The Chinese government is trying to set the economy up for a stronger start to 2020, with a multi-pronged policy push ranging from easier monetary settings to freer trade.
The latest pledge came late Monday, when Premier Li Keqiang signaled that further cuts in the amount of cash that banks have to park as reserves will be forthcoming. In theory, that will free up funds to lend to private-sector companies that have struggled to access loans this year.
The funding promise follows a wide-ranging set of initiatives to boost the non-state sector announced at the weekend, and a fresh round of tariff cuts designed to spur domestic demand released on Monday.
After a bruising year that’s seen economic output growth slow to the weakest pace in almost 30 years, modest signs of stabilization have begun to appear in incoming data. On top of that, trade negotiators this month succeeded in staving off another increase in tariffs on Chinese exports by U.S. President Donald Trump.
Speaking in the western city of Chengdu on Monday, Li said the government will continue to cut the reserve ratio for banks and look into increasing re-lending and re-discounting quotas, steps that can also help reduce overall borrowing costs for small firms.
“Beijing may cut the required-reserve ratio slightly earlier than we previously expected given an increasing risk of locally-based credit contraction in some regions, and upcoming liquidity shortage in January 2020,” said Lu Ting, chief China economist at Nomura International Ltd.. The moves would come “in the coming weeks before the lunar new year holiday, to stabilize liquidity conditions, credit supply and growth,” he said.
The private sector this year has faced difficulty accessing credit, amid a multi-year effort to reduce financial risk and rising defaults among corporate bond issuers. Despite an increase in overall credit growth, there’s evidence that not all lending is going to productive purposes.
Nevertheless, economists have upgraded their outlook for economic growth in 2020. Gross domestic product expansion will come in at 5.9% as easing trade tensions and the prospect of lower bank borrowing costs boost confidence, according to a survey of analysts and traders last week.
Survey respondents see policy makers maintaining a measured pace of easing into next year, trimming the price of central bank medium-term lending by 15 basis points with the first cut coming in the first quarter.
In the meantime, the leadership also stressed more opening-up of the economy, and is seeking to forge stronger partnerships with some trading members.
“To defend free trade is the only way to revitalize the economy,” Li said on Tuesday at a China-Japan-South Korea summit in Chengdu. He called for deeper cooperation between the three countries to counter the “downward economic pressure” posed by the changing global economic and political situation. He also urged the speeding up of negotiations toward a trilateral free trade agreement, which in his words, would allow China to further open its services sectors.
“China is willing to open up its finance, medical care, elderly care and other services sectors to foreign investors, including scrapping the caps on ownership requirements, step by step,” he reiterated.
The Ministry of Finance on Monday published a list of 859 types of products that will enjoy tariffs lower than the standard rates for this year. It included frozen pork as a key item aimed at alleviating shortages of the meat due to the outbreak of African swine fever.
In 2018, imports of the listed items totaled some $389 billion, or about 18% of China’s total imports of $2.14 trillion, according to Bloomberg calculations.
Steps announced Sunday by the State Council, China’s cabinet, aim to help private firms gain better market access and equal regulatory treatment to their state-owned peers. Among actions to be taken are the further opening of key industries to non-state investors, including energy and finance, and also facilitating equity and bond sales by private-sector businesses.
The private sector, which accounts for 9 out of every 10 new jobs created in China, has been hardest hit thanks to what critics say is a regulatory regime that tilts business conditions in favor of state-owned companies.
Alberta government says jobs, economy, COVID to be focus of fall legislature sitting – CBC.ca
The Alberta government plans a busy fall legislature sitting aimed at adding jobs and diversifying the economy while focusing on tamping down the renewed surge of COVID-19.
Government house leader Jason Nixon says this will include proposed legislation on recognizing professional credentials to address labour shortages. The bill will be introduced by Premier Jason Kenney.
“Our focus will be on Alberta’s workforce, a couple of bills around diversifying the economy, a big focus on building infrastructure for our future, [and] growing our resources, particularly on the energy side,” Nixon said in an interview Friday.
There will also be new initiatives on environmental protection and conservation.
Nixon said there will be 18 to 20 bills for the sitting, which begins Monday and is scheduled to run to the first week of December.
“It’s a very robust fall agenda,” he said.
Nixon said the government will continue to take steps to reduce COVID-19 cases, which have severely stressed the health system.
No COVID-19-specific bills are planned, he said, noting they were passed in previous sittings.
“There’s certainly other stuff to be done to manage the pandemic but we’ll stand ready if Alberta Health needs us to pass any legislation to deal with the pandemic.”
He said debate in the chamber is expected to return to some semblance of normalcy.
In the spring sitting, both the United Conservative government and the Opposition NDP reduced their numbers in the chamber to prevent the spread of the virus.
This time, with all NDP members and all but one on the UCP side vaccinated, all will be allowed back in for debate.
The lone UCP member has a medical exemption and will be tested regularly, said Nixon.
He said there are still masking rules and members will try to maintain distancing where possible.
The NDP said it plans to hold the government accountable for what went disastrously wrong on COVID-19.
“This fall sitting of the legislature will be laser-focused on getting answers from the UCP on why they’ve failed Albertans so miserably in managing the devastating fourth wave of the COVID-19 pandemic,” said Christina Gray, the NDP house leader.
“Since July 15, more than 85,000 additional Albertans have been infected with the virus and 700 have died.”
Gray said the NDP will call for an all-party inquiry into the government’s handling of the pandemic with the power to compel documents and testimony.
Nixon said the government will not agree to such a motion. He said it would be wrong to redeploy vital health resources right now and that Kenney has promised an eventual review of how the province handled the pandemic.
Kenney has also promised to bring forward a motion to ratify and act on the results of Monday’s provincewide referendum on Canada’s equalization program.
Final results aren’t in from Edmonton, but figures from Calgary and other cities suggest the referendum will pass with about 60 per cent in support of urging the federal government to remove the principle of equalization from the Constitution.
Kenney has said the issue is not about removing equalization, something no province can do unilaterally, but about getting leverage to negotiate other issues surrounding federal transfers to attain a better deal with Ottawa.
Political scientist Jared Wesley said Kenney will likely continue to focus on initiatives such as the equalization referendum, if only to change the narrative on his low popularity ratings.
“The premier will be spending most of his time, if he has anything to say about it, outside the province, stumping for this fair deal,” said Wesley, with the University of Alberta.
Charting the Global Economy: Weekly Global Economy Check – Bloomberg
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China’s economy continues to cool as the nation’s housing slump intensifies, while supply-chain bottlenecks are keeping a tight grip on the recoveries in the U.S. and Europe.
Brazil's Economy Chief to Stay in Job to Avoid Further Crisis – BNN
(Bloomberg) — Brazil Economy Minister Paulo Guedes has decided to stay in the job even after losing four key members of this team over disagreements about the government’s spending plans, according to a person familiar with the situation.
Guedes held a meeting with the remainder of his team late on Thursday after the mass resignations amid President Jair Bolsonaro’s move to break the country’s spending ceiling rule to fund a new social program ahead of the 2022 elections. The minister said he would stay because he believes his departure would further deteriorate the situation, the person said, asking not to be identified to discuss internal government matters.
Read More: Bolsonaro Loses Top Economic Aides After Unveiling Spending Plan
Brazilian markets plunged on Thursday after Bolsonaro’s spending plan was unveiled. The currency sank 1.1% to its weakest level against the dollar since April and the stock market plunged 2.8%, extending its losses to more than 6% this week.
Resignations in Guedes’s team were announced after markets closed.
©2021 Bloomberg L.P.
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