the times | Saturday April 30 2022 K1 49Business
Economists
doubt GDP
target can
be achieved
Mehreen Khan Economics EditorKEVIN FRAYER/GETTY IMAGESThe joint administrator of NMC Health
has filed a claim of at least $2.5 billion in
the High Court against EY, the former
auditor of the collapsed private health-
care company.
Alvarez & Marsal said yesterday that
as “part of our wide-ranging investi-
gation into the situation, we have
looked at the role of the auditors and
have now launched formal legal pro-
ceedings against EY in the UK for audit
negligence with regards to its work with
the company between 2012 and 2018.
“As administrators, we have an
obligation to maximise returns for
creditors and this action is part of those
wider efforts.”
Alvarez & Marsal was appointed in
April 2020 after an accounting scandal
at NMC. The Financial Reporting
Council, the accountancy watchdog,The return of China’s “zero Covid”
lockdown policy could not have come
at a more perilous time for the global
economy. As Russian tanks rolled into
Ukraine, some of China’s biggest cities
were suffering their worst outbreaks of
Covid-19 since the pandemic began.
China responded by reimposing
draconian social and economic restric-
tions that jeopardise Beijing’s target of
5.5 per cent annual growth this year.
Yesterday Beijing promised to “step
up policy support, work hard to achieve
economic growth and maintain growth
within a reasonable range”, but did not
signal an end to regional lockdown
measures.
Economists expect China to miss its
GDP target this year as lockdowns
prevent workers from leaving their
homes, businesses operate at reduced
capacity and the war in Ukraine
increases commodity prices. Maggie
Wei, of Goldman Sachs, expects Chi-
nese growth to slow to 4.5 per cent this
year, despite the stimulus promised by
the government.
China’s economy rebounded im-
pressively last year as exports surged.
Its GDP expanded by 8.1 per cent in
2021 but that rate slowed to 4.8 per cent
in the first quarter of this year. The
International Monetary Fund forecasts
4.4 per cent growth in 2022.
Official economic data may not
“accurately reflect the reality on the
ground”, Julian Evans-Pritchard, senior
China economist at Capital Economics,
warned, adding that key metrics such as
consumer spending and export
demand suggested that the economy
had been stagnant since late 2021. “The
authorities will most likely publish
GDP figures showing them meeting
their annual growth target on paper,
but the reality will be a lot less rosy. We
expect the economy to expand by only
2 per cent this year,” he said.
Beijing’s central bank has provided
modest cuts to interest rates and has
warned against a falling currency. The
yuan is on course for its worst month
against the US dollar. A weakening cur-
rency raises the risks of large capital
outflows as inventors dump Chinese
assets. Craig Botham, of Pantheon
Macroeconomics, said this was one of
the factors preventing the bank from
cutting rates too drastically.lockdown, I began to stockpile on rice,
flour, cooking oil, pasta and canned
food. A friend of mine even bought a
freezer to store enough food.
I’ve got my booster shot and I know
the chances are slim that it would do
much harm to my health if I should
get infected, but in Beijing the
coronavirus is the state’s No 1 enemy
and that means containing it trumps
everything else.
A single positive case can send an
entire residential building into a full
lockdown and the risks are real that I
could be separated from my small
children when faceless officials,
hidden behind masks and suits of
PPE, haul me away to an isolation
centre. It would be a nightmare if my
children were to be infected and
taken away from me.
Just as I was reasoning with myself
that the worst was unlikely to happen,
there was bad news. My domestic
helper, who picks up my children
from nursery in the afternoon and
cooks them a meal while I am at
work, is getting alerts. Beijing was
sealing off three and a half square
miles of blocks several metro stops
from my home, and that’s where she
lives. The alerts urged her to go home
immediately and stay there until
further notice. She was nervous about
the lockdown, and I dreaded losing
her help.
My phone started to buzz with
alerts from my grocery shopping app,
informing me that it actually did not
have eggs or most of the leafy
vegetables I had already paid for. The
delivery guy came with a small bag of
potatoes, three heads of tiny baby
cabbages and a jar of chilli pepper.
The next day, strong winds blew
away the city’s air pollutants and my
mood was lifted when the city
government did not impose further
restrictions. Local markets were again
full of vegetables and fruits and there
were people in the streets, though the
traffic was much thinner. I met two
friends at a coffee shop and we were
the only customers. We exchanged
stories of panic buying and joked that
it would be a huge disappointment if
a lockdown did not materialise.
On Wednesday, schools in a nearby
district were ordered to go online and
parents in Chaoyang could not help
but believe we would be the next.
On Thursday morning, the school
sent an emergency notice via a group
chat about the closure. I could hear
fellow parents groan through my
phone.
When I told my children about the
school closure, they immediately
knew the reason — the only reason
the school has had to close from time
to time in their two years of going to
nursery.
At the age of five, they are fluent in
the pandemic lingo.‘It would be a nightmare if
my kids were taken away’
my district of Chaoyang tested three
times in five days.
It marked the first time that I was
subject to mandatory mass testing
since the pandemic began more than
two years ago and I knew the
situation could get worse after
alarming reports from Shanghai, once
a model in fighting the pandemic with
minimum disruption to daily life but
which had failed to contain the
Omicron variant.
I was not unprepared, either. After
my friends in Shanghai complained of
a lack of food during their extendedI
t started on Monday morning,
when I tried to order my daily
supply of leafy vegetables and
fresh fruits on my usual grocery
shopping app (Didi Tang writes
in Beijing). They were sold out. I
switched to a lesser-known app, but italso ran out of fresh produce. A third
app claimed it still had leafy greens,
potatoes and eggs, so I swiftly placed
the order and hit the pay button.
It was the morning after Beijing
reported 24 infections and announced
plans to get the 3.5 million people inshops in Beijing amid new lockdown rules. Some residents, sealed behind barriers, have had to receive emergency suppliesEY sued over audits of NMC Health
said in May 2020 that it was looking at
EY’s audit of NMC’s financial state-
ments for the year to the end of 2018.
A spokesman for EY said yesterday:
“We are aware a claim has been sub-
mitted to the court by the administra-
tors of NMC Health Plc. We will defend
the claim vigorously.”
NMC was founded by Bavaguthu
Raghuram Shetty, 79, in the 1970s and
became the largest private healthcare
provider in the United Arab Emirates,
operating in 19 countries, including
Britain, where it was floated in 2012. It
descended into crisis seven years later
after Muddy Waters, a San Francisco-
based short-seller, published a damn-
ing report.
An investigation in 2020 by Freeh
Group, a management firm commis-
sioned by NMC, led to the discovery of
$6.6 billion in debt, almost triple the
figure the company reported in June- Unsecured creditors, including
Barclays, are owed an estimated
$7.2 billion and are expected to receive
15.5 per cent of the debt, or $1.1 billion,
according to previous administration
filings. Returns could rise as the
administrator tests the validity of the
debt claims.
Last month, numerous operating
companies of NMC exited administra-
tion in the UAE and continue to trade.
The former NMC plc is in administra-
tion in London as Alvarez & Marsal
pursues claims.
It emerged in November 2020 that
Alvarez & Marsal was pursuing a
lawsuit against EY and had issued a
preliminary notice of potential claim.
The formal filing of the High Court
legal claim this week was first reported
by Sky News. Alvarez & Marsal
previously sent letters before action to
12 former NMC directors.
Alex RalphRising rates spur NatWest
towards surprise profit jump
NatWest has shrugged off worries
about soaring inflation to announce a
surprise jump in first-quarter profits.
Buoyed by rising interest rates, pre-
tax operating profits at the FTSE 100
bank, which remains 48 per cent-
owned by the taxpayer after its bailout
during the financial crisis, rose by 41 per
cent to £1.25 billion, from £885 million a
year earlier. City analysts had expected
them to decline to £755 million.
Revenues were up 17 per cent at
£3 billion, helped by a 10 per cent rise in
net interest income — the difference
between the interest earned on loans
and the interest paid on deposits — to
more than £2 billion. The boost from
rising rates came as NatWest enjoyedgrowth across its businesses, with net
lending rising by £6.6 billion to
£365.3 billion.
Banks have been squeezed in recent
years by interest rates being kept at
historically low levels by central banks.
However, rate increases in recent
months to tackle rampant inflation are
boosting lenders, especially NatWest,
which is sensitive to changing rates.
Despite the encouraging profits, Nat-
West’s shares fell by 5p, or 2.2 per cent,
to below 218p after the bank told City
analysts during a presentation that the
spread between the rates it was offering
customers for mortgages and the rate it
paid for its own funding had narrowed.
There was also market speculation that
the government might be preparing to
sell more shares.Ben Martin Banking Editor