| | | | | | | Presented By OurCrowd | | | | Axios Markets | | By Emily Peck and Matt Phillips · Jun 30, 2022 | | 👋 Hey, hey. It's Matt. We're heading into the final stretch toward the holiday weekend and a week of vacation with the fam for me. But before then, we're getting a new read on the Fed's fave inflation gauge at 8:30am ET, which should set the tone for the trading day. Today's newsletter, edited by Kate Marino, is 1,083 words, 4.5 minutes. | | | | | | 1 big thing: The leverage of loans |  Note: Includes official development assistance and other official flows; Data: AidData; Chart: Axios Visuals The G7 unveiled a plan this week to invest $600 billion in infrastructure projects in developing countries, Axios' Kate Marino writes. Why it matters: The Partnership for Global Infrastructure and Investment (PGII) appears to be a bid to counter China's influence across a wide swath of the world. - Over the last two decades, China's morphed into the single largest lender to lower- and middle-income countries, igniting Western concerns that it's using its coffers as a tool for influence and control over countries badly in need of development funds.
The big picture: China's ambitious lending program, the Belt and Road Initiative (BRI), is now in a state of crisis as sovereign debt distress spreads. - 60% of BRI loans are to countries now in financial distress compared to 5% in 2010.
- Meanwhile, 35% of the BRI infrastructure project portfolio faces a major implementation problem, according to AidData, which maintains one of the most comprehensive datasets on Chinese development finance.
- During its peak years, BRI was lending about $85 billion per year, per AidData; that's down to about $14 billion last year, Bloomberg reported.
The intrigue: The most destructive part of BRI, critics say, is the "debt trap" it lays for poor nations that will be forced to turn over possession of key infrastructure to China when they can't repay their loans. - Although that kind of asset seizure has not actually taken place (as The Atlantic explains), China's loans have in many cases saddled poor countries with too much debt — and it's been unwilling to engage in constructive restructuring talks.
Meanwhile, a rebranding: This week's PGII announcement was really a relaunch of the Build Back Better World partnership announced at the June 2021 G7 meeting. - That program struggled to sign on international partners — and was saddled with a name evoking President Biden's failed domestic legislation.
- As part of the fresh PGII, the U.S. pledged to mobilize $200 billion over the next five years, via a combination of federal financing, grants and private sector investments.
"The question is, can you pull together mixed sources of financing to continue an infrastructure push in countries that have basically reached their limits in terms of debt," says Jeremy Mark, senior fellow with the Atlantic Council, a think tank. Between the lines: If PGII is a play to significantly boost U.S. influence, it's probably too little, too late, given the numbers involved, he adds. - But if implemented well — an open question, given the tangle of U.S. agencies involved, and coordination with other G7 countries — the plan could offer a small minority of the 140 BRI recipient countries a viable alternative to Chinese purse strings.
The bottom line: "I think [the G7] are trying to change the narrative, create more choice in the infrastructure financing market — and pick off some of the countries that have a bad taste in their mouth from their experience with BRI," says Brad Parks, AidData's executive director and lead China researcher. Go deeper. |     | | | | | | 2. Catch up quick | | 💸 CEO stock sales raise questions about insider trading. (WSJ) 📈 Chinese stocks set for largest monthly rise since 2020. (FT) 📉 U.S. markets head to worst first half in decades. (WSJ) | | | | | | | | 3. "An open question" on abortion benefits |  | | | Illustration: Gabriella Turrisi/Axios | | | | Companies now face the possibility that their abortion health care benefits might be a criminal liability, Emily writes, along with Arielle Dreher and Tina Reed of Axios Vitals. Why it matters: The shock the Supreme Court delivered in overturning the federal right to abortion — in place for a half-century — is starting to ripple through corporate America. - Some major employers like Starbucks, Tesla and Amazon doubled down on promises to continue abortion coverage.
- But the way some states are threatening criminal charges for facilitating the procedure could give other employers pause, potentially creating a confusing patchwork of benefits and gaps in employer-sponsored care.
What they're saying: "It seems there is an open question with criminal charges and whether these (policies) would be considered aiding someone who is getting an abortion," Joelle Abramowitz, a University of Michigan economist who studies health insurance, tells Axios. - The issue will likely play out in the courts and evolve as more states update their anti-abortion laws.
- Lawyers who work in this space say this is all employers are currently talking about with regard to health insurance.
State of play: Most large companies have self-funded health plans, regulated by a federal law that pre-empts state regulations. - Yes, but: Businesses that offer coverage through the purchase of insurance — typically smaller employers — are still subject to state insurance laws and rules.
Between the lines: A company likely can't get in trouble right now just for having a policy to cover abortion or associated travel costs. But it's possible the employer could be compelled to share information as part of a criminal investigation — and the legal landscape is fast-changing. The bottom line: Some employers have made bold statements in the aftermath of the Supreme Court ruling. - But, but, but: "I wouldn't be surprised to see some employers stop covering abortion given that potential risk," Abramowitz said.
Go deeper. | | | | | | | | A message from OurCrowd | | Look beyond the stock market | | |  | | | | Explore VC investments at OurCrowd and find long-term potential outside the daily ups and downs of the stock market. OurCrowd vets hundreds of startups, then brings you a select few identified for their outsized growth potential. Go beyond the stock market. | | | | | | 4. 🛢Charted: Barreling lower |  Data: FactSet; Chart: Axios Visuals American stockpiles of crude oil at the key hub in Cushing, Oklahoma, fell to the lowest level since 2014, as domestic oil markets remain tight, Matt writes. Why it matters: Skimpy energy supplies have driven oil and gasoline prices sharply higher this year and contributed to our stubborn inflation. - Supplies at the oil storage center in Cushing are closely watched because it's where physical deliveries of benchmark futures contracts for West Texas Intermediate crude occur.
State of play: The shortage stems from sanctions on Russia's energy production, while U.S. drillers haven't boosted supplies dramatically - The oil industry and Republican politicians argue that moves by the Biden administration — like blocking the Keystone XL pipeline on environmental grounds — deter investments in future production.
The bottom line: With oil demand above supply, high prices are likely to be with us for a while — or at least until a weakening economy softens demand. | | | | |  | | | | If you like this newsletter, your friends may, too! Refer your friends and get free Axios swag when they sign up. | | | | | | | | 5. 📉 Deal activity dips |  Data: Refinitiv; Chart: Jared Whalen/Axios Global merger and acquisition activity fell 21.1% in the first half of 2022, including a 28% decline for U.S. targets, according to preliminary data from Refinitiv, Axios' Dan Primack writes. Why it matters: Deal activity can be viewed as a proxy for business sentiment, and these numbers suggest pessimism. The big picture: The dollar drop-off between the first half of 2021 and the first half of 2022 is entirely attributed to corporate mergers - Global private equity activity actually rose by 3.3% (although the number of private equity deals fell precipitously).
Read more. | | | | | | | | A message from OurCrowd | | Market up, market down –– find alternative investments | | |  | | | | Find long-term investment growth opportunity outside the chaos of today's stock market. OurCrowd makes it easy for you to diversify your investments into a variety of expertly vetted, high-growth private companies. Invest alongside VC experts at OurCrowd. | | | | 📺 1 thing Kate loves: "Roadrunner," the new documentary about Anthony Bourdain. It's a beautifully intimate film that attempts to capture the complexity of mental illness, fame, and the soul of a searcher. As Bourdain's friend David Chang says, the chef's life and travels were "almost never about the food." |  | It's called Smart Brevity®. Over 300 orgs use it — in a tool called Axios HQ — to drive productivity with clearer workplace communications. | | | | | | Axios thanks our partners for supporting our newsletters. If you're interested in advertising, learn more here.
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