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China Spends $600 Billion To Trump America’s Economy – Forbes

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Ten years from now, when economists mull the exact moment the U.S. ceded the future to China this week’s events are sure to top the list of time-stamp candidates.

This was the week, after all, when Chinese President Xi Jinping tossed another 4 trillion yuan, or $565 billion, at an economy taking devastating coronavirus blows. The 4 trillion-yuan figure will sound familiar to students of 2008 and 2009, back when Beijing threw exactly that amount at plunging demand amid the “Lehman stock.”

It worked back then. China recovered rapidly from Wall Street’s crash thanks to aggressive infrastructure spending. By 2009, China was growing 8.7% again thanks to giant public works projects—six-lane highways, bridges, ports, new skyscraper-strewn commercial centers.

Now, as Xi’s Communist Party pulls a similar play, it’s hard not to lament this week’s missteps in Mitch McConnell’s Washington.

Within the same 24 hours during which Xi’s announced a nearly $600 billion plan to build even more airports, railways and power grids, Senate Majority Leader McConnell gave the thumbs down to comparable upgrades to America’s economic hardware. “Infrastructure is unrelated to the coronavirus pandemic that we’re all experiencing and trying to figure out how to go forward,” McConnell said.

Music to Xi’s ears. The trillions of dollars his government lavished on the “Made in China 2025” extravaganza is already positioning China to lead the future of artificial intelligence, automation, micro-processing, renewable energy, robotics, self-driving vehicles, you name it. And Trump made it easy for Xi. As China prepares for the global economy it will confront in 2025, Trump is making coal great again.

Granted, Xi has been slow to get the state’s tentacles out of the economy. His pledges to let market forces play a “decisive” role in decision making have gotten only modest traction in seven years. China’s hulking $10 trillion shadow-banking system, meantime, continues to allocate capital recklessly.

Look no further than the recent jump in the number of bank bailouts, including Hong Kong-listed Bank of Gansu. Beijing’s rescue efforts highlight the deterioration of balance sheets and the extreme opacity that plagues China Inc. The accounting fraud at Luckin Coffee, China’s supposed Starbucks killer, is a reminder Asia’s biggest economy isn’t ready for global prime time.

But Trump’s three-and-half years in office have been a lost period for building the kind of economic muscle needed to stay ahead of China. Trump is doing zero to get under the economy’s hood. His trade-war and protectionist policies might’ve worked in, say, 1985. In 2020, though, his tariffs are merely added headwinds as the global economy fends off COVID-19 fallout.

Trump isn’t increasing competitiveness and productivity or catalyzing innovation. He’s cutting investments in education, training and health. Trump’s Republican Party is avoiding the infrastructure “big bang” needed to raise America’s economic game. Instead, it cut taxes in ways that reward billionaires without incentivizing companies to fatten paychecks or hone competitiveness.

Over the last few years, Trump widened the gulf between rich and poor by putting monetary easing ahead of structural reform. It’s the same mistake Japan has been making since the 1980s. Stimulus alone does nothing to reduce corruption, increase efficiency or level playing fields.

America’s crumbling infrastructure could use its own nearly $600 million—or even $2 trillion—facelift. Not only would it create jobs, and fast, but also better prepare the U.S. for a 2025 when China’s dominance passes the point of no return.

There’s an alternate reality in which China’s coronavirus debacle plays into Trump’s hands. China absolutely needs to account for its handling of a COVID-19 pandemic believed to have started in Wuhan. There should indeed be investigations and punishment doled by the global community. But Trump’s antics, lies and over-the-top bombast are helping China deflect blame.

Each bizarre Trump Twitter rant makes Xi’s China look serious and sober by comparison. Each Trumpian threat to impose new tariffs here, demand higher military payments there or manufacture some controversy over there plays into Beijing’s hands.

So does McConnell’s refusal to rise to the occasion. At 78, it’s reasonable to think the Kentucky Republican might not have many more years left in top Senate leadership. Yet the lost period of reform that McConnell represents will be with U.S.-China dynamics for decades to come.

Come 2025, U.S. investors may wish they could engineer their own alternative reality—one where McConnell and Trump favored a Marshal Plan of sorts to halt America’s slide toward developing-nation status in terms of infrastructure. When economic historians of the future mull when this risk morphed into fact, the last few days may haunt Washington.

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Economy

Canadian dollar moves to extend weekly win streak as oil rebounds

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Canadian dollar

The Canadian dollar strengthened against its U.S. counterpart on Friday and was on track for its seventh straight weekly gain as oil prices rose and domestic data added to evidence of robust economic growth in the first quarter.

Canadian factory sales rose 3.5% in March from February, led by the motor vehicle, petroleum and coal, and food product industries, while wholesale trade was up 2.8%, Statistics Canada said.

The price of oil, one of Canada‘s major exports, reversed some of the previous day’s sharp losses as stock markets strengthened, though gains were capped by the coronavirus situation in major oil consumer India and the restart of a fuel pipeline in the United States.

U.S. crude prices rose 1.2% to $64.61 a barrel, while the Canadian dollar was trading 0.6% higher at 1.2093 to the greenback, or 82.69 U.S. cents, moving back in reach of Wednesday’s 6-year peak at 1.2042.

For the week, the loonie was on track to gain 0.3%. It has climbed more than 5% since the start of the year, the biggest gain among G10 currencies, supported by surging commodity prices and a shift last month to a more hawkish stance by the Bank of Canada.

Still, BoC Governor Tiff Macklem said on Thursday if the currency continues to rise, it could create headwinds for exports and business investment as well as affecting monetary policy.

The U.S. dollar fell against a basket of major currencies, pressured by a recovery in risk appetite across markets after Federal Reserve officials helped calm concerns about a quick policy tightening in response to accelerating U.S. inflation.

Canadian government bond yields were lower across much of a flatter curve, with the 10-year down 2 basis points at 1.549%. On Thursday, it touched its highest intraday in eight weeks at 1.624%.

 

(Reporting by Fergal Smith; Editing by Nick Zieminski)

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Economy

Toronto Stock Exchange rises 1.21% to 19,366.69

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Toronto Stock Exchange

* The Toronto Stock Exchange‘s TSX rises 1.21 percent to 19,366.69

* Leading the index were SNC-Lavalin Group Inc <SNC.TO​>, up 16.0%, Village Farms International Inc​, up 9.8%, and Denison Mines Corp​, higher by 9.4%.

* Lagging shares were Aurora Cannabis Inc​​, down 7.2%, Centerra Gold Inc​, down 3.8%, and Canadian National Railway Co​, lower by 3.7%.

* On the TSX 194 issues rose and 35 fell as a 5.5-to-1 ratio favored advancers. There were 25 new highs and no new lows, with total volume of 225.7 million shares.

* The most heavily traded shares by volume were Enbridge Inc, Manulife Financial Corp and Cenovus Energy Inc.

* The TSX’s energy group rose 3.32 points, or 2.7%, while the financials sector climbed 4.80 points, or 1.3%.

* West Texas Intermediate crude futures rose 2.65%, or $1.69, to $65.51 a barrel. Brent crude  rose 2.68%, or $1.8, to $68.85 [O/R]

* The TSX is up 11.1% for the year.

This summary was machine generated May 14 at 21:03 GMT.

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Economy

U.S., Mexico, Canada to hold ‘robust’ talks on trade deal

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The United States, Mexico and Canada will next week hold their first formal talks on their continental trade deal, with particular focus on labor and environmental obligations, the U.S. government said on Friday.

Trade ministers from the three nations are set to meet virtually on Monday and Tuesday to discuss the U.S.-Mexico-Canada (USMCA) deal, which took effect in July 2020.

“The ministers will receive updates about work already underway to advance cooperation … and will hold robust discussions about USMCA’s landmark labor and environmental obligations,” the office of U.S. Trade Representative Katherine Tai said in a statement.

The United States is also reviewing tariffs which may be leading to inflation in the country, economic adviser Cecilia Rouse told reporters at the White House on Friday, a move that could affect hundreds of billions of dollars in trade.

The United States, testing provisions in the new deal aimed at strengthening Mexican unions, this week asked Mexico to investigate alleged abuses at a General Motors Co factory.

(Reporting by David Ljunggren; Editing by Hugh Lawson and Jonathan Oatis)

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