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JPMorgan Chase is caught in U.S-Russia sanctions war after overseas court orders $440 million seized from bank

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JPMorgan Chase CEO and Chairman Jamie Dimon gestures as he speaks during the U.S. Senate Banking, Housing and Urban Affairs Committee oversight hearing on Wall Street firms, on Capitol Hill in Washington, U.S., December 6, 2023. 

Evelyn Hockstein | Reuters

A Russian court sided with state-run lender VTB Bank in its efforts to recoup $439.5 million from JPMorgan Chase that the American lender froze in U.S. accounts after the Ukraine invasion.

The court ordered the seizure of funds in JPMorgan’s Russian accounts and “movable and immovable property” including the bank’s stake in a Russian subsidiary, according to a court order published Wednesday.

The order came after VTB filed a suit last week in a St. Petersburg arbitration court, seeking to be made whole for funds frozen in the United States, and asking for relief because JPMorgan has said it plans to exit Russia.

The next hearing in the Russian case is July 17.

JPMorgan declined to comment. VTB didn’t immediately respond to a request to comment.

The order was the latest example of American banks getting caught between the demands of Western sanctions regimes and overseas interests. JPMorgan is the biggest U.S. bank by assets and run by veteran CEO Jamie Dimon.  

Two years after Russia invaded Ukraine, the Biden administration has mounted an unprecedented set of sanctions, oil price caps and trade restrictions designed to weaken Moscow’s military machine.

On Wednesday, President Joe Biden signed into law a sweeping foreign aid bill that includes new powers for U.S. officials to locate and seize Russian assets in the United States. It also boosted an ongoing American effort to convince European allies to release Russian state assets to assist Ukraine.

In its own lawsuit against VTB last week in the Southern District of New York, JPMorgan sought to block VTB’s effort, noting that U.S. law prohibits the bank from releasing VTB’s $439.5 million.

This leaves JPMorgan exposed to a nearly half-billion-dollar loss, for abiding by U.S. sanctions.

The American bank, seeking to block VTB’s effort, said the Russian company broke its contractual promise to seek relief in American courts, instead finding a friendlier venue in Russia.

JPMorgan said that Russian courts have enabled similar efforts by Russian lenders against American or European banks at least a half dozen other times.

JPMorgan said it faced “certain and irreparable harm” from VTB’s efforts.

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Mainland Chinese investors snap up a record amount of Hong Kong stocks

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Hong Kong’s stock exchange reported its highest quarterly profit in nearly four years after China’s stimulus measures boosted trading and listing volume.

Bloomberg | Bloomberg | Getty Images

BEIJING — Mainland Chinese investors are piling into the Hong Kong stock market at record volumes as its tech-heavy Hang Seng Index trades around three-year highs.

Net mainland Chinese purchases of Hong Kong stocks hit a record 29.62 billion Hong Kong dollars ($3.81 billion) on Monday, according to the Wind Information database.

That was the most since the Hong Kong stock market launched its “connect” program with the mainland, allowing local investors easier access to a select number of stocks traded offshore. The Shanghai Connect launched in November 2014, while the Shenzhen Connect opened in December 2016.

The Hang Seng Index traded around 0.7% lower Tuesday morning following a sharp sell-off in U.S. stocks overnight on worries about the impact of tariffs on global growth.

Net buys via the Shanghai Connect reached nearly 18 billion HKD on Monday, while those from the Shenzhen Connect reached 11.63 billion HKD, the data showed.

Hong Kong-traded shares of Alibaba and Tencent, both of which are not traded in mainland China, saw the largest net purchases, according to Wind data.

China last week affirmed its pro-growth stance by emphasizing plans to support private sector tech innovation, and increasing its fiscal deficit to a rare 4% of gross domestic product including an expanded consumer subsidies program.

There could be a significant reordering of investment flows out of the U.S. and into Europe and Asia

Citi’s global macro strategy team on Monday upgraded its view on Chinese stocks — namely the Hang Seng China Enterprises Index — to overweight, while downgrading the U.S. to neutral.

“One key reason why we have not been focused on Chinese equities is tariff risk,” the analysts said.

“Abstracting from this issue, we believe the case for China tech was clear. A) DeepSeek proved that China tech is at the Western technological frontier (or beyond), despite the export controls. This was followed by the release of Tencent’s Hunyuan (an AI video generator) and Alibaba’s QwQ-32B,” they added.

‘Cheap and under-owned’ stocks

Chinese and foreign institutional investors started piling back into Chinese stocks after Beijing started announcing more forceful stimulus plans in late September. Chinese equities got another boost after the emergence of DeepSeek’s latest model in late January prompted a global tech sell-off. More major tech companies are traded in Hong Kong than in mainland China.

Manishi Raychaudhuri, CEO of Emmer Capital Partners, said investors could soon pour money back into emerging markets, particularly Asian emerging markets, once global stocks emerge from the current rut.

“I would say largely it would still be Greater China, which means largely Hong Kong, China. The stocks are cheap and under-owned,” Raychaudhuri told CNBC’s “Street Signs Asia” on Tuesday.

“We have seen some degree of consumption boost in the form of what the policymakers have been doing since January. It is not yet to the full extent that the market would like to have but at least it is a departure from the trend of many years,” he continued.

“So, right on top of my list, it would still be Hong Kong, China, the internet stocks, the large internet platforms and also some of the consumption-related names, mostly in athleisure, the restaurant stocks and other travel and tourism-related names,” Raychaudhuri said.

— CNBC’s Sam Meredith and Anniek Bao contributed to this report.

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China’s $41 billion plan to boost consumption is just a start

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QINGDAO, CHINA – JANUARY 08: Customers browse at an electronics shop amid an ongoing nationwide trade-in subsidy program on January 8, 2025 in Qingdao, Shandong Province of China.  

Zhang Ying | Visual China Group | Getty Images

BEIJING — China’s latest move to boost consumption isn’t meant to jolt all kinds of spending.

Policymakers last week doubled subsidies for a consumer trade-in program to 300 billion yuan ($41.47 billion) this year, matching market expectations — and again steering clear of cash handouts. The subsidies will go toward around 15% to 20% of the purchase price for select products, including mid-range smartphones and home appliances.

That’s an expansion from last year’s 150 billion yuan program, announced in the summer, for a narrower range of products.

The new round of subsidies are “pretty substantial” and will likely support retail sales, similar to how e-commerce companies saw a sales boost in certain products late last year, Jacob Cooke, co-founder and CEO of WPIC Marketing + Technologies, told CNBC on Monday.

While there’s skepticism that the impact of a one-time subsidy won’t last long, Cooke said more subsidy programs will likely follow. He added that China’s “aggressive” 5% GDP growth target and prioritization of consumption indicate that Beijing will do more to support growth — without relying as much on the old playbook of infrastructure spending.

Deer Stags' Rick Muskat on the impact of tariffs on China on his shoe business

Chinese Premier Li Qiang last week delivered an annual report on government work that named boosting consumption as the top task for the year ahead.

That’s the first time in a decade that Beijing has given consumption such high priority, said Laura Wang, chief China equity strategist at Morgan Stanley. She added that the government work report cited “consumption” 27 times — the most mentions in a decade.

While Beijing has not followed the U.S. or other countries in handing out cash to consumers, Chinese policymakers have increasingly acknowledged the need to counter deflationary pressure at home.

China must focus more on domestic demand given the possibility of “new shocks” to overseas demand, Shen Danyang, head of the drafting group of the Government Work Report and director of the State Council Research Office, told reporters Wednesday in Mandarin, translated by CNBC.

China’s retail sales grew by 3.5% last year, a sharp slowdown from 7.2% growth the prior year. In a sign of a persistent drop in demand, China’s consumer price inflation in February fell below zero for the first time in over a year, according to official data released Sunday.

If prices are too low, it becomes difficult to incentivize businesses to invest and increase consumers’ income, Chen Changsheng, member of the drafting group of the Government Work Report and deputy director of the State Council Research Office, said at the same press conference on Wednesday.

He noted that the work report called for four tasks to address the depressed prices: expanding fiscal support, working to lift consumption, using regulation to prevent price wars and making a greater effort to stabilize real estate prices.

Real estate accounts for the majority of household wealth in China. A crackdown on property market leverage in 2020 spurred a slump that only started to turn around late last year — after a high-level policy call in September to halt the real estate sector’s decline.

Stabilizing real estate can have a significant effect on boosting consumption, similar to wealth effects from a rise in the stock market, said Meng Lei, China equity strategy analyst at UBS Securities, noting expectations that the mainland China A share market has become more strategically important.

Stocks have rallied after China’s stimulus announcements in recent months.

The 300 billion yuan for the subsidies comes from an increase in ultra-long special government bonds for 2025. China said last week it is raising its deficit to 4% as it pursues “proactive fiscal policy.”

NEW YORK, NY – SEPTEMBER 19: The Chinese flag flies outside the New York Stock Exchange during the initial price offering (IPO) for Alibaba Group on September 19, 2014 in New York City. The New York Times reported yesterday that Alibaba had raised $21.8 Billion in their initial public offering so far. 

Andrew Burton | Getty Images News 

Also helping sentiment are signs that Beijing appears to be turning more business friendly. Chinese President Xi Jinping held a rare meeting with entrepreneurs last month.

Once businesses are more confident, they can hire more and increase wages. The Chinese premier at the high-level meeting last week vowed more efforts to promote residents’ income growth and ease financial burdens for low-to-middle income groups.

The officials pledged more support for the care of the elderly, children and the broader healthcare system, steps seen critical to bolster the country’s safety net, allowing residents to feel comfortable spending more.

To a certain extent, these measures can help to reduce living costs and release potential consumption, said Pan Xiang, a macro foreign exchange analyst at Nanhua Futures.

Incremental pivot

Economists have long called for a structural re-calibration of the income distribution system and policies seen necessary to stimulating domestic consumption in a meaningful way.

The recent pledges signal that “the door [is] cracking open” yet still “very gradual movement of the leadership toward being comfortable with doing more direct support for consumption,” said Michael Hirson, a fellow at Asia Society Policy Institute’s Center for China Analysis.

“We’re not really there yet in terms of a very forceful push,” he added.

Before more support comes, an underdeveloped social safety net, a gloomy job market and low wages have spurred households to save rather than spend, Hirson said.

Household spending accounts for less than 40% of China’s GDP, significantly lower than the international average of roughly 60%, according to the Organization for Economic Co-operation and Development.

EVs, films, tourism

A look at an implementation plan, released Wednesday, from the National Development and Reform Commission reveals how China is thinking about boosting consumption.

The portion describing tasks for 2025 starts with an entire section on boosting consumption and investment. The report calls for efforts to “increase spending power” and encourage the development of products and scenarios that would encourage consumers to spend.

But it’s not a call to support all kinds of shopping.

Top of mind for policymakers is retail sales of “big-ticket items,” according to the report. China also said it would reduce restrictions on real estate transactions and automobile purchases.

Part of the plan includes developing the experience economy — immersive scenarios that combine film, video games, tourism and traditional Chinese culture — similar to the surge in tourists to historical sites associated with last year’s hit video game “Black Myth: Wukong.”

BEIJING, CHINA – JANUARY 15: People queue up in outside a Miniso store to buy co-branded goods featuring characters from the game ‘Black Myth: WuKong’ on January 15, 2025 in Beijing, China. Miniso and ‘Black Myth: WuKong’ launch co-branded products on January 15. 

Yi Haifei | China News Service | Getty Images

Chinese authorities also said they would improve “mechanisms for regular pay increases” along with the system for paid vacation days. Employees in China typically get fewer than 10 paid days off and several public holidays include days that must be made up by working for part of a weekend.

The report also discussed the continued plan for subsidizing consumer good trade-ins and upgrading equipment.

But two parts of the sub-section focused more on investment — developing talent, infrastructure and ecological projects — as well as building up “security capacity” in basic research for tech innovation and domestic food supplies.

China will soon release a more detailed plan for boosting consumption, Zheng Shanjie, head of the National Development and Reform Commission, told reporters Thursday.

Preliminary data indicates a sales boost from China’s initial 81 billion yuan in consumption subsidies announced in January, ahead of the this month’s parliamentary meeting.

Retail sales of new energy vehicles, for which buyers enjoy trade-in subsidies of up to 15,000 yuan, surged almost 80% to 686,000 units in February from a year earlier, data from China’s auto industry body showed on Monday.

Smartphone sales for the week of Jan. 20 to Jan. 26 surged by nearly 65% from the year-ago period to more than 9.5 million units, “and maintained a high level in the following weeks,” Counterpoint Research said in a late February report.

The analysis said subsidies are likely encouraging Chinese consumers to replace their smartphones earlier than planned, especially when artificial intelligence features are gaining prominence. The firm estimates the first-quarter subsidy to generate at least two to three points of additional growth this year in China’s smartphone sales.

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Stocks making the biggest moves after hours: DAL, ORCL

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