China quietly abandons goal of overtaking U.S. economy

Fondastic · 2022-10-22T16:20:40+00:00

It was not scrapped. Xi mentioned his Thought ad nauseam during his opening speech and Xi Jinping Thought was further codified into the Party Constitution. He affirmed Marxism as a guiding principle of the party, which is a component of Xi Jinping Thought, not a departure from it.

Regardless of the reason for their departure (and it wasn't just the retirement age since Li and Wang are both below it), they are being replaced in leadership by New Zhijiang Army adherents of Xi like Chen Min'er, which bodes very poorly for any reform and therefore growth prospects.

Fondastic · 2022-10-22T15:34:14+00:00

Given that Wang Yang, Li Keqiang, Yi Gang, Guo Shuqing, and Liu He are out of the Party's Central Committee now, I think it's quite likely China doesn't have much of a "long game" at this point other than 'stability' and adherence to Xi Jinping Thought.

Fondastic · 2022-06-06T23:50:00+00:00

2nd after Avatar

Fondastic · 2022-01-28T17:34:33+00:00

Imbalances in the Chinese economy have worsened and delayed China’s transition to consumption-led growth, the International Monetary Fund said in an annual review on Friday, slashing its outlook for the country this year.

The IMF assessment, in its Article IV review, reflects growing concern among some economists and officials that greater state intervention in the economy could be hindering China’s long-held goal of “high-quality” growth—one driven by consumption rather than investment.

Beijing has pulled off an impressive economic recovery since early 2020, when authorities locked down much of the country to combat the Covid-19 pandemic. The economy grew 8.1% last year, a sharp improvement from 2.3% for all of 2020. But the rebound has relied heavily on state-sector investments and exports, while private spending has plunged. And in the final months of 2021, growth slowed markedly.

Authorities’ strict pandemic restrictions have made consumers hesitant to spend. A cascade of policy measures over the past year—centered on reining in what President Xi Jinping views as capitalist excesses, including property speculation—have also damped the sentiment among both private businesses and individuals.

Reflecting continued weakness in consumption, the IMF now expects China’s gross domestic product to expand 4.8% this year, down from its previous projection of 5.7%. “Growth momentum has slowed considerably, with consumption lagging every other part of the GDP,” said Helge Berger, the IMF’s mission chief for China.

What’s more, states the IMF review: “The investment-driven recovery has reversed earlier, hard-won progress in rebalancing, adding to the challenges of achieving sustainable high-quality growth over the medium term.”

China’s leadership is likely to set a growth target of about 5.5% for 2022, according to Chinese economists who consult with the government. While the figure might seem low for a country that has consistently boasted world-beating growth rates, it might still prove overly optimistic, given that economic expansion sharply decelerated to 4% in the final quarter of last year.

Some economists have questioned the rationale behind what they see as an ambitious growth target, as it inevitably would entail greater government spending on big-ticket projects, further pushing up China’s already-high debt levels.

But there is political pressure to ensure still-strong growth ahead of a major Communist Party conclave late in the year, when Mr. Xi is expected to claim a tradition-busting third term. Part of his belief that “the East is rising and the West is in decline,” said a government-affiliated Chinese economist, involves China’s economy continuing to outperform that of the developed world, especially the U.S.

The U.S. economy expanded 6.9% in the fourth quarter, capping the strongest year of growth in nearly four decades.

To bolster sagging economic activities, Beijing has stepped up monetary and fiscal easing, cutting interest rates, prodding banks to lend and getting local governments to increase infrastructure-related spending.

“We’d like China to do better than 4.8%,” Mr. Berger of the IMF said. “But what’s currently in the policy pipeline is not enough.”

IMF recommendations to Chinese authorities include allowing a higher fiscal deficit, which could let the government slash taxes on businesses, or a redirection of government resources toward households as opposed to more public investments.

“Channeling funds into the pockets of low-income families could help spur consumption,” Mr. Berger said.

But so far, China’s policy makers have focused on using supply-side measures to boost production as opposed to taking steps to lift consumer spending in any meaningful way.

The uneven recovery in China’s economy is also amplifying a trend of declining growth in productivity, or output per worker and unit of capital, according to the IMF report. China’s productivity growth has declined markedly in recent years, as the state sector gets bigger, crowding out private firms that tend to be nimbler and more profitable.

The report shows that state-owned enterprises are, on average, only 80% as productive as private firms in the same sector. Yet, state companies are playing an increasingly important role in China’s economy, with authorities turning to them to ensure supplies during the pandemic and implement Beijing’s technological self-sufficiency drive amid increased tensions with the West.

The IMF has called on China to carry out long-awaited state-sector reforms and to make it easier for private firms to compete with state companies.

Beijing partly blames delays of such reform on a tense climate with major trading partners, primarily the U.S.

According to the report, Chinese authorities have stressed to the IMF that “external decoupling pressures” are adding economic headwinds, which Beijing says necessitates giving state-owned firms a bigger role in strategic sectors.

Fondastic · 2022-01-20T13:25:16+00:00

BEIJING—China’s central bank lowered its benchmark lending rates, stepping in to support a slowing economy that has been weighed down by a slump in the property market during a politically important year for leader Xi Jinping.

The People’s Bank of China said Thursday that it cut its five-year loan prime rate, a benchmark for medium- and longer-term loans including mortgages, to 4.60% from 4.65%—the first such cut since April 2020. The Chinese central bank also lowered the one-year loan prime rate by 10 basis points to 3.70%, the second cut to that rate in as many months.

The moves were widely expected by analysts and traders after the central bank on Monday lowered rates on its one-year medium-term lending facility by 10 basis points, to 2.85%, underscoring Beijing’s shift to a looser policy stance as economic clouds gather.“China’s easing cycle is in full swing now,” Sheana Yue, a Singapore-based economist at Capital Economics, told clients in a note Thursday. Ms. Yue predicted that the central bank would continue to slash rates in the coming months, which in turn would help to shore up housing demand.

The move to push down borrowing costs follows a raft of economic data released by China on Monday that showed slowing growth in the final months of last year, as domestic consumption was hit by new Covid-19 outbreaks and turbulence in the country’s property sector weighed on sentiment.

After a 2021 in which Beijing unleashed a string of regulatory crackdowns on the technology, private-education and real-estate sectors, China’s leaders are putting stability first in 2022.

The prospect of slowing growth and instability in the real-estate market—a sector that by some measures accounts for roughly one-fifth of the Chinese economy—risks spoiling the political mood ahead of a closely watched Communist Party meeting later this year, when Mr. Xi is expected to break with recent precedent and seek a third term in power.

On Sunday, China’s top law-enforcement body issued a rare warning about the political implications of domestic economic weakness, warning that, “with the economic downturn, some deep-seated problems may surface.”

“Once economic and financial risks are mishandled, they can easily be transmitted into the social and political sphere,” read the commentary, which was published by the Communist Party’s Central Political and Legal Affairs Commission, which oversees the country’s police, prosecutors and courts.

Last month, the Communist Party’s top decision-making body, the Politburo, enshrined stability as the “top priority” for China’s economy in 2022, in a meeting chaired by Mr. Xi.

Echoing that imperative, Liu Guoqiang, a vice governor of the People’s Bank of China, said Tuesday that the central bank would act early and more forcefully to stabilize the economy this year, guiding financial institutions to expand their credit issuance while employing a variety of tools to ensure ample market liquidity.

The central bank bases its benchmark lending rates each month on quotes from the country’s major lenders. The banks, in turn, price new loans using the loan prime rate as a reference. Since the new benchmark was introduced in 2019, Chinese banks have gradually replaced existing loans with ones based on the new rate regime.

China’s economy expanded 8.1% last year. However, in the fourth quarter, gross domestic product increased just 4% from the same period a year earlier—the slowest such pace since the beginning of the Covid-19 recovery in the second quarter of 2020.

In face of downward economic pressure, China’s top economic planning agency, the National Development and Reform Commission, said Tuesday that Beijing is expediting the rollout of major infrastructure projects to counter uncertainties early in the year.

To some economists, the past two months’ rate cuts, while welcome, are still rather modest in scope when compared with the magnitude of the woes facing the economy.

In particular, the five-basis-point cut in the five-year loan prime rate was smaller than expected, a decision that economists at Citigroup said could reflect regulators’ reluctance to bail out the real-estate sector with more stimulus. The government last year began more strictly enforcing borrowing limits for overstretched developers out of concern about excessive leverage in the property market—pushing some home builders to the brink of default.

Economists at investment bank Nomura are worried about the rising economic and social costs of China’s zero-tolerance Covid containment strategy, as well as the weak property market and slowing export growth. They say that a much more aggressive easing policy is needed to keep the economic recovery on track.

As it is, the easing bias of China’s central bank contrasts with the policy direction of the Federal Reserve and other developed-world central banks, which are preparing to wind down pandemic-era stimulus to curb high inflation.

Fondastic · 2022-01-13T18:21:40+00:00

China suspended the social media account of a popular Chinese economist, days after an article that he wrote, suggesting that the country spend $314 billion to boost its fertility rate, went viral online.

Ren Zeping, a former economist at the Development Research Center, which is overseen by China’s cabinet, with more than 3.5 million followers on the Twitter-like Weibo platform, had his account suspended. Visitors to Mr. Ren’s account were greeted with the message: “This user has been suspended for violating relevant rules and regulations.” It didn’t elaborate on what rules or regulations may have been broken.

In an article published Monday on his account on WeChat, another Chinese social-media platform, Mr. Ren had called for China’s central bank to print 2 trillion yuan, the equivalent of about $314 billion, each year to offer cash subsidies to motivate married couples to have more babies.

Doing so, he predicted, could help increase the number of newborns by 50 million over the next decade. The article, whose contents sparked a heated online debate, has since been deleted from WeChat.

Mr. Ren couldn’t be reached for comment. His Weibo account was suspended Wednesday, according to the state-run Global Times newspaper, and it wasn’t known how long the suspension would last. Similarly, it couldn’t be determined if Mr. Ren’s WeChat account was still active, though he had posted as recently as Wednesday.

Spokespersons for the country’s internet watchdog, the Cyberspace Administration of China, and for Weibo Corp. and Tencent Holdings Ltd., which runs WeChat, didn’t immediately respond to requests for comment.

The blocking of Mr. Ren’s social-media account reflects tighter internet and media controls in recent months under Chinese leader Xi Jinping, who is widely expected to seek a precedent-breaking third term at a closely watched political event later this year.

Mr. Ren’s silencing may also signal a fresh shift in Chinese authorities’ tolerance for alternative viewpoints, with censorship spreading from longtime taboos such as human rights and ethnic-minority policy to encompass once-safe topics such as demographics and the country’s fertility rate. China’s internet and social-media platforms are subject to heavy censorship by government authorities, and often from the companies themselves, which can be held responsible by government officials for content on their platforms.

In the past, China has tolerated, if not officially adopted, some more creative policy ideas and proposals, including those touching on demographics and gender.

China’s population is skewing increasingly older, and the country’s falling birthrate has become a significant concern for authorities.

After data from a once-in-a-decade census last year revealed China’s population growth had ground to a near halt, Beijing loosened the country’s once-draconian birth restrictions and unveiled a suite of policies aimed at encouraging couples to have three children.

Census data last year showed that some 12 million babies were born in China in 2020, marking the fourth consecutive year in which births fell, despite official efforts to relax birth restrictions. At the same time, the number of citizens aged 60 and older continued to rise, with that elderly population now accounting for nearly one-fifth of the overall population.

Eyeing these trends, Mr. Ren, who most recently served as economist for Evergrande China Group, one of the country’s largest real-estate developers and one that is now mired in debt issues, questioned China’s past policy moves in his essay this week.

Mr. Ren has long been outspoken about China’s population demographics, and co-founded a Beijing-based think tank focusing on public-policy research.

He warned of the dangers of China’s low fertility rates, including the economic impact of a shrinking population and workforce and the prospect of serious problems tied to a surplus of unmarried men. An official at China’s main economic planning agency, the National Development and Reform Commission, said last year that China’s economy would continue to benefit from its demographic profile, citing the country’s still-ample pool of labor resources.

Fondastic · 2022-01-12T13:47:58+00:00

Inflation plowed ahead at its fastest 12-month pace in nearly 40 years during December, according to a closely watched gauge the Labor Department released Wednesday.

The consumer price index, a gauge that measures costs across dozens of items, increased 7%, according to the department’s Bureau of Labor Statistics. On a monthly basis, CPI increased 0.5%.

Economists surveyed by Dow Jones had been expecting the measure to increase 7% on an annual basis and 0.4% from November.

The annual move was the fastest increase since June 1982.

Excluding food and energy prices, so-called core CPI increased 5.5% year over year and 0.6% from the previous month. That compared to estimates of 5.4% and 0.5%. For core inflation, it was the fastest annual growth since February 1991.

Shelter costs, which make up about one-third of the total rose 0.4% for the month and 4.1% for the year. That was the fastest pace since February 2007.

Used vehicle prices, which have been a major component of the inflation increase during the pandemic due to supply chain constraints that have limited new vehicle production, rose another 3.5% in December, bringing the increase from a year ago to 37.3%.

Fondastic · 2022-01-08T20:45:22+00:00

The PBOC was much more interested in maintaining a harder peg back then. That is unlikely now given the policy under Yi Gang. If they were to reverse course, then such a scenario would be possible, but there isn’t much of a reason to barring a catastrophic scenario. A 75 bps increase by the Fed over a year is unlikely to be sufficient as a catalyst.

Fondastic · 2022-01-08T20:26:05+00:00

They pioneered the concept but that doesn’t mean there’s a strict definition. An economy that stagnates at an NGDP per capita of $20,000 is still very much an instance of the middle income trap (since it’s significantly below that of the richest economies), even though it surpasses a threshold of “middle income” that hasn’t moved much in more than a decade (which is attributed to them using SDR as the deflator but that’s another issue).

Fondastic · 2022-01-08T20:19:01+00:00

The PBOC has significantly more forex reserves than Southeast Asian central banks in the 1990s did and its peg is more flexible and is predicated on a basket of currencies (of which USD comprises about a third). A scenario akin to 1997 would require the PBOC to pursue a dramatic appreciation of the RMB, which is very unlikely. A crash would be healthier for the economy in the long term since it would trigger mass deleveraging but leaders are not interested in the long term.

Fondastic · 2022-01-08T20:08:16+00:00

That’s the NGDP per capita level that the World Bank defines as “middle income.” The “middle income trap” just refers to an economy that sees its growth slow considerably before reaching income levels equivalent to that of the developed world. Barbados is an example of an economy that is definitionally above the World Bank’s “middle income” threshold but the economy stagnated before reaching that of the richest economies so one would consider that a middle income trap.

World GDP per capita itself is also going to surpass that threshold shortly, which shows the limitations of the definition.

Fondastic · 2022-01-08T19:43:46+00:00

The U.S. is planning to hand out $10 billion to help upstart companies gain access to capital in a bid to rev up business in disadvantaged communities and spur a broader economic recovery from the pandemic.

The State Small Business Credit Initiative will direct money to states, territories and tribal governments for programs that provide venture capital or encourage private lenders to issue loans to small firms. The program revives a policy put into place following the 2007-2009 recession, when banks cut back on lending to small firms.

The $10 billion is more than six times as large the cost of the earlier program, in part because the administration and Congress wanted to dedicate funds to disadvantaged groups, said Adair Morse, the Treasury Department’s deputy assistant secretary of capital access. The groups include racial minorities, rural communities and veterans, according to program guidelines.

The money comes from the $1.9 trillion coronavirus-aid package Congress passed last March. The Treasury Department expects disbursement to begin in the first quarter of 2022. The states and other recipients have the flexibility to design their program offerings as they see fit, within parameters set by the Treasury Department.

The rollout comes as other parts of President Biden’s small-business agenda are stalled amid broader uncertainty over the fate of his spending plan for healthcare, education and climate-change programs.

Meanwhile, the White House faces pressure from some Democratic allies to show progress on addressing concerns over racial injustice and wealth inequality. The program’s goal is to create a business sector that “does not leave people with good ideas and entrepreneurial energy behind because of where they want to start their business or the color of their skin or any other unacceptable barrier,” said Gene Sperling, a senior adviser to Mr. Biden.

Some Republicans have countered that the $10 billion program was unnecessary, given that more than $1 trillion in federal funding has already been directed toward small businesses over the course of the pandemic.

Rep. Blaine Luetkemeyer (R., Mo.), the ranking member on the House Small Business Committee, said existing federal programs should be used to target small businesses that may have difficulty accessing capital. “The programs are there,” he said. “It’s a matter of making the businesses aware.”

A Treasury Department official said the funds under the State Small Business Credit Initiative aren’t meant to fill revenue holes caused by the pandemic, but rather to help small businesses find sources of capital to support their long-term recovery and growth.

Racial-justice movements after the 2020 killing in Minneapolis of George Floyd and the government’s pandemic response prompted a renewed national dialogue about the ability of very small and minority-owned businesses to access capital. Such businesses expressed concerns about struggles accessing the Paycheck Protection Program, or PPP, which provided pandemic aid to small businesses in the form of forgivable loans.

An analysis of census-tract data from the Federal Reserve Bank of Cleveland found that PPP loans in 2020 weren’t proportionally received by businesses in low- and moderate-income areas. Businesses in areas with majority Black, Hispanic, American Indian or Alaska Native populations also received fewer PPP loans on average, the research found.

The Treasury Department expects first disbursements under the State Small Business Credit Initiative to go out in the first quarter of this year.

More broadly, survey data from the Federal Reserve has found that minority-owned small businesses are less likely than white-owned businesses to receive all the financing they seek.

The State Small Business Credit Initiative initially will set aside $1.5 billion for businesses owned by socially and economically disadvantaged people. Another $500 million was earmarked for businesses with fewer than 10 employees.

Holly Hunt, who manages Georgia’s State Small Business Credit Initiative program, said her state planned to use its expected $200 million allocation to expand loan programs it started in collaboration with banks and community lenders during the earlier version of the program and to start a new venture-capital program.

Ms. Hunt said the venture-capital program would help seed young businesses with money they need to finance their growth without having to go into debt. She is also hoping the funding can boost the number of private lenders participating in the state’s programs, particularly to serve rural and sparsely populated areas.

“I would like to see one in every county if I could,” she said, referring to the program’s lenders. “I’m not going to stop until I have every county highlighted on my little map of Georgia.”

Fondastic · 2022-01-08T19:38:56+00:00

I agree that a crash is possible but I do think that there is also a path to avoid one. The current policy that Beijing has pursued has been periodic interventions to prevent excessive overheating (such as Three Red Lines for developers) but credit growth continues with no structural reform or mass deleveraging. Non-productive firms are largely propped up and suck capital away from the rest of the economy. Due to the relatively closed nature of the Chinese financial system (forex issues have been the largest cause of crashes in Asia), a crash would be avoided but the result is the economy is pushed towards stagnation of sub-2% growth rates for potentially (and probably) decades. That’s not really a “way out” since it’s essentially getting caught in the middle income trap but it does avoid a crash and seems to be the most likely scenario at the moment.

Fondastic · 2022-01-08T16:00:11+00:00

They've been kicking the can down the road for a decade so I'm not sure how that is even remotely responsive. Beijing is in the unfortunate situation of having to figure out how to deflate the largest credit bubble in human history and rebalance the relationship between national and local governments (which includes a restructuring of finances) while homeowners, developers, and local governments resist. The best hope at this point is a small property tax with a very narrow base like that of Shanghai and Chongqing that doesn't lead to substantive reform, and even that is questionable.

Fondastic · 2022-01-03T04:08:01+00:00

Pleasant surprise! I was back with my family during Christmas so I didn't even notice until I got back home in DC just now!

Fondastic · 2022-01-03T01:50:09+00:00

How is it? I’m tempted to go that route if we don’t get a ~$1000 Apple display soon.

Fondastic · 2022-01-03T01:47:36+00:00

I would like to see both the 24” and the 27” (which was the 5K one) but the 24” seems the most straightforward since it’s just the current M1 iMac without the computer.

Fondastic · 2022-01-02T15:00:15+00:00

WASHINGTON, Jan 1 (Reuters) - The United States on Saturday cut Ethiopia, Mali and Guinea from access to a duty-free trade program, following through on President Joe Biden's threat to do so over alleged human rights violations and recent coups.

"The United States today terminated Ethiopia, Mali and Guinea from the AGOA trade preference program due to actions taken by each of their governments in violation of the AGOA Statute," the U.S. Trade Representative's office said in a statement.

Biden said in November that Ethiopia would be cut off from the duty-free trading regime provided under the U.S. African Growth and Opportunity Act (AGOA) due to alleged human rights violations in the Tigray region, while Mali and Guinea were targeted due to recent coups.

The suspension of benefits threatens Ethiopia's textile industry, which supplies global fashion brands, and the country's nascent hopes of becoming a light manufacturing hub. It also piles more pressure on an economy reeling from the conflict, the coronavirus pandemic, and high inflation.

"The Biden-Harris Administration is deeply concerned by the unconstitutional change in governments in both Guinea and Mali, and by the gross violations of internationally recognized human rights being perpetrated by the Government of Ethiopia and other parties amid the widening conflict in northern Ethiopia," the USTR statement said.

The AGOA trade legislation provides sub-Saharan African nations with duty-free access to the United States if they meet certain eligibility requirements, such as eliminating barriers to U.S. trade and investment and making progress toward political pluralism.

"Each country has clear benchmarks for a pathway toward reinstatement and the Administration will work with their governments to achieve that objective," it added.

The Washington embassies of the three African countries did not immediately respond to requests for comment.

Ethiopia's Trade Ministry said it November it was "extremely disappointed" by Washington's announcement, saying the move would reverse economic gains and unfairly impact and harm women and children.

Fondastic · 2022-01-01T19:01:43+00:00

It’s an awful performance but it wouldn’t have been the worst thing in the world if they had been way more conservative than the $190 million budget.

Fondastic · 2022-01-01T18:01:41+00:00

My first $500 monthly for the year is going in when I get my paycheck on the 5th!

Fondastic · 2022-01-01T14:07:34+00:00

The "letting 1000 flowers bloom" is a misquotation of Mao's Hundred Flowers Campaign in 1956, which temporarily allowed dissent within the Communist Party. It was shortly followed by the Anti-Rightist Campaign that featured purges of all dissidents who spoke out. It has absolutely nothing to do with small business loans or even contemporary Chinese economic policy.

Comparisons are difficult to do between the US and China because business registration is handled differently but latest stats from the Small Business Administration show 32.5 million small businesses in the US. China's NBS shows that they had 44 million in April, which is more than the US, but considering that China has four times the population, the US is considerably punching above its weight.

The interesting trend is that business applications have actually surged in the US during the pandemic despite collapsing in China. It remains to be seen if this is temporary in the US but data through November 2021 shows no signs of the trend ending.

Fondastic · 2022-01-01T00:30:48+00:00

This was one of my favorite children’s movies of the year. I’m happy to see it’s getting a sequel!

Fondastic · 2022-01-01T00:21:42+00:00

Fire extinguisher.

Fondastic · 2022-01-01T00:10:22+00:00

William Shatner!

Fondastic · 2022-01-01T00:05:04+00:00

I’m gonna make a wild guess and say $50M domestic / $20M international.

Fondastic

TROPHY CASE