Kansas prosecutor says police should return computers and cellphones seized in raid on newspaper

The Canadian Press
Wed, August 16, 2023 



MARION, Kansas (AP) — A Kansas prosecutor said Wednesday that he found insufficient evidence to support the police raid of a weekly newspaper and that all seized material should be returned in a dispute over press freedoms that the White House acknowledged it is watching closely.

“This administration has been vocal about the importance of the freedom of press, here and around the globe,” White House press secretary Karine Jean-Pierre said at her daily briefing on Wednesday. “That is the core value when you think about our democracy, when you think about the cornerstone of our democracy, the freedom of press is right there.”

She said the raid raises "a lot of concerns and a lot of questions for us.”

On Wednesday, Marion County Attorney Joel Ensey said his review of police seizures from the Marion County Record offices found “insufficient evidence exists to establish a legally sufficient nexus between this alleged crime and the places searched and the items seized."

“As a result, I have submitted a proposed order asking the court to release the evidence seized. I have asked local law enforcement to return the material seized to the owners of the property,” Ensey said in a news release.

The Kansas Bureau of Investigation said Monday it was leading the investigation into the raid and what allegedly prompted it.

Even without the computers, personal cellphones and other office equipment taken in the raid, the small staff scrambled and were able to put out a new edition on Wednesday.

“SEIZED … but not silenced,” read the front-page headline in 2-inch-tall typeface. On Wednesday's front page, stories were focused solely on the raid and the influx of support the newspaper has received.

Police raids last week of the newspaper's offices, and the home of editor and publisher Eric Meyer put the paper and the local police at the center of a national debate about press freedom, with watchdog groups condemning the police actions. The attention continued Wednesday — with TV and print reporters joining the conversation in what is normally a quiet community of about 1,900 residents.

Meyer said all of the returned equipment will be forensically audited to make sure that nothing is missing or was tampered with.

“You cannot let bullies win,” Meyer said. “And eventually, a bully will cross a line to the point that it becomes so egregious that other people come around and support you.”

He added, “We have a staff that’s very experienced, including myself, and we’re not going to take crap."

The raids — which the publisher believes were carried out because the newspaper was investigating the police chief’s background — put Meyer and his staff in a difficult position. Because their computers were seized, they were forced to reconstruct stories, ads and other materials. Meyer also blamed stress from the raid at his home for the death Saturday of his 98-year-old mother, Joan, the paper’s co-owner.

As the newspaper staff worked late into Tuesday night on the new edition, the office was so hectic that Kansas Press Association Executive Director Emily Bradbury was at once answering phones and ordering in meals for staffers.

Bradbury said the journalists and those involved in the business of the newspaper used a couple of old computers that police didn’t confiscate, taking turns to get stories to the printer, to assemble ads and to check email. With electronics scarce, staffers made do with what they had.

“There were literally index cards going back and forth,” said Bernie Rhodes, the newspaper’s attorney, who was also in the office. “They had all the classified ads, all the legal notices that they had to recreate. All of those were on the computers.”

At one point, a couple visiting from Arizona stopped at the front desk to buy a subscription, just to show their support, Bradbury said. Many others from around the country have purchased subscriptions since the raids; An office manager told Bradbury that she’s having a hard time keeping up with demand.

The raids exposed a divide over local politics and how the Record covers Marion, which sits about 150 miles (241 kilometers) southwest of Kansas City.

A warrant signed by a magistrate Friday about two hours before the raid said that local police sought to gather evidence of potential identity theft and other computer crimes stemming from a conflict between the newspaper and a local restaurant owner, Kari Newell.

Newell accused the newspaper of violating her privacy and illegally obtaining personal information about her as it checked her state driving record online. Meyer said the newspaper was looking into a tip — and ultimately decided not to write a story about Newell.

Still, Meyer said police seized a computer tower and cellphone belonging to a reporter who wasn’t part of the effort to check on the business owner’s background.

Rhodes said the newspaper was investigating the circumstances around Police Chief Gideon Cody’s departure from his previous job as an officer in Kansas City, Missouri. Cody left the Kansas City department earlier this year and began the job in Marion in June. He has not responded to interview requests.

Asked if the newspaper’s investigation of Cody may have had anything to do with the decision to raid it, Rhodes responded: “I think it is a remarkable coincidence if it didn’t."

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Salter contributed to this report from O’Fallon, Missouri. Associated Press writer Darlene Superville contributed from Washington.

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Follow John Hanna on Twitter: https://twitter.com/apjdhanna

John Hanna And Jim Salter, The Associated Press

Updates on Kansas newspaper raid: Search warrant revoked; judge has own DUI history

Natalie Wallington
Wed, August 16, 2023 

A prosecutor in Marion County, Kansas, has withdrawn the search warrant that sparked Friday’s controversial police raid of the small town’s newspaper offices.

Marion County Attorney Joel Ensey said in a statement Wednesday that the warrant was based on “insufficient evidence” that a crime had been committed. The seized electronics and documents will be returned to the Marion County Record.

The news followed days of criticism of the police search of the newspaper, which appeared to be aimed at finding evidence about how the paper obtained information that a local restaurateur, who applied for a liquor license, lost her driver’s license over a DUI in 2008.

In addition to the Record’s newsroom, the police also executed search warrants at the home of publisher and co-owner Eric Meyer and the home of Ruth Herbel, a Marion city councilwoman.

First Amendment advocates have said the raid went too far and violated legal protections for newsrooms.

Also Wednesday, new information was reported about the judge who signed the search warrant, who has her own history of drunken-driving arrests.

Here are the latest on developments following the raid on the Marion County Record:

Eric Meyer, the editor and publisher of the Marion County Record, stands outside the newspaper’s office on Monday. The office and Meyer’s home were raided by police on Friday.

Prosecutor orders seized materials to be returned to newspaper office

Marion County Attorney Joel Ensey has withdrawn the search warrant that led to Friday’s police raid. The warrant listed 15 categories of items police could seize on suspicion of “identity theft” and “unlawful acts concerning computers.”

Ensey said he concluded that “insufficient evidence” existed to establish a “legally sufficient nexus between this alleged crime and the places searched and the items seized.”

Bernie Rhodes, the Record’s lawyer who also represents The Star, said Wednesday that all the electronics police seized from the newsroom will be returned. But he argued that this is a small remedy to the harm caused by the raid.

“It does nothing about taking care of the damage that has already occurred from the violation of the First Amendment in the first place,” he told The Star.

Read more: Warrant for Kansas newspaper raid withdrawn by prosecutor for ‘insufficient evidence’

Magistrate Judge Laura Viar signed a search warrant that authorized Marion police to raid the Marion County Record’s newsroom and the home of the editor.

Judge who signed the warrant has her own DUI history

Magistrate Judge Laura Viar, who signed the warrant authorizing Friday’s raid, did so because of allegations that the newspaper had improperly obtained information about a local restaurant owner’s past DUI conviction.

But Judge Viar has a DUI history of her own. She has been arrested at least twice for driving under the influence in two different Kansas counties, an investigation by the Wichita Eagle reported Wednesday.

During a 2012 incident in Morris County, she allegedly drove off-road with a suspended license and crashed into a school building while under the influence. She was running unopposed for Morris County Attorney at the time — and won.

Viar was not sanctioned by the state’s attorney discipline board.

Read the investigation: Judge who approved raid on Kansas newspaper has history of DUI arrests

Marion locals react to the newspaper’s police raid

Tensions ran high in the small town of Marion on Tuesday as residents reacted to Friday’s raid. The newspaper has received support from around the country, including over 1,000 new digital subscriptions in the days since the raid alone.

One resident classified the paper’s coverage as “negative,” while another praised the paper for its watchdog reporting on local government and business issues.

“This newspaper is very good at investigative reporting,” he said.

Read more: Raided Kansas newspaper is known for aggressively covering small town’s many disputes

Vultures roosting on the water tower in Marion, Kansas.

KBI took over the investigation Monday

The Kansas Bureau of Investigation became the “lead law enforcement agency” in the investigation of the Marion County Record on Monday, The Star’s Jonathan Shorman reported.

KBI spokesperson Melissa Underwood told The Star that the agency will “review prior steps taken and work to determine how best to proceed with the case,” which involved a now-withdrawn search warrant suggesting that the newspaper’s offices contained evidence of identity theft and improper use of computers.

It’s unclear why the KBI, a state agency based in Topeka which provides advanced law enforcement services like forensic lab testing and special operations, took over this case.

Read more: KBI takes lead in Marion investigation following police raid of local newspaper

Marion, Kansas, Police Chief Gideon Cody

The newspaper had previously investigated Marion’s new police chief

The Record had previously investigated Marion’s new police chief, Gideon Cody, at the time of the raid. Cody had recently started the job after 24 years as a captain with the KCPD.

Editor and publisher Eric Meyer declined to comment on the exact nature of the investigation, but characterized “the charges as serious.” The paper informed city officials of allegations against Cody, but had not published anything about them at the time of the raid.

“I have already been vetted. They’ve (the newspaper) actually did a background on me. And that’s why they chose not to (publish a story),” Cody said in a Sunday interview with The Star.

“However, if they can muddy the water, make my credibility look bad, I totally get it. They’re gonna try to do everything they possibly can.”

Read more: Kansas newspaper raided, shut down by police had investigated chief who came from KCPD

The Star’s Luke Nozicka, Jonathan Shorman, Katie Moore, Glenn E. Rice and Judy Thomas contributed. The Wichita Eagle’s Chance Swaim contributed.

THE COMING SPACE WAR
Space Force Forms New Intelligence Unit to Target Enemy Satellites

Passant Rabie
Wed, August 16, 2023 

The U.S. Space Force revealed a new patch as part of the 75th Intelligence, Surveillance and Reconnaissance Squadron activation ceremony on August 11, 2023.


The United States Space Force has launched a unit dedicated to warding off threats from other countries in space.

During a ceremony held Friday at the Peterson Space Force Base in Colorado, Space Force activated its Intelligence, Surveillance and Reconnaissance Squadron (ISRS), which came with its own spooky new logo to scare off enemies in orbit. ISRS will target satellites and ground stations that are part of adversary space forces and counter-space force threats.


“Space forces are space capabilities used by a country to facilitate their joint war fighting,” Lt. Col. Travis Anderson, who leads the squadron, is quoted as saying during the ceremony. “Counter-space forces, also called space attack forces, are space capabilities designed to deny the United States the ability to use our satellite systems during conflict.”


Illustration: U.S. Space Force

The Space Force also revealed its new squadron’s patch, which depicts the grim reaper at the center to represent “the demise of any adversary the squadron would target,” according to the military branch’s statement. The reaper’s Polaris Star glint in its eye, on the other hand, “symbolizes the guiding light of security and alludes to a constant presence and vigilance in space now and in the future.”

The U.S. has grown increasingly concerned over China’s capabilities in space, including Beijing’s own space station in Earth orbit and plans to launch a crewed mission to the Moon. In 2007, China launched an anti-satellite missile to blow up one of its defunct satellites, and Russia carried out its own anti-satellite test in 2021.

In September 2022, the U.S. announced a self-imposed ban on anti-satellite weapons and encouraged other countries to join. China was quick to condemn the call to ban anti-satellite weapons, with the Chinese military claiming that the request “conceals evil intention,” and “aims to weaken others,” according to the South China Morning Post. China’s defense ministry recently condemned the very establishment of the US Space Force, saying that it has had “a great negative impact on space security and global strategic stability.”

“In recent years, the United States has accelerated the militarization of space,” Chinese Defense Ministry spokesperson Col. Tan Kefei is quoted as saying in the Associated Press. “I would like to reiterate here that China adheres to the peaceful use of space, firmly opposes the weaponization and the making of space into a battlefield, and opposes any form of arms race in space.”

As the sixth branch of the US Armed Forces, Space Force certainly wants to establish itself as one not to mess with. Therefore, the activation of the first unit dedicated to targeting the satellites of other nations sends a message across space and moves toward the militarization of earth’s orbit.

Gizmodo

Lebanon's Hezbollah rises from shadows into regional force

Reuters
Thu, August 17, 2023 

Supporters of Lebanon's Hezbollah leader Sayyed Hassan Nasrallah, carry flags as they ride in a convoy in Houla

BEIRUT (Reuters) - Hezbollah has risen from a shadowy group established during Lebanon's 1975-90 civil war to a heavily armed force with big sway over the Lebanese state. Governments including the United States deem it a terrorist organisation.

ORIGINS

Iran's Revolutionary Guards founded Hezbollah in 1982 to export its Islamic Revolution and fight Israeli forces that had invaded Lebanon. Sharing Tehran's Shi'ite Islamist ideology, Hezbollah recruited among Lebanese Shi'ite Muslims.

Groups that Lebanese security officials and Western intelligence have said were linked to Hezbollah launched suicide attacks on Western embassies and targets and kidnapped Westerners in the 1980s. One group, Islamic Jihad, was thought to be led by Imad Moughniyah, a top Hezbollah commander who was killed in a car bomb in Syria in 2008.

The United States holds Hezbollah responsible for a suicide bombing that destroyed U.S. Marine headquarters in Beirut in 1983, killing 241 servicemen, and a suicide bombing the same year on the U.S. embassy. A suicide bombing also hit a French barracks in Beirut in 1983, killing 58 French paratroopers.

Referring to those attacks and hostage-taking, Hezbollah leader Sayyed Hassan Nasrallah said in a 2022 interview they were carried out by small groups not linked to Hezbollah.

MILITARY POWER

Hezbollah kept its weapons at the end of the civil war to fight Israeli forces that were occupying the predominantly Shi'ite south. Years of guerrilla warfare led Israel to withdraw in 2000.

Hezbollah demonstrated its military advances in 2006 during a five-week war with Israel, which erupted after it crossed into Israel, kidnapping two soldiers and killing others. The war killed 1,200 people in Lebanon, mostly civilians, and 158 Israelis, mostly soldiers. Hezbollah fired thousands of rockets into Israel.

Its military power grew after deploying into Syria in 2012 to help President Bashar al-Assad fight mostly Sunni rebels.

Hezbollah boasts precision rockets and says it can hit all parts of Israel. In 2021, Nasrallah said the group had 100,000 fighters.

Iran gives Hezbollah weapons and money. The United States estimates Iran has allocated it hundreds of millions of dollars annually in recent years.

Hezbollah has fought and trained Iran-backed groups in Iraq. Saudi Arabia says Hezbollah has also fought in support of the Iran-allied Houthis in Yemen. Hezbollah denies this.

ROLE IN LEBANON

Hezbollah's sway in Lebanon is underpinned by its arsenal and the support of many Shi'ites who say the group defends Lebanon from Israel.

Critics say Hezbollah has undermined the state and accuse it of unilaterally leading Lebanon into conflicts.

The group has ministers in government and lawmakers in parliament. It has also flexed its muscles in the street.

In 2008, a power struggle with Lebanese adversaries backed by the West and Saudi Arabia spiralled into a brief conflict. Hezbollah fighters took over parts of Beirut after the government vowed to take action against the group's military communications network.

Hezbollah entered politics more prominently in 2005 after ally Syria withdrew following the killing of former Prime Minister Rafik al-Hariri, who symbolised Saudi influence in Lebanon.

A U.N.-backed court later convicted three Hezbollah members in absentia over the assassination. Hezbollah denies any role, describing the court as a tool of its enemies.

In 2016, the Hezbollah-allied Christian politician Michel Aoun became president. Two years later, Hezbollah and its allies won a parliamentary majority. This majority was lost in 2022, but the group continued to exercise a big sway.

It campaigned against a judge investigating the 2020 Beirut port explosion after he sought to question its allies. The standoff prompted deadly clashes in Beirut in 2021.

TERRORIST DESIGNATIONS

Western countries including the United States designate Hezbollah a terrorist organisation. So do U.S.-allied Gulf Arab states including Saudi Arabia. The European Union classifies Hezbollah's military wing as a terrorist group, but not its political wing.

Argentina blames Hezbollah and Iran for the 1994 bombing of a Jewish community centre in Buenos Aires in which 85 people were killed, and for a 1992 attack on the Israeli embassy in Buenos Aires that killed 29 people. Both deny responsibility.

(Compiled by Tom Perry; Editing by Nick Macfie)

SANCTIONS, WHAT SANCTIONS?!

India considers wheat imports from Russia at discount to calm prices-sources


Aftab Ahmed and Rajendra Jadhav
Thu, August 17, 2023

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India may seek up to 9 mln tons of Russian wheat-source

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Russia offering discounted wheat price - source

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Indian wholesale wheat prices at 7-month high


NEW DELHI/MUMBAI, Aug 17 (Reuters) - India is in talks with Russia to import wheat at a discount to surging global prices in a rare move to boost supplies and curb food inflation ahead of state and national elections next year, according to four sources.

The imports would allow New Delhi to intervene more effectively in the market to drive down wheat prices that stoked inflation to a 15-month high in July.

"The government is exploring the possibility of imports through private trade and government-to-government deals. The decision will be made cautiously," one of the sources told Reuters, when asked about wheat imports from Russia.

India has not imported wheat through diplomatic deals in years. The last time India imported a significant amount of wheat was in 2017, when private traders shipped in 5.3 million metric tons.

The government's plan to import Russian wheat is one of the supply-side measures being considered to bring down prices of key commodities like fuel, cereals and pulse along with an extension of rural schemes to ease the impact of inflation on the poor, two of the sources with knowledge of the matter said.

Sources did not want to be named as the discussions are private and the final decision might be weeks away. India's finance, trade and government spokespersons did not reply to emails and messages seeking comment.

Last month, Sanjeev Chopra, the most senior civil servant at the federal food ministry, said there was no proposal to import wheat from Russia.

LOW WHEAT STOCKS

Although India needs only 3 million to 4 million metric tons of wheat to plug the shortfall, New Delhi might consider importing 8 million to 9 million tons of wheat from Russia to have a far bigger impact on prices, another source said.

Since the war in Ukraine last year, Russia has become India's second biggest seller of goods mainly on account of discounted oil purchases by New Delhi.

"Russia has indicated its willingness to offer a discount on prevailing market prices. There are no restrictions on the export of food commodities from Russia," one official said.

India is also importing sunflower oil from Russia and settling payments in U.S. dollars and is planning to use the same approach, the official added.

"India can easily secure a discount of $25 to $40 per ton from Russia. This will ensure that the landed cost of wheat remains significantly below local prices," said a dealer based in Mumbai with a global trade house.

Wholesale wheat prices in India surged around 10% over two months to a seven-month high in August on limited supplies.

Wheat stocks at government warehouses were at 28.3 million tons on Aug. 1, 20% below the 10-year average.

Last year, India banned wheat exports due to lower output, and this year's crop is also expected to be at least 10% lower than the government's estimate.

(Reporting by Aftab Ahmed and Rajendra Jadhav; Additional reporting by Mayank Bhardwaj; Editing by Sonali Paul)

Ukraine reports new attack on grain silos but cargo ship sets sail

By Pavel Polityuk
Updated Wed, August 16, 2023

KYIV (Reuters) -Ukraine said Russia had attacked its grain storage facilities overnight, but a container ship left the Black Sea port of Odesa on Wednesday despite Moscow's threat to target shipping after it abandoned an export deal.

In the Russian capital, five sources said authorities were considering reimposing stringent capital controls as the rouble showed the strains of Russia's invasion of its neighbour, which has brought huge military spending and Western sanctions.

The departure from Odesa of the Hong-Kong-flagged Joseph Schulte, trapped in the port since Russia invaded Ukraine on Feb. 24 last year, followed the latest Russian attack on the country's grain export infrastructure.

Overnight air strikes damaged silos and warehouses at Reni on the Danube river, a vital wartime route for food exports, Ukrainian officials said. They posted photos of destroyed storage facilities and piles of scattered grain and sunflowers.

There was no comment from Moscow. An industry source said the port was continuing operations, tempering a rise in benchmark wheat prices in Chicago off their two-month low.

Russia has made regular air strikes on Ukrainian ports and grain silos since mid-July, when it pulled out of the U.N.-backed deal for Ukraine to export grain.

Moscow has threatened to treat any ships leaving Ukraine as potential military targets and on Sunday its navy fired warning shots at a ship travelling towards Ukraine.

Despite the threats, Ukraine last week announced a "humanitarian corridor" in the Black Sea to release cargo ships that have been trapped in its ports by a de facto Russian blockade, pledging to make clear they were serving no military purpose.

"A first vessel used the temporary corridor for merchant ships to/from the ports of Big Odesa," Deputy Prime Minister Oleksandr Kubrakov said on Facebook.

Bernhard Schulte Shipmanagement (BSM), which owns the ship jointly with a Chinese bank, confirmed that the ship was en route to Istanbul.

Kubrakov said it was carrying more than 30,000 metric tons of cargo in 2,114 containers, adding that the corridor would primarily be used to evacuate ships from the Black Sea ports of Chornomorsk, Odesa and Pivdennyi.

Moscow has not indicated whether it would respect the shipping corridor, and shipping and insurance sources have expressed concerns about safety.

Ukraine is a major grain and oilseeds exporter and the United Nations says its supplies are vital to developing countries where hunger is a growing concern. Neither Kubrakov nor the shipping company specified the cargo on board the Joseph Schulte but grain is rarely carried in containers.

BATTLEFIELD GAIN

The attacks on Ukraine's grain followed its launch of a Western-backed counteroffensive in early June to try to dislodge Russian forces from territory they occupy in the south and east.

Extensive Russian fortifications and minefields along the front line have made it hard for Ukrainian forces to break through, but they announced they had retaken another village on Wednesday, the first settlement they have declared recaptured since June 27.

"Urozhaine liberated," Deputy Defence Minister Hanna Maliar said on Telegram. "Our defenders are entrenched on the outskirts."

Ukrainian soldiers raised the country's flag above a broken war memorial in video released by the military and geolocated by Reuters to the village. It was not clear when it was filmed.

Russia's defence ministry did not confirm losing the settlement but said its artillery and war planes were attacking Ukrainian forces in the Urozhaine area.

The village's recapture would indicate Ukraine is pressing ahead with an offensive drive towards the Sea of Azov just over 90 km (55 miles) to the south, aiming to cut Russian forces occupying its southeastern coastline in half.

Inside Russia, the FSB security service said it had foiled an attempt by Ukrainian saboteurs to cross the border into Bryansk region for a second day in a row.

The conflict and accompanying sanctions have stretched Russia's finances, forcing the central bank to raise interest rates to 12% on Tuesday after the rouble dropped below 100 to the dollar. It firmed on Wednesday after the sources said officials were considering obliging exporters to sell their foreign currency revenues.

DANUBE PORTS

Ukraine turned to its Danube river ports after Russia pulled out of the international deal that had allowed Ukraine to export grain through the Black Sea, seeking better terms for exports of its own food and fertilizer.

The river ports, which had accounted for around a quarter of grain exports, have since become the main route out for Ukrainian grain, which is also sent on barges to Romania's Black Sea port of Constanta for shipment onwards.

Earlier this month, Russia attacked Izmail - Ukraine's main inland port across the Danube River from Romania, sending global food prices higher as it ramped up its use of force to prevent Ukraine from exporting grain.

Turkey, which brokered the grain deal alongside the United Nations, has expressed hope that Russia will rejoin it this month.

A senior U.N. official emphasised that the deal was vital to stabilise food prices on global markets to protect the most vulnerable, saying all efforts were being made to restart it.

"It's difficult," Rebeca Grynspan, Secretary-General of the United Nations Conference on Trade and Development told a news conference in Nairobi. "And obviously the bombardment of or shelling of grain infrastructure is not helping the markets."

(Additional reporting by Lidia Kelly, Gus Trompiz, Matthias Inverardi, Gabrielle Tétrault-Farber and Anna Magdalena Lubowicka; writing by Philippa Fletcher; editing by Angus MacSwan)

Young people took on fossil fuels and won. What’s next?

Stephanie Hanes
Tue, August 15, 2023 

Montana lawmakers violated young people’s rights – and the state constitution – by ignoring fossil fuels’ impact on the climate, a judge ruled Monday.

In her decision supporting 16 young plaintiffs in Held v. Montana ­– the first constitutional climate case to be tried in the United States ­– District Judge Kathy Seeley wrote that fossil fuel extraction and use within the state was clearly tied to global climate change. She also found that young people have a particular standing to demand changes, since they will be disproportionately and negatively impacted by a rapidly heating planet. The decision has broad implications for environmental action across the country and, potentially, the world.

“It’s one of the strongest decisions on climate change ever issued,” says Michael Gerrard, director of the Sabin Center for Climate Change Law at Columbia University’s law school, which keeps a database of the more than 2,000 climate lawsuits that have been filed globally.

While the legal arguments in the Montana case, which did not seek financial compensation or damages, are specific to the state, he says, the judge’s findings on climate science itself were broadly noteworthy and decisive. And it could help influence an explosion of climate lawsuits making their way through court systems across the U.S.

For much of the June trial, internationally renowned scientists gave testimony explaining the connections between fossil fuel use and climatic disruptions such as increased wildfires, heat extremes, and drought.

It was one of the first times that both climate science and climate change denialism were put under the microscope of American legal questioning, Mr. Gerrard said earlier this summer. And the judge’s decision reflects what many court-watchers noted during the trial: Climate science, already highly vetted and agreed upon by experts worldwide, is convincing – as are the impacts of a heating world on young people.

While the plaintiffs used their allotted five days of trial to deeply question scientists and youths, the state rested its case after a day. It called only three witnesses, canceling at the last minute the appearance of a climatologist who had publicly spread doubt about climate change.

“This case is a clear win for climate science,” said Delta Merner, lead scientist at the Science Hub for Climate Litigation at the Union of Concerned Scientists, in a statement. “Throughout the trial, climate science, the role fossil fuel emissions play in climate change, and the harm being caused to Montana’s youth were irrefutable.”

Julia Olson, chief legal counsel and executive director with Our Children’s Trust, the law firm that represents the Montana plaintiffs and other young people in climate cases making their way through other state legal systems, also called the ruling a “sweeping win.”

“Today, for the first time in U.S. history, a court ruled on the merits of a case that the government violated the constitutional rights of children through laws and actions that promote fossil fuels, ignore climate change, and disproportionately imperil young people,” she said in a statement.

But Emily Flower, spokesperson for Montana Attorney General Austin Knudsen, decried the ruling as “absurd.” She said the office planned to appeal, saying the judge had allowed plaintiffs to put on a “taxpayer-funded publicity stunt.”

During the trial, the state argued that Montana was not the cause of global climate disruption and that it therefore could not be held responsible for the alleged harm young people experienced. Defense attorneys declined to cross-examine young people, ages 5 to 22, who described grief, loss, and fear as their ranch lands burned and their fishing rivers lost water, as smoke inhalation became part of their sports seasons, and as rising temperatures and melting glaciers threatened a landscape they loved.

Earlier in the year, the office called the young plaintiffs “well-intentioned children” exploited by “an out-of-state organization.”

For Grace Gibson-Snyder, a 19-year-old plaintiff, this line has always been particularly galling. She is a sixth-generation Montanan whose great-great-great-grandmother came to the state in a covered wagon, following the gold rush.

She understands why Montanans are particularly attuned to outsiders disrupting their way of life – whether it’s the Californians moving into her home city of Missoula who are perceived to be running up property values, or vacationers buying up large homes and then trying to control ranching methods.

But this is home for her and her fellow plaintiffs, she says. They are clear-sighted, and fearful, about what is happening to their beloved state.

“I don’t think climate change should be a political issue,” she said during an interview earlier this month in Missoula, part of an upcoming global Monitor series on young people and climate. “But it keeps getting politicized. We’re still accused of bringing in out-of-state, liberal ideas and attorneys. And that’s actually a misrepresentation, both literally and also in terms of our goals.”

Ms. Gibson-Snyder is uncomfortable with the label of climate “activist.” It feels too disruptive, she says, when really she believes in government, democracy, and law. And it also doesn’t feel right for her state, she says, where care for the outdoors is widely bipartisan.

The lawsuit, she says, was simply asking elected leaders to do what they are supposed to do.

And that, in many ways, is itself specific to Montana. The state is one of a handful, including Hawaii and Massachusetts, that has environmental protection written into its constitution. It reads, “The state and each person shall maintain and improve a clean and healthful environment in Montana for present and future generations,” and it requires the legislature to protect the “environmental life system” from depletion and degradation.

That constitutional requirement, reflective of the state’s long reverence for the outdoors, was the base of Judge Seeley’s decision.

“My overwhelming emotion is relief,” Ms. Gibson-Snyder wrote in an email after the verdict. “There is still hope. Hope for me and the other youths’ futures, hope for Montana and the places we love. Hope for the rest of the world to follow suit.

“Thank you to the courts for upholding our constitutional rights,” she continued. “Thank you to all of the people who have expressed their concerns about the future, brought diverse perspectives to ensure all people are cared for, and spent time fighting for our state.”

Related stories

• Do children have a right to a healthy climate? Montana case is a test.

• Cruel summer: Will 2023 mark a tipping point for climate change?

• Cover Story Plastics have shaped nearly every aspect of society. Now what?

• Cover Story For the love of nature: Outdoorspeople help lawmakers bridge divides

csmonitor.com

Montana kids win historic climate lawsuit – here's why it could set a powerful precedent

Amber Polk, Assistant Professor of Law, Florida International University
Tue, August 15, 2023 at 6:35 AM MDT·5 min read
THE CONVERSATION

The young plaintiffs in Held v. State of Montana, ages 5 to 22, walk to the courthouse with their lawyer. William Campbell/Getty Images

Sixteen young Montanans who sued their state over climate change emerged victorious on Aug. 14, 2023, from a first-of-its-kind climate trial.

The case, Held v. State of Montana, was based on allegations that state energy policies violate the young plaintiffs’ constitutional right to “a clean and healthful environment” – a right that has been enshrined in the Montana Constitution since the 1970s. The plaintiffs claimed that state laws promoting fossil fuel extraction and forbidding the consideration of climate impacts during environmental review violate their constitutional environmental right.

Judge Kathy Seeley’s ruling in the youths’ favor sets a powerful precedent for the role of “green amendments” in climate litigation.

The lawsuit, heard in Montana district court, was the first in the U.S. to rely on a state’s constitutional right to a clean and healthful environment to challenge state policies that fuel climate change. In light of the success in Held, it won’t be the last.

Rikki Held, the lead plaintiff in the Montana case, center seated, confers with the Our Children’s Trust legal team before the start of the trial on June 12, 2023. William Campbell/Getty Images

What is a green amendment?

The U.S. Constitution does not contain a green amendment, but several state constitutions do.

Pennsylvania, Montana, Hawaii, Massachusetts and Illinois all amended their state constitutions during the environmental movement of the 1970s to recognize the people’s right to a clean and healthful environment. Because these green amendments are constitutional provisions, they function as limits on what government can do.

Early cases in Pennsylvania and Illinois testing these newly recognized constitutional rights saw little success. By the 1990s, the Illinois Supreme Court had eviscerated Illinois’ green amendment, concluding that the environmental right did not provide a basis upon which a citizen could bring a lawsuit.

In 1999, however, when green amendments were all but forgotten, a single case in Montana quietly vindicated Montanans’ constitutional right to a clean and healthful environment.

It was brought by local environmental groups over water quality concerns at a proposed gold mine. At that time, Montana’s environmental laws allowed the state to issue permits for projects that would discharge pollutants into Montana waters without conducting any environmental review. The Montana Supreme Court determined that such a law violated Montanans’ fundamental right to a clean and healthful environment and was unconstitutional.

Montana’s forests are facing new threats as temperatures rise. Whitebark pine, a foundational species, are increasingly at risk from diseases and insects that previously couldn’t thrive in the high-mountain habitat. Chip Somodevilla/Getty Images

The next green amendment success took 14 years and occurred in Pennsylvania. In the early 2010s, Pennsylvania enacted a state law that gave the oil and gas industry the right to commence hydraulic fracturing, or fracking, anywhere in the state. This law prevented local governments from making land use decisions to restrict or limit fracking in their jurisdictions. The Pennsylvania Supreme Court struck down this state law as violating Pennsylvanians’ constitutional right to a clean and healthful environment.

That Pennsylvania decision ignited an explosion of interest in green amendments.

In Hawaii, public interest groups began challenging the state’s approval of carbon-intensive electricity generation on the ground that it violates Hawaiians’ right to a clean and healthful environment. The state now relies on its green amendment to reject new carbon-intensive electricity sources for powering Hawaii.

In 2022, New York became the first state since the 1970s to adopt a green amendment. Currently, Arizona, Connecticut, Iowa, Kentucky, Maine, Nevada, New Jersey, New Mexico, Tennessee, Texas, Vermont, Washington, and West Virginia are considering adopting green amendments.

Success in Montana

Based on the extensive scientific evidence presented at the trial in June, Judge Seeley found that the Montana youth are being harmed by climate change occurring in Montana and that those climate change effects can be attributed to the state law the plaintiffs challenged.

Seeley also determined that declaring the state law forbidding the consideration of climate impacts during environmental review unconstitutional would alleviate further harm to the youth. On these grounds, she struck down the state law as unconstitutional.

This result sets a groundbreaking precedent for climate litigation and demonstrates a new way in which green amendments can be invoked to elicit environmental change. It suggests that in other states with green amendments, state laws cannot forbid the consideration of greenhouse gas emissions and their climate impact during environmental review.

Wildfire smoke has become an unwelcome part of life during summer and fall in parts of Montana. Robin Loznak/Getty Images

However, Seeley made it clear long before trial that she does not have the power to order the state to create a remedial plan to address climate change.

Further, the Montana legislature repealed the state policies promoting fossil fuel extraction just two months before the trial began, and a judge cannot generally rule on the constitutionality of a repealed law. So, whether state policies promoting fossil fuel extraction violate the people’s constitutional right to a clean and healthful environment is a question for another day and another case.

A spokeswoman for Montana’s attorney general said the state plans to appeal Seeley’s ruling.

Impact on federal climate litigation

It is unclear how the Montana youths’ victory will influence federal climate litigation. The federal youth climate case Juliana v. United States, which was recently revived, relies on the Fifth and Ninth amendments to the U.S. Constitution, as well as the common law public trust doctrine. Neither the Fifth Amendment nor the Ninth Amendment is considered environmental rights akin to a green amendment. However, the public trust doctrine has been relevant in some states’ green amendment jurisprudence.

In the states that have green amendments, climate advocates will certainly rely on the Montana youth case as they challenge state laws that promote climate change.

In recent years, we have witnessed an erosion of our environmental laws through politics and the courts. That has fueled new legal claims of environmental rights in the U.S., Canada and other countries.

This phenomenon is the focus of my research, of which green amendments are just a part. I believe we will continue to see cases, like Held v. State of Montana, invoke rights-based approaches to tackle environmental problems in the future.

This article is republished from The Conversation, an independent nonprofit news site dedicated to sharing ideas from academic experts. If you found it interesting, you could subscribe to our weekly newsletter.

It was written by: Amber Polk, Florida International University.

Read more:


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3 reasons local climate activism is more powerful than people realize

WHITE AMERIKA RULES

Mercy Granted to Mom Imprisoned for Trying to Save Her Baby

Kalyn Womack

THE ROOT
Wed, August 16, 2023

Screenshot: Facebook

In 2005, the night before Hurricane Katrina pummeled New Orleans, Tiffany Woods and her boyfriend Emmanuel Scott fled the city with their newborn son to outrun the flood. However, their baby died of malnutrition when resources ran dry. Monday, Woods was finally granted mercy from serving a life sentence in prison in connection to her baby’s death.

Woods had just given birth to baby Emmanuel, who tested positive for a genetic abnormality and was also born premature. According to NOLA.com, he came home at just five pounds three weeks before the hurricane reached land. Woods didn’t make a follow-up appointment before she picked her other three children to take shelter in Shreveport, 300 miles away. She was able to feed the baby boy with formula bought with government vouchers, per The Advocate. However, his health continued to decline.

“The formula he was taking, he wasn’t swallowing. He was always throwing it up, and then we ran out of WIC (food) vouchers, so I decided to switch it... I switched it to organic milk. I thought he was doing better, but he wasn’t thriving,” said Woods to the state pardon board Monday.

Within weeks of switching to regular milk, baby Emmanuel died of malnutrition, according to the autopsy. Prosecutor Suzanne Ellis saw the infant’s death as pure neglect and ignorance. Months later, the couple faced charges.

Read more from NOLA.com:

The boy died in his crib on Nov. 27, 2005. Ten months later, the Caddo Parish District Attorney’s Office secured an indictment for murder.

Unlike most states, Louisiana law allows murder convictions in accidental deaths resulting from a set of felonies that includes cruelty to juveniles. Also unlike most states, Louisiana murder convictions carry a mandatory life prison sentence with no chance at parole for adults. Both parents lost their appeals.

A Caddo Parish judge convicted Woods and the baby’s father, Emmanuel Scott, with seconddegree murder from a 2006 indictment under Louisiana’s unusually broad murder statute. Prosecutors needed only to prove that the pair was negligent for not taking the infant to the doctor before his death.

Upon a unanimous vote from the Louisiana Board of Pardons, Woods was released after serving 17 years in prison. She told the board she is not the same woman she was in 2005 and admitted she made a “huge mistake.”

If Gov. John Bel Edwards agrees to commute Woods’ sentence, the Louisiana Parole Project will house her until she’s able to get back on her feet, per the report. Mr. Scott is still serving a life sentence and has not applied for clemency yet.

US wildlife managers agree to review the plight of a Western bird linked to piñon forests

SUSAN MONTOYA BRYAN
Wed, August 16, 2023 


In this undated image provided by Christina M. Selby, a single pinyon jay flies over a juniper tree in northern New Mexico. U.S. wildlife managers announced Wednesday, Aug. 16, 2023, that they will investigate whether a bird that is inextricably linked to the piñon and juniper forests that span the Western United States warrants protection under the Endangered Species Act. 

(Christina M. Selby via AP, File)

ALBUQUERQUE, N.M. (AP) — U.S. wildlife managers announced Wednesday that they will investigate whether a bird that is inextricably linked to the piñon and juniper forests that span the Western United States warrants protection under the Endangered Species Act.

The pinyon jay’s numbers have declined over the last half-century as persistent drought, more severe wildfires and other effects of climate change have intensified, leaving the birds with less food and fewer nesting options as more trees die or are removed.

Environmentalists also are concerned that without the pinyon jay — a social bird that essentially plants the next generation of trees by stashing away the seeds — it’s possible the piñon forests of New Mexico, Arizona, Nevada and other Western states could face another reproductive hurdle.

The U.S. Fish and Wildlife Service's decision to review the jay's status comes in response to a petition filed more than a year ago that included research showing the species' numbers have declined by an estimated 80% over the last five decades, a rate even faster than that of the greater sage grouse.

“This decision moves us one step closer to reversing the trend of one of the fastest declining birds in North America,” Peggy Darr of the group Defenders of Wildlife said in a statement. “Without pinyon jays, we stand to lose iconic Southwestern landscapes, cultures and cuisines intimately tied to piñon pine nuts."

Piñon-juniper forests cover more than 75,000 square miles (190,000 square kilometers) in the United States, and wildlife managers in several Western states already have classified the bird as a species of greatest conservation need.

Nearly 60% of the jay’s remaining population can be found in New Mexico and Nevada, but its range also includes central Oregon and parts of California, Utah, Wyoming, Oklahoma and Mexico’s northern Baja California.

Defenders of Wildlife pointed Wednesday to research published this year that indicated one hypothesis for the birds' decline was habitat loss and degradation due to climate change. Another was land management policies that call for the thinning or removal of piñon-juniper forests to reduce wildfire threats or improve habitat for other species. And development has resulted in the clearing of trees to make room for homes as Western cities expand.

Fewer trees mean less food for the birds, and previous research has shown that the jays will forgo breeding when piñons are scarce.

Pale blue with a white bib, the pinyon jay typically mates for life and can be choosey about where to build a nest. For example, taller and older trees aren't high on the list as they typically have less foliage and can double as perches for potential predators.

While environmentalists say there still is much research to be done on pinyon jays, it was well known by the 1970s that the birds' habits revolved around harvesting, stashing and later retrieving pine seeds. In one case, a researcher watched a bird carry 56 seeds in one trip.

Drought and high temperatures also have been shown to affect the production of piñon cones, forcing the birds to fan out over hundreds of miles when food is scarce.

Researchers have said that understanding the bird's needs and effects on its habitats will be fundamental to managing Western environments to ensure pinyon jay colonies can be protected.

The Fish and Wildlife Service also agreed to review the status of the bleached sandhill skipper, a butterfly with golden-orange wings that has been the focus of a fight over a geothermal energy project near the Nevada-Oregon state line.

The proposed power plant would be outside the butterfly’s habitat, an alkali wetland that spans about 2 square miles (5 square kilometers). But environmentalists are concerned that tapping underground water sources likely would affect the flows that support plants where the butterflies lay eggs and get nectar.

We could be 16 years into a methane-fueled 'termination' event significant enough to end an ice age

Sascha Pare
Wed, August 16, 2023 

Layers of ice hanging off a glacier melt and drip water.

A dramatic spike in atmospheric methane over the past 16 years may be a sign that Earth's climate could flip within decades, scientists have warned.

Large amounts of methane wafting from tropical wetlands into Earth's atmosphere could trigger warming similar to the "termination" events that ended ice ages — replacing frosty expanses of tundra with tropical savanna, a new study finds. Researchers first detected a strange peak in methane emissions in 2006, but until now, it was unclear where the gas was leaking from and if it constituted a novel trend.

"A termination is a major reorganization of the Earth's climate system," study lead author Euan Nisbet, a professor emeritus of Earth sciences at Royal Holloway, University of London, told Live Science. "These repeated changes have taken the world from ice ages into the sort of interglacial we have now."


Ice age terminations typically occur in three phases, which are recorded in ice cores going back 800,000 years. The initial phase is characterized by a gradual rise in methane and CO2, leading to global warming over a few thousand years. This is followed by a sharp increase in temperatures fueled by a burst of methane, leveling off in a third phase lasting several thousand years.

Related: New map of methane 'super-emitters' shows some of the largest methane clouds ever seen

"Within the termination, which takes thousands of years, there's this abrupt phase, which only takes a few decades," Nisbet said. "During that abrupt phase, the methane soars up and it's probably driven by tropical wetlands."

Methane is a powerful greenhouse gas released both by human activities — including fossil-fuel burning, landfills and agriculture — and natural processes, such as decomposition in wetlands. Human emissions soared in the 1980s with the expansion of the natural gas industry and stabilized in the 1990s, Nisbet said.

An underwater picture of mangrove roots in a tropical wetland.

But in late 2006, something "very, very odd" happened, he said. Methane started rising again, but there was no dramatic shift in human activity to blame — and researchers were left scratching their heads. Then, in 2013, Nisbet and his colleagues realized this rise was accelerating. By 2020, methane was increasing at the fastest rate on record, he said.

"It looks as if there's a big, new methane source turning on," Nisbet said.

A flurry of studies since 2019 has linked the strange spike to soaring emissions from tropical wetlands, predominantly in Africa. A "significant change" in tropical weather ascribed to human-caused climate change has led wetlands to get bigger and more plants to grow there, thus leading to more decomposition — a process that produces methane, Nisbet said.

In the new study, published July 14 in the journal Global Biogeochemical Cycles, Nisbet and colleagues compared current trends in atmospheric methane to the abrupt phase of warming during ice age terminations.

"The closest analogy we have to what we think is happening today is these terminations," Nisbet said.

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While the evidence remains inconclusive, the scale of such a shift in climate is worth pondering, he added. In the past, terminations have flipped vast expanses of icy tundra in the Northern Hemisphere into tropical grasslands roamed by hippos, Nisbet said. There is no way to know what a termination could signify today, given that we are not in an ice age. "We're not saying we've got proof this is happening, but we're raising the question."

Regardless of whether termination-scale climate shifts are on the horizon, tackling methane emissions should be high on our list of priorities, Nisbet said. "We can do a great deal to bring down methane," he said, and this includes plugging gas leaks, and tackling emissions from manure, landfill and crop waste.

China to make steady progress in chip equipment self-sufficiency amid gradual market recovery, UBS survey finds

South China Morning Post
Wed, August 16, 2023 

China's chip equipment self-sufficiency rate will keep increasing in the next few years, especially in the less-advanced equipment sector, amid a gradual market recovery and ongoing geopolitical tensions, according to research by UBS Securities.

The semiconductor equipment self-sufficiency rate is expected to increase in less-advanced sectors which account for around 70 per cent of the total market, such as etching and cleaning machines, Jimmy Yu, a China technology analyst at UBS Securities, said at a media briefing in Shanghai on Wednesday.

"You cannot assume that domestic companies will take up 100 per cent of the [Chinese] market, but it is reasonable to make the assumption of a market share of around 60 per cent [in some sectors]," said Yu.

Do you have questions about the biggest topics and trends from around the world? Get the answers with SCMP Knowledge, our new platform of curated content with explainers, FAQs, analyses and infographics brought to you by our award-winning team.

Meanwhile, China still accounts for a relatively lower proportion of the global market for chip design, Yu said. But he added that nearly half of chip buyers in the country have signalled increasing willingness to raise their usage of domestically-developed chips.

According to the UBS survey, 11 per cent of the integrated circuit (IC) product purchasing managers said that they are "much more" actively considering using domestic chips compared with two years ago, while 39 per cent said they are "a little more" willing to do so.

"Looking forward to the next three years, the adoption rate of domestically-developed chips will gradually increase to between 30 and 50 per cent, which is quite high," said Yu.

China's domestic semiconductor production has been gradually picking up as the country's chip market slowly recovers from sluggish consumer demand and various economic headwinds.

In July, China's integrated circuit output rose 4.1 per cent to 29.2 billion units, marking the fourth consecutive month of positive growth. However, the IC output in the first seven months was still down 3.9 per cent from the same period of last year, reflecting that the world's largest semiconductor market continues to struggle with economic headwinds and escalating tech rivalry between Washington and Beijing.

Yu expected capital expenditure in the global semiconductor sector to decline by 15.1 per cent in 2023, with China having a larger drop than the global rate amid geopolitical risks including the export controls imposed by the US last October.

"But looking at next year, I believe China will have a higher level of recovery than the global market and remain as the world's most important regional market in capital expenditure," he added.

Yu said he expected global semiconductor companies to see their revenue return to growth between the second half of 2023 and first half of 2024, as demand for smartphones, PCs and servers "recover from a bottom". Smartphones are expected to see demand increase earlier as the sector clears up excess inventories, he added.

In 2023, global semiconductor sector revenue will decline by 14.3 per cent year on year to US$492 billion, while returning to growth of 22.8 per cent in 2024, according to estimates by UBS.

Copyright (c) 2023. South China Morning Post Publishers Ltd. All rights reserved.

China's Xi calls for patience as Communist Party tries to reverse economic slump

STATE CAPITALI$M IS STILL CAPITALI$M

JOE McDONALD
Updated Thu, August 17, 2023 

BEIJING (AP) — Chinese leader Xi Jinping has called for patience in a speech released as the ruling Communist Party tries to reverse a deepening economic slump and said Western countries are “increasingly in trouble” because of their materialism and “spiritual poverty.”

Xi’s speech was published by Qiushi, the party’s top theoretical journal, hours after data Tuesday showed consumer and factory activity weakened further in July despite official promises to support struggling entrepreneurs. The government skipped giving an update on a politically sensitive spike in unemployment among young people.

Xi, the country’s most powerful leader in decades, called for China to “build a socialist ideology with strong cohesion” and to focus on long-term goals of improving education, health care and food supplies for China’s 1.4 billion people instead of only pursuing short-term material wealth.

Since taking power in 2012, Xi has called for restoring the ruling party's role as an economic and social leader and has tightened control over business and society since taking power in 2012. Some changes come at a rising cost as successful Chinese companies are pressured to divert money into political initiatives including processor chip development. The party tightened control over tech industries by launching data security and anti-monopoly crackdowns that wiped out billions of dollars of their stock market value.

“We must maintain historic patience and insist on making steady, step-by-step progress,” Xi said in the speech. Qiushi said it was delivered in February in the southwestern city of Chongqing. It is common for Qiushi journal to publish speeches months after they are delivered.

Economic growth slid to 0.8% in the three months ending in June compared with the previous month, down from 2.2% in January-March. That is equivalent to a 3.2% annual rate, which would be among China’s weakest in decades.

A survey in June found unemployment among urban workers aged 16 to 24 spiked to a record 21.3%. The statistics bureau said this week it would withhold updates while it refined its measurement.

The government is trying to reassure uneasy homebuyers and investors about the deeply indebted real estate industry after one of China's biggest developers, Country Garden, failed to make a payment to bondholders and suspended trading of its bonds. A government spokesperson said Tuesday regulators are getting debt under control and risks are “expected to be gradually resolved.”

Beijing also has expanded anti-spying rules and tightened controls on information, leaving foreign and private companies uncertain about what activities might be allowed.

Xi stressed “common prosperity,” a 1950s party slogan he has revived. He called for narrowing China’s yawning wealth gap between a tiny elite and the poor majority and to “regulate the healthy development of capital” but announced no new initiatives.

“Common prosperity for all people” is an “essential feature of Chinese-style modernization and distinguishes it from Western modernization,” Xi said.

Western-style modernization “pursues the maximization of capital interests instead of serving the interests of the vast majority of people,” Xi said.

“Today, Western countries are increasingly in trouble,” Xi said. “They cannot curb the greedy nature of capital and cannot solve chronic diseases such as materialism and spiritual poverty."

People wait outside a restaurant in Beijing, Tuesday, Aug. 15, 2023. Chinese leader Xi Jinping has called for patience in a speech released as the ruling Communist Party tries to reverse a deepening economic slump and said Western countries are "increasingly in trouble" because of their materialism and "spiritual poverty." (AP Photo/Ng Han Guan)

Analysis-China's crackdowns rewrite investors' private sector playbook

 An electronic board shows stock indexes at the Lujiazui financial district in Shanghai

By Samuel Shen and Summer Zhen

Thu, August 17, 2023

SHANGHAI/HONGKONG (Reuters) - Buy the state, sell the capitalist - that's how global investors are trying to play China's latest anti-graft crackdowns as they see private enterprise increasingly sidelined in Beijing's quest for "common prosperity".

China's recent sweep of the medical sector came as a shock to many investors who had thought the end of Beijing's three-year regulatory purge of the property and tech sectors meant there would be no more industry-wide crackdowns as policymakers prioritised economic recovery.

Several government bodies in July launched a year-long anti-corruption campaign into the medical system, making clear that China's drive to deliver affordable housing, education and healthcare to its masses was more important.

That forced many investors to quickly draw parallels with last year's crusade against private tutoring and a long-running one against tycoon Jack Ma's consumer finance firm Ant Group.

The one unanimous conclusion they came to was that Beijing wants a greater state presence in these sectors.

"The underlying principle is that healthcare is kind of like a social service that should principally be in state hands," said Arthur Kroeber, partner and head of research at Gavekal in New York. Kroeber says the crackdowns are about "defining what the state does, what the private sector does, and creating a more limited sandbox for the private sector to play in."

"This links to the idea of common prosperity because it's the state's job to guarantee a level of provision of basic services, whether it's education or healthcare, so it's important for the state to have a role," he said.

That has left investors now picking the state over the private sector.

While the CSI Medical Services Index is down 4.4% this month and 20% so far this year, investors have snapped up shares of state-owned medicine producers such as Beijing Tongrentang Co, which is up 14% this month.

Similarly, the expectation that state-backed property firms will gain better access to funding and bigger market share has seen investors dump private developers' stocks and rush into state-owned developers such as Yuexiu Property and Poly Developments.

Zhang Kexing, general manager of Beijing Gelei Asset Management, expects healthcare companies with strong branding will benefit, as will firms in traditional Chinese medicine, which has political support, such as Beijing Tongrentang.

NATIONAL SERVICE

While President Xi Jinping has made graft busting a priority since 2012, the Chinese Communist Party's (CCP) two-year-old "common prosperity" campaign that targets financial services, private education and healthcare has accelerated that push.

The CCP's July Politburo meeting reinforced the message, with the top policymaking body pledging to put a floor under the property sector, help indebted local governments heal and boost consumer demand.

Investors now believe Xi will be relentless in his social and economic agenda, much of which draws on Mao Zedong's Marxist and socialist thinking.

Thomas Masi, a partner and equity portfolio manager at Boston-based GW&K Investment Management, spoke to heads of several Chinese firms that he reckoned were at the fore of innovation in healthcare.

"Basically the message they were getting from the government was that they should be doing some of this innovation for national service, as opposed to for profitability only. That was a lightbulb for us," said Masi, who was once bullish on healthcare.

"We basically understood...we were not necessarily going to be paid as shareholders."

Xi himself has often said that private companies should be "rich and loving," be "patriotic" and share the fruits of their growth with employees more equitably.

Nuno Fernandes, also a partner and portfolio manager at GW&K, says it is important for investors in China to recognise the power of the state to override private interests, which means companies will need to "make a profit out of whatever circumstances and situation they are given."

That is why Fernandes has slashed his portfolio holdings in Chinese drugmakers.

Huang Yan, general manager of private fund manager Shanghai QiuYang Capital Co, said Beijing will crack down on any sector seen as increasing people's economic burden.

"Whether it's healthcare or tutoring, a crackdown will befall any sector as long as the campaign benefits the majority of people at the cost of the minority," Huang said.

Huang points to inflated liquor prices as an example.

"Using pricey spirit to lubricate business at the banquet increases companies' cost which could be used in better ways. It's possible for this sector to be targeted," he says.

But Beijing may ignore other sectors such as infrastructure, where such excess is less visible, he said.

Kumar Pandit, portfolio manager at Somerset Capital Management's Emerging Markets Dividend Growth Fund in London, is not cutting his China exposure but has an "added layer of scrutiny" around sectors Beijing deems important to common prosperity.

While the probability of wider crackdowns is low, he said making decisions remains challenging.

"It is difficult to say with certainty whether the crackdown will spill into other sectors," Pandit said.

(Additional reporting by Jason Xue in Shanghai and Ankur Banerjee in Singapore; Writing by Vidya Ranganathan; Editing by Sam Holmes)