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China copper tycoon He Jinbi wobbles as Maike Metals admits crisis

From a start guarding trains full of metal from thieves on freezing winter nights, He Jinbi built a copper trading house so powerful that it handles one of every four tons imported into China.

A born trader with an infectious sense of humor, the 57-year-old grew Maike Metals International Ltd. through the rough-and-tumble rush for commodities in the early 2000s, to become a key conduit between China’s industrial heartlands and global merchants like Glencore Plc.

Now Maike is suffering a liquidity crisis, and He’s empire is under threat. The ripple effects could be felt across the world: the company handles a million tons a year — a quarter of China’s refined copper imports — making it the largest player in the most important global trade route for the metal, and a major trader on the London Metal Exchange.

With his wide network of contacts giving enviable insight into China’s factories and building sites, He has been a poster child for China’s commodity-fueled boom over two decades — making a fortune from its ravenous demand for raw materials and then plunging it into the red-hot property market.

But this year, Beijing’s restrictive Covid Zero policies have hit both the property market and the copper price hard. After months of rumors, He admitted publicly last month that Maike had asked for help to resolve liquidity issues.

He said the problems are temporary and affected only a small part of his business, but his trading counterparties and creditors are being cautious. Some Chinese domestic traders have suspended new deals, while one of the company’s longest-standing lenders, ICBC Standard Bank Plc, was concerned enough that it moved some copper out of China that had been backing its lending to Maike.

Even if it can secure support from the government and state banks, industry executives say Maike may struggle to maintain its dominant role in the Chinese copper market.

Much as He’s rise was a microcosm of China’s economic boom, his current woes may mark a turning point for commodity markets: the end of an era in which Chinese demand could only go up.

“In some ways Maike’s story is the story of modern China,” said David Lilley, who started dealing with Maike in the 1990s, first as a trader at MG Plc and later as co-founder of trading house and hedge fund Red Kite. “He has skillfully ridden the dynamics of the Chinese economy, but no one was prepared for the Covid lockdowns.”

This account of He’s rise to the pinnacle of China’s commodities industry is based on interviews with business associates, rivals and bankers, many of whom asked not to be named because of the sensitivity of the situation. 

A spokesperson for Maike declined to comment on this story, but said in response to earlier questions from Bloomberg on Sept. 7: “Our company has been deeply involved in the development of the commodity industry for nearly 30 years. It had maintained a steady development as witnessed by everyone. It will soon resume normal operations and continue to contribute to the development of the industry and the local economy.”

Copper Boom 

Born in 1964 in the Chinese province of Shaanxi, He’s first encounter with copper came when he got a job procuring industrial materials for a local firm. As a young man, he was paid to guard cargoes of copper in trains crisscrossing China — which could be a cold job on freezing winter nights.

In 1993, He and several friends established Maike in the western city of Xi’an, known as the capital of China’s first emperor and the location of the iconic Terracotta Army statues. The group took out a loan of 50,000 yuan (about $7,200) to buy and sell mechanical and electrical products. But He’s early encounter with copper had made an impact, and they quickly moved their focus to scrap metal, copper wire and refined copper.

With a personable nature, a broad grin and a light-hearted sense of humor, He was a natural commodity trader whose charisma would help him build a wide network of friends and business contacts.

As China’s economy liberalized, He used his connections to make Maike a middleman between big international traders and China’s burgeoning throng of copper consumers.

In the space of 15 years, China would go from consuming a tenth of the world’s copper supply to 50%, triggering a supercycle of skyrocketing prices for the metal which is used in electrical wires in everything from power cables to air-conditioning units.

Commodities Casino

This was a wild era when, for many, China’s commodity markets were little more than a casino. Groups of traders would team up to bet together, launching ambushes against their opponents on the other side of the market. The bravest players would be nicknamed after the martial art masters of popular novels.

While many traders came and went in these go-go years, He persisted.

“We did a huge amount of business together over twenty years,” said Lilley. “There were times when the Chinese metals trade was a real wild west and he stood out for his honorableness. He would always make good on his word.”

He also had another characteristic essential for a successful commodity trader: an appetite for risk.

His big break came in the early days of the supercycle. In May 2005, China’s metals industry gathered in Shanghai for the Shanghai Futures Exchange’s annual conference. Copper prices had risen sharply, and most of the producers, fabricators and traders in the audience thought they would soon fall. Even China’s mighty State Reserve Bureau had made bearish bets.

They were shocked to hear Barclays analyst Ingrid Sternby predict that copper would hit new highs as Chinese demand exceeded supply. But she was soon proved right, as prices more than doubled in the next 12 months. The SRB’s losses became a national scandal, and most Chinese traders missed the opportunity to cash in on the gains.

He was not among them. Paying close attention to demand from his network of Chinese consumers, he had built up a bullish position and profited handsomely from the global price surge.

It was a pattern he would successfully repeat many times over the years. His preferred strategy involved selling options — on the downside, at the price his Chinese customers were likely to see as a buying opportunity, and on the upside, at a price they were likely to consider too dear.

While he enjoyed some of the trappings of success, people who have known He for many years say he remained down-to-earth even as his net worth swelled to levels that probably made him, at his peak, a dollar billionaire.

In Shanghai, he would regularly have lunch at a restaurant serving cuisine from Xi’an, where he’d eat his favorite steamed cold noodles and fried leek dumplings for 50 yuan ($7).

Financial Flows

The evolution of He’s business mirrored the changes taking place in the Chinese business world. Although he had started simply as a distributor of physical copper, he soon pioneered the growing interconnections between the commodities business and financial markets in China.

As Maike grew to become the country’s top copper importer, He began to utilize the constant flow of metal to raise financing. He could ask for prepayments from his end customers, and also borrow against the increasingly large volumes of copper he was shipping and holding in warehouses. Over the years, the connection between copper and cash became well established, and the ebbs and flows of China’s credit cycle became a key driver of the global market.

He would use money raised from his copper business to speculate on the exchange or, increasingly, invest in China’s booming real estate sector. Starting in around 2011, He built hotels and business centers, and even his own warehouses in Shanghai’s bonded zone.

“In some ways Maike’s story is the story of modern China”

As the state became an ever more dominant force in China’s business world, He turned his focus to investing in his hometown, Xi’an, backing projects under Xi Jinping’s Belt and Road Initiative.

This year, however, He’s empire started to wobble. 

The city of Xi’an faced a month-long lockdown in December and January, and further restrictions in April and July as Covid re-emerged, hurting He’s property investments. His hotels sat almost empty for months, and some commercial tenants simply stopped paying rent.

Maike was one of a number of companies that plunged their fortunes into the property market in the boom years, said Dong Hao, head of the Chaos Ternary Research Institute. “After the sharp turnaround in real estate last year, such companies have encountered various difficulties,” he said.

Nickel Squeeze

The Chinese economy’s wider malaise has also caused the copper price to slump, while at the same time Maike suffered the result of growing caution among banks toward the commodity sector in China. Trust in the industry was hurt by the historic nickel squeeze in March, as well as several scandals involving missing aluminum and copper ores.

In recent weeks, Maike began experiencing difficulties paying for its copper purchases, and several international companies — including BHP Group and Chile’s Codelco — paused sales to Maike and diverted cargoes.

The future is uncertain. He met a group of Chinese banks in late August at a crunch meeting organized by the local Shaanxi government. Maike later said that the banks had agreed to support it, including by offering extensions on existing loans.

But its trading activity has largely ground to a halt as other traders grow increasingly nervous about dealing with the company. And, in the wake of Maike’s troubles, some of the biggest banks in the sector are pulling back from financing metals in China more generally.

Within China, He’s woes elicit mixed emotions. Many mourn his situation as tragic for the Chinese commodities industry and emblematic of an economy increasingly dominated by state companies. 

Others would be less sad to see the end of a business model that elevated copper to a financial asset and sometimes caused import margins to diverge from physical fundamentals.

“For many years, traders like Maike have been quite important in the importation of copper into China — they’ve bought very consistently to keep the flow of financing going,” said Simon Collins, the former head of metals trading at Trafigura Group and the CEO of digital trading platform TradeCloud. “With the property market like it is, I think the music could be stopping.”

–With assistance from Winnie Zhu.

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Elon Musk’s ‘peace’ plan for Russia and Ukraine met with backlash

Elon Musk took a break from his day job of leading carmaker Tesla and space cargo company SpaceX to post a “peace” plan for ending the war in Ukraine. But his proposal was quickly met with backlash—including from Ukrainian President Volodymyr Zelensky.

On Monday, Musk posted a poll on Twitter with four suggestions to ending the war. The first: Enlist the United Nations to supervise a redo of the recent sham elections by Russia of four Ukrainian regions that it formally annexed last week. Next, he called for Crimea—invaded by Russia in 2014 and currently occupied by it—to formally become part of Russia. Then, he said Crimea’s water supply should be assured. And lastly, he argued, Ukraine should remain neutral rather than joining NATO. 

“This is highly likely to be the outcome in the end – just a question of how many die before then,” Musk wrote, as a follow up. “Also worth noting that a possible, albeit unlikely, outcome from this conflict is nuclear war.” 

Less than three hours after his first tweet, Zelensky responded to Musk with his own poll, mocking Musk’s plan. 

“Which @elonmusk do you like more?” Zelensky asked. The two choices? One who supports Ukraine, and one who supports Russia. 

Ukraine’s ambassador to Germany, Andrij Melnyk, also piled on Musk in atypical fashion for a diplomat. “Fuck off is my very diplomatic reply to you,” he wrote. Melnyk later added that no Ukrainian would ever buy a Tesla, telling Musk “good luck.”

Musk, however, persisted. 

“Let’s try this then: the will of the people who live in the Donbas & Crimea should decide whether they’re part of Russia or Ukraine,” he wrote—asking his Twitter followers to answer either “yes” or “no.”

Financial Times correspondent Christopher Miller replied to Musk’s tweet, referring to the Ukrainian Independence Referendum, when Ukrainians were asked to vote on the country’s independence.

“Let’s not try that, @elonmusk,” he wrote. “The people of Donbas & Crimea made their decision in 1991, when Ukrainians from those areas & all others voted freely & unanimously to be in Ukraine.” 

Donbas, a region in Eastern Ukraine, is now nearly fully occupied by Russia. But Ukraine has vowed to liberate it. 

In suggesting Crimea—a peninsula that’s been at the center of Russia and Ukraine’s conflicts—should formally become part of Russia, Musk made clear his belief that the region belongs to Russia, adding that Crimea’s being transferred to Ukraine from Russia by Soviet Premier Nikita Khrushchev was a “mistake.” 

A top advisor to Zelensky responded sarcastically to Musk’s Twitter diplomacy  by saying there was a “better peace plan”—including Ukraine liberating its territories, Russia demilitarizing and denuclearizing so it can no longer threaten others, and war criminals be put on trial. 

It’s not just Ukrainian officials who pushed back against Musk. Many of his Twitter followers sounded off in the comments, calling him a “disappointment” and asking that he refrain from weighing in on a topic so outside of his expertise.  

Despite the often hostile response, Musk gave his peace plan one more push on Twitter. 

“Russia is doing partial mobilization. They go to full war mobilization if Crimea is at risk. Death on both sides will be devastating,” the tweet said. “Russia has >3 times population of Ukraine, so victory for Ukraine is unlikely in total war. If you care about the people of Ukraine, seek peace.”

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Global recession could happen because of wealthy nations raising interest rates, United Nations says

Governments around the world are determined to bring down inflation whatever the cost, but a growing chorus of voices is pointing out that aggressive monetary policies could have some serious and long-lasting consequences on the world economy.

Central banks in the U.S., Europe, and the U.K. have pursued relentless monetary tightening policies this year to reduce domestic inflation, but transnational institutions including the World Trade Organization and the International Monetary Fund have warned that this approach could push the world into a long period of low economic growth and persistently high prices, according to a Monday report.

“The world is headed towards a global recession and prolonged stagnation unless we quickly change the current policy course of monetary and fiscal tightening in advanced economies,” the UN Conference on Trade and Development (Unctad) cautioned in an annual global trade forecast report released on Monday.

The report predicted that current monetary policies in wealthy nations could spark an economic downturn worldwide, with growth slipping from 2.5% in 2022 to 2.2% next year. The UN says that such a slowdown would leave global GDP well below its pre-pandemic norm, and cost the world economy around $17 trillion, or 20% of the world’s income. And developing nations will be the most negatively impacted, according to the report, and many might be facing a recession worse than any financial crisis in the past 20 years.

“The policy moves that we have seen in advanced economies are affecting economic, social, and climate goals. They are hitting the poorest the hardest,” Unctad director Rebeca Grynspan said in a statement accompanying the report’s release.

“They could inflict worse damage than the financial crisis in 2008,” Grynspan said.

A ‘policy-induced’ recession

The UN agency made clear it will hold central banks around the world responsible for causing the next global recession.

“Excessive monetary tightening and inadequate financial support” in advanced economies could backfire spectacularly, resulting in high levels of public and private debt in the developing world, the report says.

Rising interest rates and fears of a coming recession have sent the value of the U.S. dollar soaring against all other currencies this year. And while this has been great news for American tourists traveling abroad, it’s a fiscal nightmare for developing countries, where import prices are rising fast and servicing dollar-denominated debt is becoming untenably expensive.

Debt levels in emerging markets have been hitting record highs for months, but the strong dollar has exacerbated uneven balances and raised inflation in developing nations as well, according to a separate economic report from the UN published on Monday.

With debt becoming more expensive to service, emerging economies have fewer funds available to invest in health care, climate resilience, and other critical infrastructure, the Unctad report warned, which could lead to a prolonged period of economic stagnation.

“We may be on the edge of a policy-induced global recession,” Grynspan said. 

The report urged advanced economies to consider ways to reduce inflation other than raising interest rates. Grynspan insisted that inflation in every country today is because of a “distributional crisis,” caused by supply-chain bottlenecks unresolved from the pandemic-era, and recommended wealthy nations invest more in developing nations and optimizing supply chains around the world.

Grynspan also called for more debt relief and restructuring packages for emerging economies that are struggling to service their debt.

Unctad joins a growing number of transnational institutions calling on wealthy nations to consider what their efforts to reduce inflation at home is doing to the global economy. Last week, World Bank president David Malpass urged wealthy countries to focus on the supply side of the inflation problem by investing more in production in developing nations and in optimizing supply chains.

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Khloé Kardashian takes a brain scan to prove her emotional trauma

If you have the resources, why not undergo a $3,500 test to prove your brain’s been impacted by cheating, loss, and other forms of emotional trauma. Khloé Kardashian did just that, aiming to prove she’s survived emotional trauma and to counter an online quiz she took that said she lacks resilience. 

In the latest episode of Hulu’s The Kardashians, Khloé underwent a single-photon emission computed tomography, or SPECT scan, after being convinced by sister Kendall Jenner who says it showed her she “100%” has anxiety. The scan is a nuclear imaging tool that uses a gamma camera to examine the brain’s activity, producing a 3D image for a doctor to use to see which areas of the brain are most active. X-rays are helpful to examine the body’s anatomy but have difficulty capturing soft tissue the way a nuclear scan can, which is more helpful at looking at organ function, according to Johns Hopkins Medicine. 

Khloé met with Dr. Daniel Amen, a psychiatrist and author of You, Happier: The 7 Neuroscience Secrets of Feeling Good Based on Your Brain Type. He explained that the SPECT scan can show where her brain’s blood is flowing, and measures brain activity. 

“It looks at how your brain works,” he explains to Khloé. Other celebrities, including Bella Hadid, have also take the scan with Amen.

When looking at the imaging results of the “emotional brain” scan, Amen explains how you can assess which parts of the brain are overactive or “way too busy” based on blood flow, a way to show the impact of anxiety. 

“You worry, and you can be anxious, and you’ve had trauma,” says Amen, as he describes Khloé’s scan and shows a “diamond” on the screen. “This often will go with emotional trauma.” 

Amen showed Khloé her physical or outer brain image which was “hurt.” Khloé opened up on the show about being in a car crash when she was 16, something the physical image of the brain scan picked up on. The other image Amen showed was the emotional brain scan. She also noted her dad passing away when she was 19, her emotional stress dealing with a past partner who struggled with drug abuse, as well as finding out she was being cheated on while she was pregnant. A lot of this trauma she learned from social media, she says.

“It surprises me that a scan is able to pick up on things that are emotional and not just physical,” Khloé says in a reflection of her experience on the show. This type of scan is used to identify other mental disorders like ADHD and dementia. 

A study found that traumatic events have an impact on the brain, specifically in the amygdala, which regulates emotions; the hippocampus, which regulates memory; and the prefrontal cortex, which plays a role in decision making. For those with anxiety, for example, brain scans can show overactivity in the amygdala or emotional processing area, although they aren’t the sole way of identifying mental health issues.  

Khloé’s brain scan shows she may have been affected by cheating or loss, but emotional trauma doesn’t have to be permanent. Neuroplasticity, which is the brain’s ability to change and create new thought patterns, is a hopeful note that the brain’s emotional trauma is not permanent. 

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