China Economy – TJDJDJ http://tjdjdj.com/ Sun, 09 Jan 2022 02:26:31 +0000 en-US hourly 1 https://wordpress.org/?v=5.8 https://tjdjdj.com/wp-content/uploads/2021/06/icon-2-150x150.png China Economy – TJDJDJ http://tjdjdj.com/ 32 32 Evergrande: Impact of the Chinese real estate crash on Australia https://tjdjdj.com/evergrande-impact-of-the-chinese-real-estate-crash-on-australia/ Sat, 08 Jan 2022 11:51:08 +0000 https://tjdjdj.com/evergrande-impact-of-the-chinese-real-estate-crash-on-australia/ The next six months will test Australia’s risky decision to rely on this one thing to boost its economy. It was once said that the fortunes of the Australian economy rested on the backs of a flock of sheep, so dependent on wool exports. But in the 21st century, the fortunes of Australia’s economy now […]]]>

The next six months will test Australia’s risky decision to rely on this one thing to boost its economy.

It was once said that the fortunes of the Australian economy rested on the backs of a flock of sheep, so dependent on wool exports. But in the 21st century, the fortunes of Australia’s economy now rest on a 200,000-ton bulk carrier filled to the brim with the nation’s bounty of coal, iron ore and other minerals.

In early 2020, as the pandemic sent Chinese cities into the world’s first Covid shutdowns, Australia’s strategy of reliance on China appeared to rest on increasingly volatile ground.

However, like so many other times in recent history, the good fortune of the lucky land has once again come to our aid. With the Chinese government spending heavily on the stimulus, Beijing once again came to Australia’s rescue, with the Middle Empire at one point accounting for nearly half of all Australian exports.

But now, as China’s real estate woes continue amid a clampdown on systemic risk that comes straight from above, Australia’s strategy of betting everything but the kitchen sink on demand. China’s continued for raw material imports seems more and more risky.

Crackdown on Chinese Communist Party (CCP) Property

Since taking office as president, Xi Jinping has consistently insisted that systemic risk in China’s economy and financial markets be addressed.

With homes in some Chinese cities selling for up to 43 times household income and the affordability threshold solid at around five times, depending on who you ask, it’s clear that there is a need to contain the risks.

As you would expect when dealing with an industry that accounts for nearly 30 percent of Chinese GDP, these efforts have had some pretty serious consequences of both intended and unintended variety.

In recent months, Chinese house prices have started to fall, undermining market confidence. At the same time, the most financially vulnerable developers have struggled to access credit, even some companies that were believed to be exceptional in the industry being hit hard by the deteriorating environment in the real estate sector.

As you can imagine, not everyone is happy with the drive to reduce systemic risk in a global environment that Xi sees as highly vulnerable to yet another financial crisis.

Some local governments have backed down as their incomes dwindled in the wake of the crackdown, implementing policies to try to revive the real estate industry.

Evergrande and the risks

During the second half of last year, the impact of the CCP’s crackdown on the real estate industry became increasingly clear, as the woes of mega developer Evergrande made headlines around the world and that concerns have arisen at the highest level of government about the potential impact.

With such a large proportion of Chinese economic activity at stake, and the potential for the impact of a Chinese slowdown to hit a still vulnerable global economy, chances are high that the woes of the real estate sector could snowball into the future. a larger crisis if not managed properly.

While the formal default of Evergrande and the entry into a period of restructuring were not the Lehman Brothers-type catalyst (the Lehman collapse contributed to the onset of the global financial crisis) that some expected, the magnitude problems facing the Chinese real estate sector cannot be underestimated.

The real estate time bomb keeps spinning

According to a recent Bloomberg calculation based on analyst estimates, Chinese real estate developers will need to find A $ 271 billion (US $ 197 billion) to cover maturing bonds, bond payments, trust products. and the deferred wages of millions of migrant workers in January alone.

And these are just the obligations that we know of.

For example, in the case of mega developer Evergrande, for every $ 2 in debt and other bonds it held, U.S. investment bank Goldman Sachs estimated it held around $ 1 in hidden off-balance sheet bonds. .

These shadow bank obligations and other off-balance sheet debt often attract higher interest rates and potentially more difficult refinancing terms in times of difficulty. Compared to loans in more established credit markets, the likelihood of endless problems arising is arguably quite high.

For companies that are in disgrace in the credit markets or in difficulty, mustering liquidity could be quite a challenge.

With borrowing costs currently near record highs, the US dollar-based offshore financing market effectively remains closed to developers looking to refinance or roll over debt. According to analysis by HSBC Holdings PLC, this will continue for at least six months.

The outlook for the new year

Although 2022 is an absolutely vital year for the CCP and President Xi from a political point of view, so far there are few signs that they are ready to abandon their efforts to curb the excesses in the real estate sector. .

On Monday, it was revealed that Evergrande had been ordered to demolish 39 apartment complexes on the man-made Ocean Flower Island in Hainan province. Chinese media report that the planning permission for the apartments was “illegally obtained” and had been “revoked”.

The apartments are valued at around 7.7 billion yuan (AU $ 1.7 billion).

Evergrande only had 10 days to demolish the buildings.

This latest development is further confirmation that Beijing currently has little interest in ending its crackdown, even as the damage to balance sheets and developer viability continues to worsen.

While the local government in China is expected to increase spending on infrastructure in an attempt to offset woes in the real estate sector, the question of whether that will suffice is open.

From the White House to Wall Street, the eyes of the world are on the lookout for signs of how this is all going to play out.

But for Australia, the stakes are higher than almost anywhere else in the developed world. We have taken a firm bet on the Chinese real estate sector and whether the nation’s famous luck comes to our aid again could play a major role in shaping Australia’s economic fortunes in 2022.

Tarric Brooker is a freelance journalist and social commentator | @AvidCommenter

Read related topics:China

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Wall Street stock predictions in 2022 for China https://tjdjdj.com/wall-street-stock-predictions-in-2022-for-china/ Fri, 07 Jan 2022 09:32:01 +0000 https://tjdjdj.com/wall-street-stock-predictions-in-2022-for-china/ Heading into 2022, Wall Street is divided over the trajectory of China’s growth and regulatory future. Some say tough regulation will persist, while others believe it will ease soon. Insider rounded up the economic forecasts of major Wall Street companies for China for 2022. In the decades following the market reforms of 1978, the rapid […]]]>
  • Heading into 2022, Wall Street is divided over the trajectory of China’s growth and regulatory future.
  • Some say tough regulation will persist, while others believe it will ease soon.
  • Insider rounded up the economic forecasts of major Wall Street companies for China for 2022.

In the decades following the market reforms of 1978, the rapid growth of the Chinese economy heralded the emergence of a superpower.

By shifting its focus to industrial manufacturing, emphasizing greater economic efficiency, and welcoming foreign investment, the Chinese government increased the country’s annual growth rate from around 6% before 1978 to an average by 10% in recent decades. In some years, annual GDP has peaked at over 13% – by comparison, the annual GDP growth rate of the United States has averaged 1.7% over the past two decades.

But in recent years, China’s astonishing growth rate has slowed down due to structural constraints such as “declining workforce growth, declining returns on investment, and slowing down of productivity, ”the World Bank said.

China's GDP


The World Bank


The World Bank added that “the challenge for the future is to find new engines of growth while tackling the social and environmental legacies of China’s previous development path.”

Besides the ebb in growth, investors in 2021 were frightened by China’s brutal regulatory crackdown targeting sectors ranging from tech to education. From February to September of last year, these initiatives wiped out nearly $ 1 trillion in the market value of Chinese stocks.

“After a strong rally in 2020, Chinese stocks underperformed the MSCI World by 25% as politics tightened, the economy slowed, earnings disappointed and regulatory interventions shook confidence “said Niall MacLeod and Karen, equity research strategists at UBS Asia. Hizon wrote.

It is therefore not surprising that at the start of 2022, investors are particularly cautious and increasingly divided on the trajectory of the Chinese economy. While some expect profits to improve as the Chinese government loosens its strict policies, others believe these strict market regulations will prevail for years to come.

The case of the bull: heavier regulation now facilitates the way forward

Morgan Stanley strategists predict a “rebound in growth” this year, a sentiment shared by analysts at UBS and the BlackRock Investment Institute, the latter predicting “a relatively brighter environment for Chinese assets.”

“China’s policymakers are prioritizing quality growth over quantity – a change that increases short-term risk but is positive in the long term, in our view,” BII analysts wrote.

According to the BII, policymakers took advantage of robust growth after the COVID-19 epidemics ended to initiate reforms earlier this year, significantly shifting “China’s overall political position towards increased public intervention and social goals , even at the occasional expense of growth “.

JPMorgan analysts agree, writing that policymakers have compromised “weaker short-term growth” for long-term goals, including “deleveraging, decarbonization and reducing income inequality.” However, the company remains optimistic about China’s short-term trajectory, saying it believes the growth rate will accelerate to 5.7% in 2022 from -3.1% in the third quarter thanks to the creation jobs, reduced financial leverage, reopenings and greater improvements. in regional cooperation and US-China relations.

The BII said future threats from COVID-19 may warrant more policy easing.

“We expect tighter regulation to persist in China, but we believe it is unlikely to intensify in the politically significant year of 2022 given the slowdown in growth,” the team said. But even a slight reduction in regulation could provide a huge boost; IBI’s chief economist for China, Yu Song, said “markets may be underestimating that Chinese policy is about to ease from this year’s tight stance.”

china risk premium


BlackRock Investment Institute


In contrast, UBS’s MacLeod and Hizon said they believe Chinese policy “looks more neutral from here,” with tightening already underway. A drop in regulatory headwinds, they wrote, should encourage a rebound in earnings, especially in the Internet sectors.

Additionally, the duo said investor fears over government interference with antitrust and data privacy rules may be “exaggerated.” While there has been a substantial amount of regulation over the past year, the “proposed rules, remedies and enforcement are broadly in line with global best practice,” they said.

“As this becomes more evident, we believe concerns about the motivation for regulation are likely to subside, allowing risk premiums to ease,” MacLeod and Hizon continued.

Lei Meng, UBS China equity strategist, said Chinese policy follows a cycle of regulation and support. Rather than being frightened by technology regulations, investors “should focus on the positive side of China’s supportive policy,” which is currently benefiting the manufacturing and infrastructure sectors, he said.

For 2022, the BII remains tactically overweight Chinese assets, saying current valuations adequately compensate investors for uncertainties and “materially higher” risks relative to other developed markets.

UBS agreed, saying Chinese stock valuations would continue to trade “below regional averages” and Chinese assets would outperform with any improvement in growth policy or regulation.

At the sector level, Meng said internet stocks look cheap. Citing strong political support, rich valuations and strong growth over the next two years, he said he was also bullish on the manufacturing and renewable energy sectors, including electric vehicles and solar power. .

And while UBS has predicted that Chinese growth will “weaken” this year, Meng said the Chinese economic slowdown will put additional pressure on the market in the coming months. For this reason, it is overweight consumer staples and specific consumer discretionary subsectors, notably auto parts and major appliances.

Unlike the above companies, Goldman Sachs said it expects “China


Real gdp

Growth trajectory continues to decline, “adding that” growth in emerging countries excluding China may even overtake China in the years to come “with lower growth rates.

china growth


Goldman Sachs


Despite this, Goldman Sachs remains bullish on the Chinese market, saying the “pervasive negativity” surrounding the market warrants a “more balanced outlook.” The company urged investors to keep in mind that economic growth, “even at a slower rate,” is still part of the policy goal. Even in the worst-case growth forecast scenario, the market remains stable, while accelerating growth follows the best-case scenario.

For 2022, the company is bullish on Chinese stocks, saying multiples mean cheap valuations. Analysts also predicted “wiggle room for policy to become more favorable” and said they saw a “clearer path” for China’s outperformance this year relative to the emerging market average excluding China.

The case of the bear: regulatory headwinds will prevail

On the flip side, the Wells Fargo Investment Institute said the United States was still “likely to be the main source of global economic growth” even as the Chinese economy normalizes.

china growth


Wells Fargo Investment Institute


Wells Fargo said that “regulatory crackdown in China could mean more political restrictions limiting growth looming on the horizon, which would likely weigh more heavily on emerging markets.” Analysts also warned that a lack of local oil production meant Asian companies would be more vulnerable to higher energy prices than their US counterparts.

“We expect the global recovery to continue into 2022, but economic, earnings and currency conditions continue to favor the United States,” concluded Wells Fargo. It particularly favors large and mid-capitalization US equities over international equities.

Jefferies also maintains a modest overweight outlook in US stocks in 2022, with analysts expressing concerns about “downside risks to China’s GDP growth” as the government appears “unwilling to ease policy.” .

According to the company, global trade was affected last year by slower Chinese growth and a drop in critical manufacturing supplies due to power shortages. He said that if the electricity shortage extends to 2022, China’s economy will experience stagflation as price levels rise while output growth remains weak. In turn, analysts said, this “would make it more difficult for Chinese policymakers to relax.”

Bank of America analysts also affirmed a lower-than-consensus Chinese growth forecast of 4% in 2022, writing that the potential rebound in growth would be less deep than current expectations, especially considering the time needed to deploy. more flexibility measures.

Notably, the bank said it was surprised to see “the delay in the policy response in China so far.” Echoing the sentiment of JPMorgan and the BII, its strategists said they envision the possibility of a “stronger structural engine for delayed policy easing – with policymakers deliberately shifting the political priority from stable growth. short term towards long term social goals “.

But while declaring those longer-term goals to be ultimately positive, the bank warned that such changes implied “stronger headwinds” for near-term growth. China, he explained, would be forced to shift growth engines from “old engines” like real estate to “new ones” like sustainability and 5G relatively quickly to avoid further weakening trend growth. .

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China Could Stay Closed All Year 2022: Goldman Sachs | Coronavirus pandemic News https://tjdjdj.com/china-could-stay-closed-all-year-2022-goldman-sachs-coronavirus-pandemic-news/ Wed, 05 Jan 2022 05:18:55 +0000 https://tjdjdj.com/china-could-stay-closed-all-year-2022-goldman-sachs-coronavirus-pandemic-news/ China could maintain its strict border restrictions throughout the year as it prepares to host the Winter Olympics and a series of political events in 2022, Goldman Sachs Group Inc said. The information that vaccines produced by the state-owned Sinovac Biotech Ltd. offer limited protection against the omicron variant will likely strengthen China’s resolve to […]]]>

China could maintain its strict border restrictions throughout the year as it prepares to host the Winter Olympics and a series of political events in 2022, Goldman Sachs Group Inc said.

The information that vaccines produced by the state-owned Sinovac Biotech Ltd. offer limited protection against the omicron variant will likely strengthen China’s resolve to stick to its Covid Zero strategy, analysts led by Andrew Tilton wrote in a note on Tuesday.

China is one of the few countries in the world still committed to the Covid Zero approach, while many others have turned to life with the virus.

Strict measures to contain epidemics – like the current Xi’an hard lockdown – have resulted in disruptions to production and travel, and lower consumption, adding pressure on an economy already weighed down by a slowdown in the economy. housing market.

Quarantine requirements for travelers arriving from overseas could be maintained to avoid major disruption of the Winter Olympics, which begin next month, the annual meeting of the national legislature in March, and the 20th Communist Party Congress. in the fourth quarter, Goldman analysts said.

President Xi Jinping is expected to get an unprecedented third term at the party event once every five years.

With Covid-19 likely to be spread outside China and with the party congress approaching in the last quarter “we doubt policymakers will eliminate quarantines before then,” analysts said. “With transmission typically higher during the winter months, it is possible that border restrictions will remain largely intact until spring 2023.”

China has some of the world’s toughest border controls in place to control COVID-19 [File: Qilai Shen/Bloomberg]

China’s tough measures to contain Covid won’t work as well this year as they did in 2020, said Ian Bremmer, chairman of Eurasia Group, a political risk consultancy. This means supply chain challenges will continue around the world and inflation could persist longer than expected, he said.

“The ability to live with the virus, an extremely easily transmitted virus that is not as deadly, is the exact opposite of China’s zero Covid policy, and zero Covid will not work for them. But they’re going to stick with it, ”Bremmer told Bloomberg TV. “It is not primarily a challenge caused by a virus, but it is a challenge the Chinese government cannot meet.”

Beijing has vowed to reorient its policy this year towards stabilizing economic growth rather than preventing risks, as it warns of a triple whammy of shrinking demand, a supply shock and weakening prices. expectations.

Last month, the central bank boosted liquidity by reducing the amount of cash lenders must keep in reserve. Authorities have also said they will respond better to what they call a “reasonable demand” for housing as they work to limit the fallout from a growing debt crisis engulfing the country’s housing sector.

Goldman expects a further reduction in the reserve requirement ratio in the first quarter, with credit-focused easing and tax measures cushioning but not completely absorbing the slowdown in the housing market.

Rest of asia

The yuan could see “small further gains” to 6.2 per dollar by the end of this year, with China maintaining a “significant” current account surplus, analysts said. The Chinese currency would also benefit from a net inflow of strong portfolios thanks to index inclusions and a potential acceleration in stock purchases by foreigners, with domestic stocks likely performing better this year than last year, they added.

For the rest of Asia, a shift to ‘living with Covid’ will likely dominate the economic response to the pandemic, with headline inflation unlikely to accelerate significantly from current levels as central banks raise rates of interest, topping New Zealand, South Korea and Singapore.

“We expect the three to tighten further in 2022 and be joined by many of their peers in the region,” Goldman analysts wrote. “In our opinion, the next group of central banks most likely to increase are India, Malaysia, Indonesia and Taiwan.

Japan’s economy is likely to grow by 2.7%, which would be the fastest pace in a decade, supported by fiscal easing and global demand.

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US on the sidelines as China and other Asia-Pacific countries launch trade pact https://tjdjdj.com/us-on-the-sidelines-as-china-and-other-asia-pacific-countries-launch-trade-pact/ Sat, 01 Jan 2022 12:00:00 +0000 https://tjdjdj.com/us-on-the-sidelines-as-china-and-other-asia-pacific-countries-launch-trade-pact/ WASHINGTON – China is joining U.S. allies, including Japan and Australia, in a new Asia-Pacific trade deal that will be launched on Saturday, in front of the United States. The new Regional Comprehensive Economic Partnership, or RCEP, will eventually eliminate more than 90% of tariffs on trade between its 15 member countries, which economists say […]]]>

WASHINGTON – China is joining U.S. allies, including Japan and Australia, in a new Asia-Pacific trade deal that will be launched on Saturday, in front of the United States.

The new Regional Comprehensive Economic Partnership, or RCEP, will eventually eliminate more than 90% of tariffs on trade between its 15 member countries, which economists say will be a boon to trade in the region.

It will also give China a bigger role in establishing trade rules in the Asia-Pacific region at the expense of the United States, some analysts say.

“It will be a grouping of countries that will work together and try to develop new rules and standards,” said Wendy Cutler, vice president of the Asia Society Policy Institute and former head of US commerce. “[The U.S. is] go the other way.

China had been excluded from an earlier trade deal, the Comprehensive and Progressive Agreement on Trans-Pacific Partnership, which the United States had led to counter China’s influence in the region.

The United States withdrew from the Trans-Pacific Partnership in 2017 under former President Donald Trump, who said the deal was hurting American workers. Many lawmakers have also opposed the pact, and the Biden administration has said it has no plans to join it.

Henry Gao, Asian trade expert and associate professor of law at Singapore Management University, said the new RCEP “could be a wake-up call for the United States to rethink its strategy and return to Asia-Pacific.”

He said RCEP would benefit China by making its parts and components more attractive to factories that make up supply chains in Southeast Asia, and by boosting trade with Japan and South Korea.

RCEP was launched in 2012 by the Association of Southeast Asian Nations to strengthen ties with China and other countries in Asia. Ms Cutler, who was working with the U.S. Trade Representative’s office at the time, said the United States had not been invited to participate and would not have joined anyway because the agreement was considered too weak, lacking in labor standards and environmental requirements.

When RCEP members unveiled the completion of their deal in November 2020, then President-elect Biden said the United States should “set the rules of the road instead of leaving China and d ‘others dictate the results as they are the only game in town.

A senior official in the Biden administration said the White House recognizes the need for the United States to engage the Asia-Pacific region economically and discussions on how to do so are underway.

The other RCEP member countries are Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, New Zealand, Philippines, Singapore, South Korea, Thailand and Vietnam.

So far, 10 of the 15 member countries have officially ratified the deal and the rest are expected to do so in the coming months.

With RCEP members representing 30% of the world’s population and gross domestic product, the partnership becomes the largest regional trade agreement in the world, surpassing the United States-Mexico-Canada agreement and the European Customs Union.

The agreement aims to eliminate almost all tariffs on imports between countries within 20 years and establish common standards on intellectual property rights and electronic commerce.

Some business analysts have said the RCEP does not address issues where China may be vulnerable, including labor and environmental standards and its support for state-owned enterprises.

In a November 8 letter, 13 GOP Senators led by Mike Crapo (R., Idaho), the top Republican on the Senate Finance Committee, urged Biden to get involved in crafting new rules trade in the Asia-Pacific region, declaring the absence of the United States “encourages potential partners to move forward without us and ensures that China will hold the reins of the world economy.”

As an early indication, they pointed to the launch of RCEP, calling it “an agreement in line with China’s interests, including weak rules on intellectual property rights, and none on state-owned enterprises.”

Senator Mike Crapo (R., Idaho) urged President Biden to get involved in shaping new trade rules in the Asia-Pacific region.


Photo:

Chip Somodevilla / Getty Images

Liu Pengyu, spokesperson for the Chinese Embassy in Washington, said China was “committed to building an open world economy, rather than forming an exclusive and closed ‘clique.’

The launch of RCEP comes at a time when China seeks a greater role in shaping trade rules in the Asia-Pacific region, while the United States remains largely absent.

In recent months, Beijing has asked to join the CPTPP and the Digital Economy Partnership Agreement, an ambitious new pact between Chile, New Zealand and Singapore that aims to establish common standards in areas like trade. electronics and artificial intelligence. Some experts see DEPA as a model for a future agreement for the whole region.

Highlighting China’s progress in opening up its economy in a speech on November 5, Chinese President Xi Jinping said China was among the first nations to ratify RCEP nationally. He also pledged to actively work to join the CPTPP and DEPA.

As the first free trade agreement between China, Japan and South Korea, RCEP is expected to help significantly boost trade between countries.

Customs duties will be removed on 86% of industrial products exported from Japan to China, compared to 8% currently. This includes the elimination of levies on 87% of auto parts exports worth nearly $ 45 billion a year, according to the Japanese government.

Some 92% of Japanese industrial products will be exported to South Korea duty-free, compared to 19% currently.

The Brookings Institution estimates that RCEP could add $ 209 billion a year to global revenues and $ 500 billion to global trade by 2030.

The most notable feature of RCEP, according to trade experts, is the flexibility of rules of origin. It only requires 40% of the content of a product from the RCEP block to qualify for duty-free treatment, compared to 50% to 60% of floors for the USMCA.

“This offers many opportunities to create and strengthen intra-Asian supply chains,” said Jeffrey Schott, senior researcher at the Peterson Institute for International Economics.

Write to Yuka Hayashi at yuka.hayashi@wsj.com

Copyright © 2021 Dow Jones & Company, Inc. All rights reserved. 87990cbe856818d5eddac44c7b1cdeb8

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China’s robust economy will attract more foreign investment and talent, economist says https://tjdjdj.com/chinas-robust-economy-will-attract-more-foreign-investment-and-talent-economist-says/ Thu, 30 Dec 2021 16:31:00 +0000 https://tjdjdj.com/chinas-robust-economy-will-attract-more-foreign-investment-and-talent-economist-says/ имофей орзенко China’s robust economy. Photo by Xinhua. “China’s robust economy will attract more foreign investment and foreign talent to China”, – Dan Wang, chief economist at Heng Seng Bank (China), said, according to Xinhua News Agency reports. “China’s main attraction for foreign investment is its strong economic performance,” – Wang wrote in a recent […]]]>

имофей орзенко

China’s robust economy. Photo by Xinhua.

“China’s robust economy will attract more foreign investment and foreign talent to China”, – Dan Wang, chief economist at Heng Seng Bank (China), said, according to Xinhua News Agency reports.

“China’s main attraction for foreign investment is its strong economic performance,” – Wang wrote in a recent opinion piece in the Financial Times, noting that China’s performance contrasts sharply with the rest of the global economy.

“There is no doubt that its GDP growth will exceed the official target by more than 6% this year. We expect full-year growth to exceed 8%”, – she said.

“Statistics show that foreign investment has not left China and that China’s policy of opening up its domestic market has not been reversed either”, – according to Wang.

“Global foreign direct investment (FDI) declined in 2020, but China’s FDI continued to grow. In 2020, China’s FDI accounted for more than a fifth of the global total, doubling its pre-pandemic share, and this trend will continue this year “, – she said.

“Concerns about China’s future growth stem mainly from a slowdown in the real estate sector. However, investments in the manufacturing sector will partly offset the repercussions”, – Wang said.

China’s GDP grew 4.9% year-on-year in the third quarter, slower than its growth of 18.3% in the first quarter and 7.9% in the second quarter. In the first three quarters, the country recorded a GDP expansion of 9.8%, well above its annual growth target of more than 6%, according to official data.

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China clarifies rules for overseas IPOs in US What we don’t know. https://tjdjdj.com/china-clarifies-rules-for-overseas-ipos-in-us-what-we-dont-know/ Mon, 27 Dec 2021 08:42:14 +0000 https://tjdjdj.com/china-clarifies-rules-for-overseas-ipos-in-us-what-we-dont-know/ Traders work during the IPO of Chinese rideshare company Didi Global Inc on the New York Stock Exchange (NYSE) floor in New York, United States on June 30, 2021. Brendan McDermid | Reuters BEIJING – Six months after the Chinese IPO rush in the United States has dried up, many details remain unknown to companies […]]]>

Traders work during the IPO of Chinese rideshare company Didi Global Inc on the New York Stock Exchange (NYSE) floor in New York, United States on June 30, 2021.

Brendan McDermid | Reuters

BEIJING – Six months after the Chinese IPO rush in the United States has dried up, many details remain unknown to companies wishing to pursue such international listings.

Since the fallout from the IPO of the Chinese rideshare app Didi in late June, authorities have stepped up their surveillance of Chinese companies raising billions of dollars in U.S. public markets. A 10-year high of 34 China-based companies listed in the United States this year, but only three of the IPOs have occurred since July, according to Renaissance Capital.

Regulators in both countries this month released clarifications on what Chinese companies need to go public in the United States. While this is a start, many implementation questions remain.

Over the Christmas weekend on Wall Street, the China Securities Regulatory Commission released proposed rules for domestic companies if they wish to list overseas. The public comment period ends on January 23.

The rules proposed by the CSRC provided that registration abroad could be suspended if the authorities considered it a threat to national security. Domestic companies must comply with relevant provisions in the areas of foreign investment, cybersecurity and data security, according to a draft, without too much detail.

“The details of the application of the rules still require further observation, especially the scope of oversight of other related departmental regulators, in addition to the CSRC,” said Winston Ma, assistant professor of law at the University. from New York and co-authored “The Hunt for Unicorns: How Sovereign Wealth Funds are Reshaping Investing in the Digital Economy.”

No ban on the popular VIE structure

Beijing has said for years that one of its goals is to increase access and improve its stock market, which is only around 30 years old. Authorities have attempted to make it easier for companies to raise funds on the national stock market by gradually moving from a registration system to an approval system.

Learn more about China from CNBC Pro

The new rules for foreign listings set out specific requirements for filing documents and say the securities commission will respond to filing requests within 20 business days of receiving all documents, according to one draft.

The commission also did not ban the widely used variable interest entity structure, as some had feared. The structure creates a listing through a shell company, often based in the Cayman Islands, preventing investors in US-listed stocks from having majority voting rights.

“If they comply with national laws and regulations, companies with a VIE structure are eligible to register abroad after filing a case with the CSRC,” the commission said in an English statement on its website. Internet. He did not specify what these laws and regulations were.

However, the amount of foreign investment allowed in Chinese VIEs will likely be reduced to match that of mainland China A-shares, said Bruce Pang, head of macro and strategic research at China Renaissance.

He pointed to an online question-and-answer article on new foreign investment regulations released Monday by China’s Ministry of Commerce and the National Development and Reform Commission. The article noted existing restrictions that limit foreign ownership to 30% of a company’s shares, with each foreign investor capped at 10% of the capital.

US ownership of Chinese stocks listed in New York is relatively low, according to data from Morgan Stanley. Among those eligible for secondary listing in Hong Kong, the median share of US ownership for the top 50 names is 27%, according to CNBC’s calculations of the data.

Foreign financial institutions may also face more stringent requirements to participate in Chinese IPOs.

“The [CSRC’s] The proposed rule will also require international banks that subscribe to a Chinese company’s overseas listing to register with the CSRC, which may create new compliance issues for foreign underwriters as they may have to follow. Chinese rules once they are registered with [the] CSRC, ”said Ma, former managing director and head of North America of China Investment Corporation, a sovereign wealth fund.

Control extends to PSPCs

Meanwhile, the United States has stepped up efforts to alert investors to the uncertainties surrounding investing in Chinese companies listed in New York.

Earlier this month, the U.S. Securities and Exchange Commission finalized the rules it needs to implement a law that could force Chinese companies to withdraw from U.S. stock exchanges. It’s unclear when such write-offs would begin – Morgan Stanley analysts don’t expect them to happen until at least 2024.

The SEC’s corporate finance division also released details last week on 15 areas in which it “encouraged” China-based listings – existing and future – to increase disclosures. One section read:

Indicate whether you, your subsidiaries, or VIEs are covered by the licensing requirements of the China Securities Regulatory Commission (CSRC), the Cyberspace Administration of China (CAC), or any other government agency that is required to approve the operations of the VIE, and indicate in the affirmative whether you have received all the required authorizations or approvals and if any authorizations or approvals have been denied.

The SEC statement noted that special purpose acquisition companies with significant ties to China should also disclose relevant risks. PSPCs have exploded in popularity over the past two years. They bypass the traditional IPO process by using shell companies created for the sole purpose of acquiring existing private companies.

The CSRC draft rules stipulated that companies going to other markets via SPACs had to follow the same filing requirements as overseas IPOs.

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Australia-China trade war: Penfolds sources grapes from US to escape wine crackdown https://tjdjdj.com/australia-china-trade-war-penfolds-sources-grapes-from-us-to-escape-wine-crackdown/ Sat, 25 Dec 2021 14:02:37 +0000 https://tjdjdj.com/australia-china-trade-war-penfolds-sources-grapes-from-us-to-escape-wine-crackdown/ China’s brutal trade war with Australia has brought many companies to their knees. But a famous company managed to avoid the drama. The devastating trade war between Australia and China has decimated countless businesses and industries and wiped out billions of dollars in the economy. Relations between Canberra and Beijing began to deteriorate in 2016, […]]]>

China’s brutal trade war with Australia has brought many companies to their knees. But a famous company managed to avoid the drama.

The devastating trade war between Australia and China has decimated countless businesses and industries and wiped out billions of dollars in the economy.

Relations between Canberra and Beijing began to deteriorate in 2016, leading to a diplomatic freeze – but things accelerated last year, when a dozen Australian merchandise exports were hit with tariffs.

Coal, barley, beef, timber, lobster and wine were among the casualties, and earlier this month we learned how overwhelming the spat has been.

According to a revealing report by the Australian-China Relations Institute (ACRI) in early December, Australian exports of 12 key commodities affected by Beijing sanctions fell by $ 17.3 billion in the first nine months of 2021 , compared to 2019.

Professor James Laurenceson, ACRI director at UTS, told news.com.au that many Australian brands and livelihoods have been devastated by the ongoing trade war.

“When you start looking at the longer term, a lot of the costs will depend on the ability of the Chinese market to outperform alternative markets as it has over the past 20 years – for example, research shows that Over the past 15 years, China has added 60 million people to the middle class every year, and it far exceeds anywhere else – India is far from that, ”he said.

“So when we’re left out of the Chinese market, diversification is great, but all we can try to do is sell into smaller, slower growing markets, and that comes at a cost.

“In 2017, an Australian government foreign policy white paper predicted that the Chinese economy would add more new purchasing power than the United States, Japan, India and Indonesia combined, and if that is true, it suggests the cost of being locked out and having this disruption to the chinese market will increase over time.

The “smart” move of the Australian icon

Professor Laurenceson said the impact on some commodities such as coal and barley was less severe because sales could simply be diverted elsewhere.

But other industries like wine were starting to “really struggle” – although he said some Australian brands, such as the iconic Penfolds, had taken “really smart” steps to stay in the game.

“Penfolds is a flagship Australian wine brand, and guess what they do? They still sell to China and source from California rather than the Barossa Valley, ”he said.

“So it’s an Australian brand coming into China, but the product isn’t actually Australian – California wine growers are now profiting from this business, and we’ll see more and more Australian companies doing things like that – and good for them, they keep the brand afloat, but it comes at a cost to the Australian economy.

“It’s a sad comparison to the reality of what’s going on. “

While it is understood that work on the Penfolds California collection began long before the introduction of Chinese wine tariffs, a spokeswoman for parent company Treasury Wine Estates said the company was adjusting to this setback. by exploring global opportunities.

“The effective shutdown of the Chinese wine market to Australian wine has been important to us and to the Australian wine industry, but we have walked it with the implementation of our global response plan, including reallocation of product to respond unmet demand and accelerating investments to support Penfolds’ future growth in key global markets, ”the spokesperson told news.com.au.

“As we have said before, we remain committed to the Chinese market for the long term and continue to invest in our people, our brands and our relationships with customers and consumers.”

It was a sentiment shared by Treasury Wine Estates CEO Tim Ford, who recently told ACRI’s deputy industry member Glenda Korporaal OAM that the company is committed to doing business with China.

“When the tariffs (on Australian wine) came in, everyone said you had to take China off your game plan. But I was like, ‘No, it stays there,’ ”he said.

“We remain committed to China, we’ll just find a different way to do it… We continue to have strong engagement at all levels with China.”

Meanwhile, Professor Laurenceson said it was a similar story with the lobster industry, which was banned from China last November.

While the industry feared looming disaster at the time, fishermen simply started selling to Hong Kong instead, with the lobsters then being smuggled into China via a so-called ‘gray route’, which means that “sales were hardly affected” by the sanctions.

No end in sight

Professor Laurenceson has sadly said he doesn’t believe the trade war will be resolved anytime soon.

“I see no reason for China to suddenly turn around and change course – Kurt Campbell, Joe Biden’s Indo-Pacific Tsar, recently said in a speech at the Lowy Institute that he expects ‘in time China re-engages with Australia,’ on Australia terms, ‘but why would China choose to re-commit to Australian terms? ”he said.

“If anything, this stalemate would end with a mutual agreement, but this idea that China would come with its cap in hand begging to get us back is utterly ridiculous to me.

“China’s economy is ten times bigger than ours, so having no Australian coal makes hardly any difference – I don’t see the point in Beijing adjusting its course, and that would send a signal to others as well. country saying “hello everyone, we ‘failed”.

“The prospect of Beijing making a 180-degree turn is almost nil.”

Professor Laurenceson said that while many countries currently have problems with China, Australia is unique in the range of sanctions it faces.

“New Zealand, Korea, Japan – what really sets them apart is… the way they handle diplomacy more carefully,” he said.

“If the Australian government were more careful in its diplomacy, we wouldn’t be in this situation. Many countries have banned Huawei, but no other is in the business mess we find ourselves in.

“A lot of countries would take Australia as a lesson in what not to do – I don’t think a lot of countries would see Australia as a model of diplomacy.”

Professor Laurenceson said if political relations between Australia and China deteriorate, education could be next on the chopping block, dealing a heavy blow to the Australian economy.

He said the problem could easily spread to other industries and businesses, as well as Australian companies currently operating in China – although if Labor wins next year’s federal election there could be a certain thaw in relations.

Read related topics:China
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China’s GDP problems could endanger Latin American economies https://tjdjdj.com/chinas-gdp-problems-could-endanger-latin-american-economies/ Thu, 23 Dec 2021 13:51:48 +0000 https://tjdjdj.com/chinas-gdp-problems-could-endanger-latin-american-economies/ At the end of September, when stock markets around the world entered into anxiety attacks following the news of the bankruptcy of Chinese real estate giant Evergrande, the shockwaves reached Latin America, little by little. near as far as possible from the mainland of China. In fact, South American markets have fallen even more than […]]]>

At the end of September, when stock markets around the world entered into anxiety attacks following the news of the bankruptcy of Chinese real estate giant Evergrande, the shockwaves reached Latin America, little by little. near as far as possible from the mainland of China. In fact, South American markets have fallen even more than those in the United States, although Evergrande has had little or no contact with the region. This is because the economies of Latin America are not only deeply linked to China, but increasingly depend on its growth to support theirs.

The drama of Evergrande, with its debt of 300 billion dollars, larger than the economies of 3 out of 4 countries on Earth, is still far from over. But its struggles point to problems in the Chinese economy that could pose an even greater and longer-term danger to Latin America.

Beijing’s efforts to protect the impressive rates of economic growth it has achieved in recent decades now face strong headwinds. Premier Li Keqiang finally acknowledged this fact at a rally in Beijing a few weeks ago, admitting that “further downward pressure” has had a negative impact on growth. He listed the stubborn persistence of the coronavirus pandemic, supply chain disruptions, energy shortages, sharply rising commodity prices and climate-related disasters, including major flooding of these. weeks, as culprits.

As a result, China’s gross domestic product is expected to grow just over 6% this year, according to Liu Shijin, a member of the central bank’s monetary policy committee. It would be spectacular for almost any country and exceed the Chinese Communist Party’s target for this year, but is significantly lower than what had become the norm in China: an average GDP expansion of 9.23% per year since 1989.

And the economic woes may soon become even more complicated for Beijing. Liu further warned that what he called “near stagflation” could also emerge. Stagflation – high inflation coupled with sluggish growth – would create a serious dilemma for policymakers, as the tools typically used to suppress inflation, such as rising interest rates, tend to depress growth.

If the authorities nevertheless decide to fight inflation by raising interest rates, China’s growth rate could decline further. It would be a disaster for Latin America, where many countries that are already struggling to recover from the coronavirus pandemic have come to rely on strong Chinese growth to turn their economies around.

Beijing has firmly established itself in the Latin American markets. His most important involvement is in the commodity trade. While China has become the factory for the West and for much of the planet, South America has become one of its main suppliers of the materials that make this manufacturing possible.

Consider, for example, the Chilean economy. The world’s leading copper exporter, Chile relies on these exports to finance government operations and keep its economy moving. Copper mining has been responsible for an average of 10 percent of its GDP over the past two decades. In 2020, it represented 12.5% ​​of GDP, or one in eight dollars of economic activity.

Latin American economies are not only deeply linked to China, but increasingly depend on its growth to support theirs.

Now consider that almost half of Chile’s copper exports went to China. If the Chinese economy cools and its appetite for copper wanes, Chile will struggle to find new customers to take over. Copper prices would undoubtedly fall, exports would decline and the Chilean economy would almost certainly take a hard hit.

Chile is not alone in being vulnerable to the vicissitudes of Beijing’s fortune. Despite Brazilian President Jair Bolsonaro’s strong pro-American foreign policy, the country remains deeply and increasingly linked to Beijing on trade matters.

Over a decade ago, China became Brazil’s largest trading partner. Beijing is by far Brasilia’s biggest commodity customer, and in recent years it has also become a major investor in the country. The arrival of the coronavirus pandemic has only accelerated this trend, as economic activity has weakened around the world. China now buys around two-thirds of Brazil’s iron ore exports and more than a third of its soybean exports, as well as large amounts of petroleum, beef, cellulose and other products.

Chile and Brazil have the two highest export rates to China in the region (38.85% and 32.31%, respectively), but the entire continent depends on Beijing. Peru sends 28.29% of its exports to China, Uruguay 20.3% and Ecuador 15.79%, to name a few. All would feel the pain of a Chinese slowdown, let alone a recession, a development no one is predicting for China at the moment. But if China sneezes, Latin America could catch the flu. A Chinese slowdown could indeed trigger a recession in already struggling economies.

Beyond economic activity, the value of assets could also take a hit. China has invested heavily in the region. This added to concerns about the political implications of China’s growing influence there. After all, economic power inevitably translates into political influence. But China’s cash injections have also become such a big part of asset values ​​that if Beijing backs down, it’s not just commodity exporters that will miss it.

For example, the state-owned utility, State Grid Corporation of China, has made spectacular acquisitions in South America. State Grid has just agreed to buy an electricity grid in Chile valued at more than $ 5 billion. This happened just after the takeover of the Chilean assets of another company, Sempra Energy. In Mexico, the State Power Investment Corporation of China bought Zuma Energy, the country’s largest renewable energy company, while in Peru, the Three Gorges Corporation of China acquired the local assets of Sempra Energy for 3.6 billions of dollars. These numbers are huge by Latin American standards and quite high by any other measure as well.

As it dominates Latin American commodity export markets, Beijing is also gobbling up huge infrastructure. The potential diplomatic, political and strategic impact of the Chinese entanglement in Latin America is the subject of much debate. But when it comes to the economic implications, the risk couldn’t be clearer: if the Chinese economy stumbles, Latin America is going to be seriously damaged.

Frida Ghitis is a columnist for world affairs. A former producer and CNN correspondent, she is a regular contributor to CNN and the Washington Post. His WPR column appears every Thursday. Follow her on Twitter at @fridaghitis.

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Omicron casts a shadow over pandemic economic recovery https://tjdjdj.com/omicron-casts-a-shadow-over-pandemic-economic-recovery/ Tue, 21 Dec 2021 19:02:06 +0000 https://tjdjdj.com/omicron-casts-a-shadow-over-pandemic-economic-recovery/ Just as Americans and Europeans have been eagerly awaiting their most normal holiday season for a few years, the omicron variant has sparked a new wave of fear and uncertainty – for travelers, shoppers, party-goers and their savings in their homes. together. The Rockettes have canceled their Christmas show in New York City. Some restaurants […]]]>

Just as Americans and Europeans have been eagerly awaiting their most normal holiday season for a few years, the omicron variant has sparked a new wave of fear and uncertainty – for travelers, shoppers, party-goers and their savings in their homes. together.

The Rockettes have canceled their Christmas show in New York City. Some restaurants in London have emptied as commuters avoid the city center. Broadway shows cancel some performances. The National Hockey League has suspended its games until after Christmas. Boston plans to require diners, party goers and shoppers to show proof of vaccination to enter restaurants, bars and stores.

A heightened sense of anxiety began to erode the willingness of some people and businesses to continue as usual in the face of the extraordinarily contagious variant of omicron, which quickly became the dominant version of the virus in the United States.

READ MORE: Less than a month after discovery, Omicron now has 73% of COVID-19 cases in the United States

Other people, however, continue to travel, spend, and meet with other people as they normally do, albeit often with a cautious wait-and-see perspective. Air travel during the holidays remains robust. Many stores and restaurants continue to have strong sales. And omicron has yet to keep audiences away from movie theaters in droves. Last weekend, record audiences across all demographics flocked to theaters for the new “Spider-Man” movie.

“Cinema hasn’t been hampered by omicron yet,” said Steve Buck, chief strategy officer at EntTelligence.

At the same time, no one yet knows what the omicron will ultimately mean for the health of Western economies, which have suffered a wave of downturns and recoveries since the start of 2020.

“These changes continue to happen,” said Robin Brooks, chief economist at the Institute of International Finance. “How likely is it that sometimes we get a really nasty one?” No one has the slightest idea. This thing is mutating, and it’s very, very hard to tell. ”

Will Omicron cause epidemics in factories and ports, disrupt operations and worsen supply chain bottlenecks that have driven up prices and contributed to the highest US inflation in decades?

Will that mean people will fall back home and spend less on services – restaurant meals, concerts, hotel stays – which could weaken the economy but potentially defuse inflationary pressures?

Will plans to return white-collar workers to the office be put on hold indefinitely, further worsening the blow to downtown businesses in many cities?

READ MORE: Moms made it work during the pandemic, but at what cost?

Or will omicron turn out to be a hang-up that is barely slowing down what has become a surprisingly strong recovery from the short but intense pandemic recession?

Frightened by uncertainty and fear of worst-case scenarios, stock markets around the world sold for three days before rebounding on Tuesday.

“We don’t know if this is good or bad for growth or inflation over the medium term,” said Megan Greene, chief global economist at the Kroll Institute. “We just don’t have enough data yet. “

Unable to assess its long-term consequences, businesses, consumers and policymakers have struggled to respond to the omicron threat.

Danielle Ballantyne, a dietitian from Chicago, had planned to visit some stores and seek inspiration for holiday gifts. But as omicron spread, she abandoned the idea in favor of staying home and shopping online.

“From what I’ve heard on the news,” Ballantyne said, “omicron is more contagious. So I’m trying to be more selective in my destination in terms of large public spaces.”

At its stores in major cities like New York and Chicago, clothier Untuckit is reporting a 15% drop in traffic, similar to what it experienced when the delta variant began to spread last summer.

“It impacts people’s perceptions of comfort and safety and their willingness to go out,” said Aaron Sanandres, co-founder of the company.

As infections have spread, European countries have so far gone further than the United States, with restrictions ranging from a full lockdown in the Netherlands to indoor mask warrants. UK.

A theater in the west of England reimbursed $ 240,000 in tickets. Advantage Travel Group, which represents UK travel agents, said business – flights, cruises and package holidays – fell 40% in mid-December compared to the previous month. A restaurant in central Madrid absorbed cancellations of about half of its reserved space a week recently.

In London, city center restaurants are suffering as office workers stay at home.

“As soon as they say they are working from home it is completely drained,” said Sally Abe, chef at the Conrad Hotel in central London.

Britain on Tuesday announced it would provide £ 1 billion ($ 1.3 billion) in grants and other aid to help the hospitality industry survive omicron. The government has bowed to pressure from pubs, restaurants and other businesses whose revenues have plunged following public health warnings.

Since the pandemic struck nearly two years ago, it has imposed one economic challenge after another. The economies all but came to a halt when the virus struck early last year. In the United States, more than 22 million people have lost their jobs. Bars, restaurants and hotels were particularly devastated.

But record injections of government spending and ultimately the rollout of vaccines sparked a surprisingly powerful recovery, giving many households the confidence and the financial means to resume shopping. And it sparked optimism for the 2021 holiday season: In an updated forecast shortly before omicron became a serious threat, the National Retail Federation said holiday sales in the United States were on track for a record year.

There are now fears that omicron infections could further disrupt manufacturing and shipping, exacerbate delays in the supply chain, and keep inflation low. It could also increase the already intensified consumer demand for goods, which would exacerbate supply shortages.

“If everyone is afraid that going to a bar or a restaurant will take them to a hospital, they can continue to buy goods,” said Greene, the economist at the Kroll Institute. “So that could exacerbate the short-term trend and worsen inflation. “

On the flip side, she said, “if growth is really slowing (from the omicron), that should dampen inflation. “

There are other reasons to believe that the recovery may be slowing. In the United States, economic aid from federal spending and relief checks is fading. The Federal Reserve is reducing its economic support. The Chinese economy, the second in the world after the United States, is slowing down.

For now, the US bond market is signaling more concern about economic weakness than runaway inflation: the yield on the benchmark 10-year Treasury bond remains at historically low levels, below 1 , 5%.

Citing omicron and other factors, Oxford Economics lowered its estimate of US economic growth for the October-December quarter to an annual pace of 7.3%, from an earlier estimate of 7.8%.

READ MORE: Anxious restaurants like omicron, high food costs are taking their toll

“Omicron has been so rampant,” said Kathy Bostjancic, chief financial economist for Oxford in the United States. “And it hits in the high density areas of the northeast. We think it’s going to have a pretty big impact on economic activity. ”

That said, it’s also possible that the economy will prove resilient in the face of the latest challenge COVID has thrown at it. A retail traffic measurement shows that the new variant has made little difference, at least so far. For the week ended December 18, store traffic increased nearly 20% from the previous year, but down 23% from the same week the year before. pandemic of 2019, according to Sensormatic Solutions. For Black Friday which ended on November 27, sales were up 30% from last year.

Peter McCall, head of retail consulting at Sensormatic, noted that shoppers still go to retail stores, but now they prefer open-air malls and malls over closed malls.

Arnold Donald, CEO of Carnival Corp., the world’s largest cruise line, said this week that Carnival had experienced a “small spike” in cancellations, but predicted it would only prove to be a short-term mishap.

“The booking models are strong,” said Donald.

The same goes for traffic at some large retailers. Several hundred people lined up for the Toys R Us flagship store opening on Sunday at the American Dream Mall in East Rutherford, New Jersey.

“We were ready for a big day, but it was even more important than we thought,” said Yehuda Shmidman, co-founder of WHP Global, owner of Toys R Us.

Abt Electronics in Chicago says it’s enjoying a good holiday season so far, with sales up 10% from last year. But John Abt, co-chairman and grandson of the company’s founder, said he’s noticed omicron is changing the way some people buy. Although fewer customers are entering stores, the demand for curbside pickup is increasing.

It has also made changes to workers to prevent the spread of COVID: it forces them to stay at counters or warehouses where they work instead of jumping between workplaces.

“I am an optimist,” Abt said. ” I’m not worried. It’s life. And you have to roll with the punches. ”

___

Wiseman reported from Washington, D’Innocenzio of Cape Cod, Massachusetts. AP writers Martin Crutsinger in Washington, Lindsey Bahr in Los Angeles and Kelvin Chan, Sylvia Hui and Danica Kirka in London contributed to this report.

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China spent 2021 battling business. Xi Jinping to play more cautiously this year https://tjdjdj.com/china-spent-2021-battling-business-xi-jinping-to-play-more-cautiously-this-year/ Mon, 20 Dec 2021 07:18:00 +0000 https://tjdjdj.com/china-spent-2021-battling-business-xi-jinping-to-play-more-cautiously-this-year/ Add that to a handful of other issues in the world’s second-largest economy, and you have serious risks for the Chinese government to face in 2022. Even though China emerged from 2020 as the only major economy to grow that year, growth slowed faster than expected in 2021, weighed down by repeated outbreaks of Covid-19, […]]]>

Add that to a handful of other issues in the world’s second-largest economy, and you have serious risks for the Chinese government to face in 2022.

Even though China emerged from 2020 as the only major economy to grow that year, growth slowed faster than expected in 2021, weighed down by repeated outbreaks of Covid-19, disruptions in the supply chain. supply, an electricity crisis and the real estate crisis.

All these headaches are forcing Beijing to reconsider its political approach. At a key economic meeting earlier this month, top leaders of the ruling Communist Party of China marked “stability” as their top priority for 2022. It’s a huge pivot compared to the meeting of the last year, when “curb the disorderly expansion of capital” ruled the day.

“The emphasis on stability suggests that key leaders are increasingly concerned about the risk of instability,” said Larry Hu, chief economist for China at Macquarie Group, in a recent research note.

“A year of regulatory tightening has shaken business confidence,” he added. “Now it’s time for policy makers to step back a bit. ”

China is still expected to register significant growth in 2021, despite its challenges. Many economists are forecasting growth of around 7.8%, well above the low of 6% that Chinese authorities set as a target earlier this year.

But 2022 is another story. Many large banks have cut their growth forecasts to between 4.9% and 5.5%, which would be the slowest growth rate since 1990 – a year when international sanctions following the 1989 Tiananmen Square massacre. seriously hampered economic activity.

“The Chinese government’s focus on regulatory and anti-monopoly repression has been made possible by China’s skyrocketing economic growth,” said Craig Singleton, associate researcher in China at the Foundation for the Defense of Democracies, a Washington-based think tank.

“Not anymore, because the growth engines of the Chinese economy are quickly running out of steam.”

Reining in, now calming down

The crackdown on the private sector began in late 2020 after Alibaba co-founder Jack Ma – by far the most recognizable of China’s business elite – lambasted the the country’s financial system during a controversial speech.
An initial public offering for its financial technology company Ant Group was suspended soon after. Since then, life has gotten more difficult not only for Ant Group, but a bunch of other companies as well.
Ali Baba (BABA), Tencent (TCEHY) and others have been fined or investigated for suspected anti-competitive behavior. China has also taken steps to punish companies for data collection and national security, including the Didi rideshare app. The company was hammered by regulators shortly after going public on Wall Street, and eventually announced it would be delisting and moving to Hong Kong.

Beijing’s firm stance on these companies is justified. For Xi, limiting private enterprise is the solution to solving long-standing issues of consumer rights, data privacy, excess debt and economic inequality. In other words, it is about taming the excesses of capitalism and embracing the history of socialism in the country.

But there is a balance to be struck. Now faced with the prospect of a hard landing for the economy, Beijing seems to be reversing its firm position vis-à-vis the private sector. AT their recent meeting, Chinese leaders praised the positive role private capital plays in the economy – a dramatic change in tone from how they spoke a year ago.

“There will inevitably be various forms of capital in the socialist market economy,” they said in a statement after the meeting. “Capital must play its positive role as a factor of production, while its negative role must be effectively controlled.”

This post suggests that “the peak of regulation is behind us,” according to Hu de Macquarie. “State control is important, but the Party does not want to kill capitalism either,” he added.

A big focus on employment

As Chinese policymakers attempt to stabilize the economy in 2022, a few key factors will be in mind.

Keeping unemployment low has been listed, once again, as the most important of a set of areas Beijing wants to focus on, according to the statement released after this month’s meeting.. (Other goals include preserving food and energy security and stabilizing supply chains.)

The focus on job creation comes as employment prospects deteriorate in China. Education technology companies laid off thousands of workers after the government curtailed tutoring in July. Other tech companies are also reportedly planning to downsize due to the crackdown on their companies.

The real estate crisis is also contributing to this. Cash-strapped real estate developers, such as the huge conglomerate Evergrande, have cut jobs and offloaded assets to stay afloat.

Evergrande cannot pay its debts.  China struggles to contain fallout

The notoriously stable unemployment rate, released monthly by the government, has remained stable this year, fluctuating only between 4.9% and 5.5%. But repeated calls from top executives on various occasions to bolster jobs suggest there may be a bigger problem than the data shows.

“I think jobs are now a greater sensitivity than GDP,” said George Magnus, associate at the China Center at the University of Oxford and former chief economist at UBS.

As a host of challenges weigh on jobs, including the Covid epidemics and the real estate crisis, Magnus said corporate crackdown is a notable factor. The private sector contributes 80% of employment, according to government statistics.

Singleton stressed that the party “is laser-focused on unemployment, fearing that massive layoffs could potentially endanger the party’s reputation.”

Xi’s power play will leave him a difficult path to walk

At the forefront of Xi’s mind is almost certainly the desire to keep the country going ahead of a historic third term.

The Chinese leader is widely expected to extend his rule at the 20th Party Congress next year, consolidating his position as the most powerful leader in the country since Mao Zedong.

“Xi’s message of ‘stability’ is aimed at the political establishment in China, which must absorb the weight of a historic power play, in addition to the business sector,” said Alex Capri, researcher at the Hinrich Foundation.

Xi has taken several steps to signal that he is focusing more on domestic issues than big international ambitions. The Chinese leader has not left the country since the start of the pandemic and has taken dramatic steps to secure his country’s borders and lock down entire regions to contain even a single case of the coronavirus – an approach “Covid-zero” abandoned by much of the world.

China doubles zero-Covid as it battles most widespread epidemic since Wuhan

But Capri noted that Xi had to consider the outside world to some extent. He said Xi’s stability message was “also intended to allay growing concerns on Wall Street and other commercial and financial centers, which China relies on far more than it wants to admit. investment, technology and trade “.

It’s a precarious balancing act – and an Xi will need to think about it carefully over the coming year.

“Like other nations, China wants a future based on high levels of innovation and productivity, but is politically determined to create conditions that hinder both,” Magnus said.

“The main challenge for China will be, with Xi in the driver’s seat for a decade, will course corrections be possible? Singleton said. “And unfortunately, the historical record is that absolute power does not generally lead to a more pragmatic and flexible attitude.”

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