BEIJING (AP) — Chinese leaders are under pressure to boost slumping economic growth while they try to contain coronavirus outbreaks ahead of next month’s Winter Olympics in Beijing.
The world’s second-largest economy grew by 8.1% last year, but activity fell abruptly in the second half as the ruling Communist Party forced China’s vast real estate industry to cut surging debt, official data showed Monday.
Growth sank to 4% over a year earlier in the final three months of the year, fueling expectations Beijing may need to cut interest rates or stimulate the economy with more spending on public works construction.
That slump is likely to worsen, leading to “more aggressive measures to boost growth,” Ting Lu and Jing Wang of Nomura said in a report.
On Monday, the Chinese central bank cut its interest rate for medium-term lending to commercial banks to the lowest level since early 2020, at the start of the coronavirus pandemic.
Asian stock markets ended the day mixed following the dual announcements. China’s benchmark Shanghai Composite Index gained 0.6% while the Hang Seng in Hong Kong lost 0.7%. The Nikkei 2225 in Tokyo rose 0.7%.
Lingering Chinese economic weakness has potential global repercussions, depressing demand for steel, consumer goods and other imports.
China rebounded quickly from the pandemic, but activity weakened last year as Beijing tightened controls on borrowing by real estate developers, triggering a slump in construction that supports millions of jobs. That made consumers nervous about spending and investors anxious about possible defaults by developers.
Consumer spending has suffered after authorities responded to virus outbreaks by blocking most access to cities including Tianjin, a port and manufacturing center near Beijing, and imposed travel controls in other areas.
Their “zero-COVID strategy” aims to keep the virus out of China by finding and isolating every infected person. That has helped to keep case numbers low but is depressing consumer activity and causing congestion in some ports.
The ruling party has stepped up enforcement ahead of the Feb. 4 start of the Winter Games, a prestige project. Athletes, reporters and officials at the Games are required to stay in sealed areas and avoid contact with outsiders.
Growth in consumer spending, the biggest driver of economic growth, fell to 1.7% over a year earlier in December from the previous month’s 3.9%.
“The prospect this year for consumer spending to rebound back to pre-pandemic levels has certainly dimmed,” David Chao of Invesco said in a report. “All eyes are on whether policymakers will evolve their zero-COVID pandemic policies.”
Officials have urged the public to stay where they are during the Lunar New Year holiday instead of visiting their hometowns. That will cut spending on travel, gifts and banquets during the country’s most important family holiday.
Forecasters have cut this year’s growth outlook to as low as 5% due to the debt crackdown and coronavirus.
“Downward pressure on growth will persist in 2022,” Tommy Wu of Oxford Economics said in a report.
Compared with the previous quarter, the way other major economies are measured, the Chinese economy grew 1.4% in the final three months of 2021. That was up from the previous quarter’s 0.2%.
Chinese exports, reported Friday, surged 29.9% in 2021 over the previous year despite a global shortage of semiconductors needed to make smartphones and other goods and power rationing imposed in major manufacturing areas.
Exporters benefited from reviving global demand while their foreign competitors were hampered by anti-virus controls. But economists say this year’s trade growth is likely to be weak and export volumes might shrink due to congestion at ports.
“With supply chains already stretched to capacity, last year’s boost from surging exports can’t be repeated,” Julian Evans-Pritchard of Capital Economics said in a report.
Auto sales fell for a seventh month in November, declining 9.1% from a year earlier, reflecting consumer reluctance to commit to big purchases.
Chinese leaders are trying to steer the economy to more sustainable growth based on domestic consumption instead of exports and investment and to reduce financial risk.
In mid-September, factories in some provinces were ordered to shut down to meet official targets for reducing energy use and energy intensity, or the amount used per unit of output.
One of the country’s biggest developers, Evergrande Group, is struggling to avoid defaulting on $310 billion owed to banks and bondholders. Smaller developers have collapsed or defaulted on debts after Beijing reduced the amount of borrowed money they can use.
Chinese officials have tried to reassure investors over the risks of wider problems, saying any impact on lending markets can be contained. Economists say a potential Evergrande default should have little effect on global markets.
National Bureau of Statistics (in Chinese): www.stats.gov.cn
Joe Mcdonald, The Associated Press
German economy dodges recession as war, pandemic weigh – Financial Post
BERLIN — The German economy grew slightly in the first quarter from the previous one, data showed, with higher investments offset by the twin impacts of war in Ukraine and COVID-19 that experts predicted would weigh more heavily in the three months to June.
Europe’s largest economy grew an adjusted 0.2% quarter on quarter and 3.8% on the year, the Federal Statistics Office said on Wednesday. A Reuters poll had forecast 0.2% and 3.7%, respectively.
The reading meant that Germany skirted a recession, often defined as two quarters in a row of quarter-on-quarter contraction, after gross domestic product (GDP) fell by 0.3% at the end of 2021.
While household and government spending remained mostly at the same level as in the previous quarter and exports were down at the start of the year, investments grew.
Construction investments, boosted by mild weather, were up 4.6% from the previous quarter, despite price increases, and machinery and equipment investments rose 2.5%.
German business morale rose unexpectedly in May as its economy showed resilience, according to an Ifo institute survey published this week that found no observable signs of a recession.
However, there is no upswing in sight either, and Sebastian Dullien, director of the Macroeconomic Policy Institute (IMK), predicted the effect of the war and pandemic-linked restrictions in China – Germany’s biggest trading partner last year, according to official data – would be much greater in the second quarter.
ING economist Carsten Brzeski said he was sticking with his baseline scenario of a slight GDP contraction in the second quarter after Wednesday’s reading.
“The build-up of inventories and weak consumption in the first quarter, as well as very weak consumer confidence, clearly dampen the optimism that traditional leading indicators are currently conveying,” he said.
A consumer sentiment index by the GfK institute inched up slightly heading into June from an all-time low in May, with household spending burdened by inflation.
The government forecasts economic growth of 2.2% in 2022. (Reporting by Miranda Murray and Rene Wagner; Editing by Paul Carrel and John Stonestreet)
5 reasons why the G20 needs a sustainable blue economy – World Economic Forum
- Ocean-based climate solutions should be a critical part of the G20’s COVID-19 recovery plans.
- “The blue economy” can create jobs, spur economic growth, mitigate the impacts of climate change and help meet the food needs of a growing global population.
- From sustainable fisheries to maritime renewable energies, there are five crucial areas where the G20 would benefit from investing in the ocean.
The G20 has vowed to rebuild the global economy in the aftermath of the COVID-19 pandemic and to fight climate change by investing in sustainable development. Yet one of the most powerful tools available to achieve these goals is largely missing from national economic recovery plans: ocean-based climate solutions.
The ocean has tremendous potential to spur economic growth, create jobs and mitigate some of the most severe climate impacts if we protect it and use its resources sustainably. This is often referred to as “the blue economy”.
For instance, it is estimated the world’s wetlands alone provide $47 trillion worth of ecological services annually, services such as coastal flood defences, carbon sequestration and breeding grounds for commercial fish, and support at least 1 billion jobs. But climate change, habitat destruction and plastic pollution – to name just a few problems – threaten to undermine their ecological integrity and destroy a remarkably effective buffer against some of the most severe climate change impacts.
A similar story is playing out on the ocean’s coral reefs and in our global fisheries. So-called “blue” food (food from the ocean and other aquatic sources) offers immense potential to help meet the food needs of a growing population in a way that is nutritious, sustainable, equitable and affordable. To do so successfully requires a concerted effort from the global community to ensure that fishing is sustainable.
The G20, which comprises 45% of the world’s coastline and 21% of its exclusive economic zones, has a special obligation to protect marine ecosystems and is well-positioned to deploy ocean-based climate solutions as the world continues its post-pandemic recovery.
Creating a blue economy
There are five crucial areas where the G20 would benefit from investments in ocean-based climate action to create a blue economy:
1. Maritime renewable energy sources, such as offshore wind, floating solar arrays and wave and tidal power, hold enormous promise to build energy independence and help countries meet their emissions reduction commitments under the Paris Climate Change Agreement.
2. We must decarbonize global shipping. If this industrial sector were a country, it would be the world’s eighth-largest in terms of carbon emissions. The good news is that emerging technologies can vastly reduce emissions from vessels and port facilities. The international community needs to set new standards to ensure best practices are implemented evenly around the world.
Our ocean covers 70% of the world’s surface and accounts for 80% of the planet’s biodiversity. We can’t have a healthy future without a healthy ocean – but it’s more vulnerable than ever because of climate change and pollution.
Tackling the grave threats to our ocean means working with leaders across sectors, from business to government to academia.
The World Economic Forum, in collaboration with the World Resources Institute, convenes the Friends of Ocean Action, a coalition of leaders working together to protect the seas. From a programme with the Indonesian government to cut plastic waste entering the sea to a global plan to track illegal fishing, the Friends are pushing for new solutions.
Climate change is an inextricable part of the threat to our oceans, with rising temperatures and acidification disrupting fragile ecosystems. The Forum runs a number of initiatives to support the shift to a low-carbon economy, including hosting the Alliance of CEO Climate Leaders, who have cut emissions in their companies by 9%.
Is your organization interested in working with the World Economic Forum? Find out more here.
3. Coastal wetlands and ecosystems – such as salt marshes, seagrass meadows, coral reefs and mangrove forests – need urgent protection in order to maintain their critical environmental services. It is estimated that these ecosystems sequester as much as five times the amount of carbon as terrestrial forests per unit area while shielding coastal populations from increasingly powerful storms and sea-level rise.
4. Investing in sustainable fisheries and, in particular, aquaculture will create well-paid jobs and help promote food security and economic fairness, especially in developing countries.
5. Sustainable and regenerative tourism can form a critical building block in ensuring a lasting economic recovery for coastal nations in a way that supports the ocean and nature – and the countless people who depend on them.
A 2021 report by the High Level Panel for a Sustainable Ocean Economy found that ocean-based climate and nature-based solutions such as these could collectively reduce around 4 billion tonnes of greenhouse gas emissions annually by 2030 and more than 11 billion tonnes by 2050 – equivalent to closing all the world’s coal-fired power plants for a year.
Even modest investments in these solutions to create a sustainable blue economy would go a long way toward achieving UN Sustainable Development Goal 14 (life below water), including gender equity and fair access to the economic benefits of the world’s marine resources.
As this year’s G20 president and host of the group’s next leaders’ summit in November, Indonesia must lead by example, making major investments in marine and coastal ecosystem governance, promoting equal economic access, reducing marine debris, and working to restore and conserve mangrove and other wetlands.
Indonesia, Australia and all other G20 countries must expand these efforts and increase collaboration, to further strengthen and implement a robust and sustainable global blue economy that benefits everyone.
General (Ret.) Luhut Binsar Pandjaitan is Coordinating Minister for Maritime Affairs and Investment for Indonesia, which is this year’s G20 President and host of the group’s 17th Heads of State and Government Summit in November.
Dr Andrew Forrest AO is Founder and Chair of the Minderoo Foundation, Australia, and a Member of Friends of Ocean Action at the World Economic Forum.
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Mexico's Economy Rebounded in First Quarter on US Demand – BNN
(Bloomberg) — Mexico’s economic growth was in line with expectations for the first three months of 2022, a positive sign for a country that narrowly avoided falling into recession late last year.
Gross domestic product grew 1% in the first quarter from the previous three-month period, above the 0.9% preliminary reading released in April, according to final data published by Mexico’s statistics institute Wednesday. Analysts in a Bloomberg survey had estimated 1% quarter-on-quarter growth.
On an annual basis, GDP expanded 1.8% in the January-March period, compared to the 1.6% flash reading reported last month. The manufacturing and services sectors led the recovery, as exports to the US, Mexico’s largest trading partner, continued to be a boon for Latin America’s second-largest economy, especially once past the late January peak of the highly infectious omicron variant.
“It would be desirable for us to grow more, but it’s not bad growth,” said Janneth Quiroz Zamora, vice president of economic research at Monex Casa de Bolsa. “There was an impact of Omicron, but it wasn’t as strong or as pronounced as was expected.”
While doling out aid to farmers, dropping tariffs and kicking in for subsides against rising fuel and energy prices, President Andres Manuel Lopez Obrador has been hesitant to emulate Latin America’s other big economies by taking steps to spur the economy. His government’s attempts to woo companies from abroad with the appeal that they’ll have shorter supply chains and be closer to US consumers has seen limited results so far.
Looking ahead, gathering headwinds to growth abound. Russia’s invasion of Ukraine has already had an alarming impact on food and energy prices in Mexico and exacerbated snarls in disrupted global supply-chains, which impact the country disproportionately as it’s one of the world’s largest exporters. Economic factors in the US also stand to impact Mexico’s performance.
“There was some forward momentum heading into Q2,” said Nikhil Sanghani, a Latin America economist at Capital Economics. “Growth will be sluggish though as activity cools in the US and high inflation and tighter monetary policy weigh on domestic demand.”
Assessing the mounting challenges, the International Monetary Fund in April lowered its 2022 GDP forecast for Mexico to 2%, down from 2.8% in January, and half its forecast of 4% made in October 2021. Economists polled by Citibanamex earlier this month were even less upbeat still, with a 2022 GDP forecast of 1.8%, only marginally better than the 1.73% estimate in the central bank’s most recent survey of economists.
Since the IMF’s last forecast, however, the US Federal Reserve raised its key rate for a second meeting and vowed to keep hiking until officials see “clear and convincing” cooling in inflation, raising the specter of recession in the world’s largest economy and a fall-off in demand for Mexico’s exports.
At the same time, persistent inflation at home has Mexico’s central bank engaged in an aggressive tightening cycle that’s taken the key rate up to 7% from 4% last June, with a possible terminal rate of 10%, by the reckoning of Deputy Governor Jonathan Heath.
Read More: Banxico’s Heath Sees Additional 200-300 Basis Point Rate Hikes
(Updates with analyst comments starting in seventh paragraph.)
©2022 Bloomberg L.P.
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