and the US, where they are striving to limit reliance on China in emerging industries and establish homegrown supply chains.

The EU has passed regulations designed to create a “circular economy” in batteries by preventing spent batteries from leaving the bloc, mandating that they must have minimum recycled content at 16 per cent for cobalt and 6 per cent for lithium and nickel. Brussels is targeting 65 per cent of the weight of lithium-ion batteries to be recycled by the end of 2025.

Sarah Colbourn, senior analyst at consultancy Benchmark Mineral Intelligence, said Chinese recyclers, who are presently “far ahead” of western peers in technology and scale, were looking to enter the European and North American markets by partnering with local players.

She noted the “real concern” of EU officials about battery materials leaking from Europe to China, undermining the development of the European recycling industry. One option being considered in Brussels, she said, was for “black mass” — the crushed remnants of batteries after unwanted steel and plastic have been removed — to be redesignated as hazardous waste as a means of preventing it from leaving the bloc.

Another consideration for western recyclers is whether the lithium iron phosphate, or LFP batteries that dominate the Chinese market, will win the global battery race against the nickel-manganese-cobalt, or NMC batteries in which Korean and Japanese battery makers specialise.

Because iron phosphate is much more abundant than the nickel and cobalt used in NMC batteries, the value of the materials recovered by recycling an LFP battery is considerably lower, meaning LFP recyclers tend to have significantly lower margins.

That is less of a problem in China, where recyclers operate at huge scale and with lower capital costs. But it could have repercussions for western recyclers — and in turn, for western environmental and resource security ambitions — if LFP were to prevail.

Breiter of McKinsey, meanwhile, notes the industry could yet be upended by proprietary techniques being developed by a new generation of smaller recycling companies.

“New technologies are being announced all the time, new technologies are in development, and there could be a breakthrough at any time,” he said.

“We don’t know what we will be recycling in the future, we don’t know what techniques we will be using, we don’t know how regulations will evolve, and we don’t know how the materials market will work out,” Breiter added. “These are the things that will determine the commercial viability of the recycling model.”

Zipse sees ‘imminent risk’ to European makers of cheaper cars vying against brands such as BYD

BMW’s chief executive has warned that EU plans to ban combustion engine vehicles is pushing European makers of cheaper cars into a price war with Chinese rivals that they are unlikely to win.

“The base car market segment will either vanish or will not be done by European manufacturers,” said Oliver Zipse, pointing to the growing ambitions of Chinese car brands such as BYD, which specialise in electric vehicles.

China — the world’s largest market for cars — has in the past 15 years built up an electric vehicle industry that has cornered much of the world’s battery supply chains and is now, among increasingly fierce competition at home, trying to enter the European market.

“I want to send a message: I see that as an imminent risk,” Zipse said, adding that premium carmakers such as BMW were better insulated against competition from Chinese manufacturers — most of which target buyers of cheaper vehicles.

The EU’s plans to phase out combustion engine vehicles by 2035 have been criticised by the region’s car industry, which indirectly employs nearly 14mn people. Concerns have ranged from the lack of access to raw materials necessary to make car batteries to the slow rollout of charging infrastructure.

Zipse also questioned whether the bloc’s deadline could be met. In a nod to a review of the EU’s e-vehicle legislation planned for 2026, he argued that European charging infrastructure was still “far behind expectations . . . there are countries where they are not developing anything at all”.

“You wouldn’t do a review if legislators were certain that everything was in order,” he added.

Zipse, who oversaw BMW’s production lines before taking over as chief executive in 2019, was speaking ahead of the annual IAA Mobility conference in Munich that is set to be attended by more Chinese companies than ever before.

“I am not worried about BMW,” he said, adding that the company had not been affected by the price wars that have been pushing down margins for many car manufacturers in China.

“There is super fierce competition below Rmb300,000 ($41,310) — most new competitors enter that market segment,” Zipse said, noting that most of BMW’s brands were priced above that. One company that has been hit by the rise of Chinese rivals is Volkswagen, whose flagship VW brand was this year dethroned as China’s best-selling car by BYD.

BMW has, under Zipse, also become a relatively lone advocate for hydrogen-powered cars as an alternative to battery-driven vehicles, and has vowed to continue selling cars with combustion engines outside of Europe.

“If you want to be a participant in the 80mn worldwide car market, you have to do all technologies, otherwise you are not participating,” Zipse said, as the company presented a prototype for its Neue Klasse electric series, which is set to hit production lines in 2025.

“Some players are doing only electric, but these players are not covering the whole market,” he said.

Property shares rise after Beijing eases borrowing requirements for homebuyers

Shares in Chinese property developer Country Garden rose almost 20 per cent on Monday after creditors agreed over the weekend to restructure the repayment of a renminbi-denominated bond that was due on Saturday.

The approval from bondholders provides the cash-strapped company with more time as it rushes to meet domestic and international repayment obligations.

Country Garden, which has become the focus of international investors trying to gauge the state of China’s vast property sector, said in a statement to bondholders that it had secured 56.08 per cent approval from participating Chinese creditors in a vote.

Creditors granted an extension for a nearly Rmb4bn ($550mn) bond that had been set to mature on Saturday and allowed the developer to repay the debt in a series of instalments over the course of three years.

The news sent the developer’s Hong Kong-listed shares up as much 19.1 per cent on Monday. The stock is still down more than 60 per cent in the year to date.

Country Garden, once considered one of the Chinese developers least likely to default, has struggled to meet recent repayment obligations. It missed interest payments of $22.5mn on two $500mn international bonds about a month ago, triggering a broad sell-off in shares of property groups already under pressure from widespread defaults.

Developer stocks listed in Hong Kong rose as much as 10.5 per cent on Monday following action by Chinese authorities to lower downpayment requirements nationwide for first-time and second-time homebuyers.

The pace of mortgage rule easing to encourage homebuyers has picked up markedly in recent weeks after years of a punishing crackdown on excess leverage in the sector. Major cities including Beijing, Shanghai, Guangzhou and Shenzhen lowered minimum mortgage interest rates for first-time homebuyers last week.

Ting Lu, an analyst at Nomura, said while the recent easing marked a “significant step in stimulating the property sector”, these measures were “still not enough” to pull it out of a protracted liquidity crisis.

Dealogic data shows Chinese developers face a $38bn wall of renminbi and dollar bond payments coming due over the next four months, while Fitch Ratings warned last week that annual new home sales in China could fall by as much as 15 per cent.

The rating agency also warned that the situation at Country Garden “may exacerbate weakness in [Chinese] homebuyers’ sentiment”.

Country Garden, which alone had liabilities of about Rmb1.36tn as of the end of the first half of 2023, faces more repayment pressure this week. The grace period for the dollar bond payments it missed a month ago is set to expire on Wednesday.

Beijing has pushed renminbi as alternative global currency to dollar

Chinese lenders stepped in to extend billions of dollars to Russian banks as western institutions pulled back their operations in the country during the first year of Moscow’s invasion of Ukraine.

The moves by four of China’s biggest banks are part of Beijing’s efforts to promote the renminbi as an alternative global currency to the dollar.

China’s exposure to Russia’s banking sector quadrupled in the 14 months to the end of March this year, according to the latest official data analysed for the Financial Times by the Kyiv School of Economics. 

The lenders took the place of western banks, which came under acute pressure from regulators and politicians in their home countries to exit Russia, while international sanctions made doing business much harder.

The Industrial and Commercial Bank of China, Bank of China, China Construction Bank and Agricultural Bank of China increased their combined exposure to Russia from $2.2bn to $9.7bn in the 14 months to March, according to Russian central bank data, with ICBC and Bank of China accounting for $8.8bn of the assets between them.

During the same period, Austria’s Raiffeisen Bank — the foreign bank with the biggest exposure to Russia — increased its assets in the country by more than 40 per cent, from $20.5bn to $29.2bn.

Raiffeisen has said it is looking at ways of pulling out of the country and has reduced its assets to $25.5bn since March.

The moves by Chinese banks are part of a shift by Russia to adopt the renminbi rather than the US dollar or euro as a reserve currency.

“The loans by Chinese banks to Russian banks and credit institutions, which are for the most part a case of the yuan taking the place of dollars and euros, show the sanctions are doing their job,” said Andrii Onopriienko, deputy development director at the Kyiv School of Economics, who compiled the data. 

The rise of renminbi trading highlights Russia’s economic pivot to China as trade between the two countries hit a record $185bn in 2022.

Before last year’s invasion, more than 60 per cent of Russia’s payments for its exports were made in what the country’s authorities now refer to as “toxic currencies”, such as the dollar and euro, with renminbi accounting for less than 1 per cent.

“Toxic” currencies have since dropped to less than half of export payments, while the renminbi accounts for 16 per cent, according to data from Russia’s central bank.

Raiffeisen is one of the few western banks that has kept a significant presence in Russia, after several other foreign lenders cut ties and sold subsidiaries last year.

But reforms brought in by the Kremlin last summer have made it much harder for foreign banks to sell their Russian subsidiaries. On Friday, Russia’s deputy finance minister Alexei Moiseev reaffirmed the government’s position to obstruct foreign bank sales.

Profits at Raiffeisen’s Russian business rose 9.6 per cent to €867mn in the first six months of this year, with the Austrian lender raising pay for its Russia-based staff by €200mn.

The European Central Bank is increasing pressure on lenders it supervises, including Raiffeisen, to exit Russia.

Raiffeisen said it was trying to find ways of selling or spinning off its Russian business, while staying compliant with local and international laws and regulations.

“We are committing to further reducing business activity in Russia whilst we continue to progress such potential transactions,” the bank added.

Overall, the proportion of Russian banking assets held by foreign lenders reduced from 6.2 per cent to 4.9 per cent in the 14 months to March.

ICBC, Bank of China, China Construction Bank and Agricultural Bank of China all declined to comment.