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Biden signs order to promote competition in U.S. economy – Financial Post

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WASHINGTON — President Joe Biden signed a sweeping executive order Friday to promote more competition in the U.S. economy, urging agencies to crack down on anti-competitive practices in sectors from agriculture to drugs and labor.

If fully implemented, the effort will help lower Americans’ internet costs, allow for airline baggage fee refunds for delayed luggage and cut some prescription drug prices, among many other steps.

Biden said the order “commits the federal government to full and aggressive enforcement of our antitrust laws.”

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“No more tolerance of abusive actions by monopolies. No more bad mergers that lead to massive layoffs, higher prices and fewer options for workers and consumers alike,” he said before signing the order.

The White House says the rate of new business formation has fallen by almost 50% since the 1970s as large businesses make it harder for Americans with good ideas to break into markets.

Biden’s action goes after corporate monopolies across a broad swath of industries, and includes 72 initiatives he wants more than a dozen federal agencies to act on.

Antitrust agencies will be told to focus on labor, healthcare, technology and agriculture sectors as they address a laundry list of issues that have irritated consumers, and in the case of drug prices, has bankrupted some.

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Lower wages caused by lack of competition are estimated to cost the median American household $5,000 per year, according to a White House fact sheet that cites research from the American Economic Liberties Project – an influential Washington-based anti-monopoly group.

The initiatives will no doubt kick off a series of fights with the affected industries.

The powerful U.S. Chamber of Commerce issued a statement saying the move “smacks of a ‘government knows best’ approach to managing the economy” and pledged to “vigorously oppose calls for government-set prices, onerous and legally questionable rulemakings, efforts to treat innovative industries as public utilities, and the politicization of antitrust enforcement.”

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INTERNET, HEARING AIDS

Among the administration’s plans to open up the U.S. economy are new rules to mandate ending excessive internet contract termination fees, allow hearing aids to be sold and end non-compete clauses for millions of workers and many occupational licensing requirements.

White House economic adviser Bharat Ramamurti told Reuters the order is “about going to the maximum extent that the agencies can within their existing authority” to boost competition. “President Biden is doing this at the beginning of his administration, which gives his agencies more time to execute on the orders here,” he said.

Biden’s order pushes the Agriculture Department to act to stop what the White House called “abusive practices of some meat processors,” reacting to farmers and ranchers who sometimes say they face too few buyers for their animals.

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The administration also seeks to make it easier for customers to switch banks and take their transaction data with them, and restore net neutrality rules that require companies to treat all internet services equally.

Reuters first reported Biden’s plan to issue a competition executive order in late June and subsequently published stories on how it will impact industries such as farm equipment manufacturers, banking, rail and sea shipping.

The executive order will direct the Department of Justice (DOJ) and Federal Trade Commission (FTC) to carefully review mergers, and to challenge prior deals that have closed.

It directs the FTC to issue rules to address competition concerns from Big Tech companies, Facebook, Apple, Alphabet’s Google and Amazon, and limit “killer acquisitions” where large internet platforms acquire potential competitors.

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On prescription drugs, it aims to lower prices for consumers by allowing importation of drugs from Canada, where they are cheaper. It also urges the Department of Health and Human Services to draw up a plan to fight high drug prices, and gouging.

Evercore/ISI analyst Michael Newshel said in a research note that the impact of allowing imports from Canada on pricing would be limited given Canada’s limited drug supply and that Canada has indicated in the past that it would not cooperate with any program. He said the government’s decision to turn to executive orders on drug pricing was surprising given ongoing legislative efforts in Congress.

The executive order also establishes a White House Competition Council, led by the Director of the National Economic Council and including many cabinet secretaries, to monitor progress on finalizing the initiatives in the order.

(Reporting by Nandita Bose and Jarrett Renshaw in Washington; Additional reporting by Caroline Humer and David Shepardson; Editing by Chizu Nomiyama and Alistair Bell)

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China's economy recovering but foundation not solid, premier says – Financial Post

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BEIJING — China’s economy has recovered to some extent, but its foundation is not solid, state media on Tuesday quoted Premier Li Keqiang as saying.

China will strive to drive the economy back onto a normal track and bring down the jobless rate as soon as possible, Li was quoted as saying.

“Currently, the implementation of the policy package to stabilize the economy is accelerating and taking effect. The economy has recovered on the whole, but the foundation is not yet solid,” Li was quoted as saying.

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“The task of stabilizing employment remains arduous.”

China’s economy showed signs of recovery in May after slumping the previous month as industrial production revived, but consumption remained weak and underlined the challenge for policymakers amid the persistent drag from strict COVID-19 curbs.

China’s nationwide survey-based jobless rate fell to 5.9% in May from 6.1% in April, still above the government’s 2022 target of below 5.5%.

In particular, the surveyed jobless rate in 31 major cities picked up to 6.9%, the highest on record. Some economists expect employment to worsen before it gets better, with a record number of graduates entering the workforce in summer.

Li vowed to achieve reasonable economic growth in the second quarter, although some private-sector economists expect the economy to shrink in the April-June quarter from a year earlier, compared with the first quarter’s 4.8% growth.

(Reporting by Kevin Yao and Beijing newsroom; Editing by Andrew Heavens, William Maclean)

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Economy sending mixed signals: Maybe a recession isn't coming – Axios

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The job market is strong. Layoffs are happening. Businesses are pessimistic. Consumers are still spending.

  • If you’re having a hard time figuring out this economy, you’re not alone — it’s sending all sorts of mixed signals.

Why it matters: The inflation crisis — namely record gas prices — has plunged consumer sentiment to an all-time low.

  • Meanwhile, the Fed’s bid to wrest control of price spikes by imposing interest-rate hikes is having far-reaching effects.

The big picture: Depending on where you focus your attention, the economy can look nowhere near as bad as some people say — or that we’re heading for a total face-plant:

  • The unemployment rate is only about a point away from an all-time low, but companies like Redfin, Netflix and Coinbase are cutting workers.
  • Business optimism hit the lowest point in the 12 years of JPMorgan Chase’s Business Leaders Outlook Pulse survey, released today. But durable goods orders rose 0.7% in May, according to figures released today, signaling that companies were still spending.
  • Mortgage rates are pricing many buyers out of the housing market — but median home price growth held steady for a third straight week last week.

Reality check: The pandemic triggered a period of profound economic disruption, leaving some of the economic tea leaves harder to read than in past cycles.

  • Much of what seems today like conflicting or inconsistent data could simply be the result of an economy on the brink of change.

What they’re saying: “As people learned to live with COVID-19 and prove resilient so far to higher prices at the checkout stand, economic momentum will likely protect the U.S economy this year,” S&P Global Ratings U.S. chief economist Beth Ann Bovino said Monday in a statement. “What’s around the bend in 2023 is the bigger worry.”

The bottom line: Uncertainty is toxic for investor and consumer sentiment.

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Analysis | What Is the 'Special Debt' China Uses to Spur Its Economy? – The Washington Post

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China’s government is cash-strapped with Covid-19, tax breaks and a property downturn pulling down income while spending keeps rising to pay for economic stimulus and containing virus outbreaks. One option Beijing has to fill the gap is to sell special sovereign bonds, a rarely used financing tool it last dusted off in 2020 to help lift the economy without inflating the budget deficit. Before that, they were employed during the Asian financial crisis in the 1990s and to help seed China’s sovereign wealth fund in 2007.

1. What are special sovereign bonds?

Unlike regular government debt, special bonds raise cash for a certain policy or to help solve a particular problem. They are not part of China’s official budget and thus not included in deficit calculations. The State Council, China’s cabinet, can propose the sale of such bonds, which then requires approval only by a standing committee of the National People’s Congress, which generally meets every two months, rather than the full legislative body, which meets only once a year. That means they can be issued in a more flexible way than regular bonds, which have to be planned for in the budget and approved by the annual session of the NPC. 

2. Why use this tool now?

China has a target for gross domestic product growth of around 5.5% for this year, but with Covid lockdowns and a property slump, economists say the government is nowhere close to achieving that. One way President Xi Jinping is hoping to fuel a faster recovery is by spending trillions of yuan on infrastructure projects. Funding that kind of stimulus through the budget will be challenging though, given the plunge in tax revenues this year. Part of the financing will come from China’s state-owned development banks, like China Development Bank and Agricultural Development Bank of China, which have been given an additional 800 billion yuan ($120 billion) credit line to provide loans for infrastructure investment. Special sovereign bonds could be an additional source, given some were used for that purpose in 2020. Wang Yiming, an adviser to the central bank’s monetary policy committee, highlighted special national bonds as an option. More likely, the notes may be used to bridge the fiscal gap and finance the stimulus measures the government announced in May, according to Australia & New Zealand Banking Group Ltd. analysts Betty Wang and Xing Zhaopeng.

3. How were these bonds used before?

Some 1 trillion yuan of notes were sold in 2020, early in the pandemic. Exceptionally that time, the Communist Party’s all-powerful Politburo decided to sell the bonds and the NPC gave the official go-ahead at its full session in May. Some 700 billion yuan from that sale was transferred to local governments to support their Covid control efforts and infrastructure investment, according to a report by the Ministry of Finance. The rest was brought into the central government’s general public budget for subsidizing local spending on the outbreak, it shows. Before that: 

• In 2007, 1.55 trillion yuan of special government bonds were issued to capitalize China Investment Corp., the sovereign wealth fund. The bond proceeds were used to buy currency reserves from the People’s Bank of China, and those funds then went to CIC. Some of the bonds worth around 950 billion yuan will come due in the second half of this year, Bloomberg-compiled data show.

• During the Asian financial crisis, China sold 270 billion yuan of special government bonds — at the time the country’s largest bond issue — to raise capital for its big state banks and help offset losses from nonperforming assets.

4. How might the bonds affect financial markets?

A surge of bond supply would drive down prices of the securities and push up yields. The issuance in mid-2020 helped to boost the yield on China’s 10-year government bond by more than 20 basis points in about three weeks, to a near six-month high. At the time, liquidity conditions were tight because of a deluge of local government bond supply before the special debt hit the market and the central bank’s cautious approach to monetary easing, in part to avoid fueling asset bubbles. The situation is different now. Interest rate cuts and other central bank easing measures mean the nation’s banks are flush with cash that they can use to soak up any extra bond supply. Also, local governments — which issue their own special bonds used mainly for infrastructure investment — have been ordered to sell almost all of this year’s quota of 3.65 trillion yuan of debt by the end of June. That should leave room for the market to absorb new debt issuances in the second half of 2022.

5. How much are we talking? 

Jia Kang, a former head of a finance ministry research institute, said the 1 trillion yuan sold in 2020 could serve as a “reference” for policy makers when deciding on how much to issue this year. Others think it might be more. Larry Hu, head of China economics at Macquarie Group Ltd., estimated that the Covid outbreaks this year in China likely caused a budget shortfall of 1 trillion to 2 trillion yuan. A sale that size could contribute 1-2 percentage points to gross domestic product growth given the extra financial boost it will give local governments to spend, he estimated, adding the impact on the financial market is expected to be “limited.”

More stories like this are available on bloomberg.com

©2022 Bloomberg L.P.

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