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China's economy is still months away from a full recovery, business survey finds – CNBC

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Containers and trucks at the port of Qingdao, China on February 14, 2019.
Reuters

BEIJING — China has not fully recovered from the shock of the coronavirus pandemic, business leaders said in a survey by the China Beige Book released Tuesday.

After about a year since Covid-19 first emerged in the Chinese city of Wuhan, roughly two-thirds of executives polled by the third-party firm said they don’t expect sales, profitability and hiring to return to 2019 levels until at least three months from now.

China Beige Book conducted more than 3,300 interviews between Nov. 12 and Dec. 11 in its latest quarterly business activity survey.

The survey’s tepid outlook contrasts with generally optimistic forecasts for China, the only major economy in the world expected to grow this year in the wake of the pandemic.

Government commentary in the last few weeks have also signaled concerns about overall economic growth. While economists predict China’s gross domestic product will likely expand about 2% this year, consumers have so far spent less than they did last year as many remain uncertain about future income.

Credit concerns and trade tensions

For the fourth quarter, the China Beige Book found sharp drops in sales growth for luxury goods, food and apparel compared to the prior quarter.

“Firms in these sub-sectors noted narrower margins as well as weaker sales volumes and hiring growth,” the report said.

That was in contrast with the better performance of auto dealers and vendors for furniture and appliances, indicating that richer households might be boosting overall consumption by spending on big-ticket items, the Beige Book noted.

Creditors were also more concerned about retail businesses. While the loan rejection rate held fairly steady among most sectors — around 10% to 20% — that of the retail industry surged to 38% in the fourth quarter, the report said.

Domestic demand is a key part of Beijing’s plan for sustainable economic growth in the coming years. China has been trying to rely more on its own consumers for growth, rather than on exports, especially amid increased tensions with major trading partners such as the U.S.

China still a bright spot but outlook tentative

In the services sector, the China Beige Book also found that fourth-quarter gains were not driven by consumers, but by industries meeting business needs such as telecoms, shipping and financial services.

Chain restaurants didn’t see as much growth, while travel saw no growth and hospitality recorded the weakest revenues, the report said.

The Beige Book also pointed out that compared with a surge in exports, China’s imports have stalled since an initial recovery from the shock of the first quarter.

The Chinese market remains a bright spot for companies worldwide after the country was able to control the outbreak domestically and return to overall growth by the second quarter.

But scattered Covid-19 cases, most recently in the capital city of Beijing in the last two weeks, as well as the virus’ persistent spread overseas mean the pandemic is an uncertainty for Chinese authorities and businesses.

China’s full-year economic data for 2020 is due out Jan. 18, according to the National Bureau of Statistics’ website.

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Canadian dollar gains as stimulus hopes boost Wall Street

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Canadian dollar

By Fergal Smith

TORONTO (Reuters) – The Canadian dollar rose against the greenback on Tuesday, as the prospect of U.S. stimulus bolstered risk appetite and Prime Minister Justin Trudeau said Canada was pressing the incoming U.S. administration not to scuttle a major pipeline project.

The loonie was trading 0.2% higher at 1.2729 to the greenback, or 78.56 U.S. cents, having traded in a range of 1.2714 to 1.2763.

“Relatively firm oil prices, along with a risk-on backdrop, this morning supported the CAD,” Ronald Simpson, managing director, global currency analysis, at Action Economics, said in a note.

Wall Street’s main indexes rose as U.S. Treasury Secretary nominee Janet Yellen advocated for a hefty fiscal relief package to help the world’s largest economy ride out a pandemic-driven slump.

Canada sends about 75% of its exports to the United States, including oil. U.S. crude oil futures settled 1.2% higher at $52.98 a barrel.

Canada is pressing people at the highest levels of U.S. President-elect Joe Biden’s incoming administration to reconsider canceling the Keystone XL pipeline, Prime Minister Justin Trudeau said.

Canadian factory sales decreased by 0.6% in November from December, the first drop in three months, Statistics Canada said. Separate data for the same month showed wholesale trade rising 0.7%.

Canada‘s inflation report for December and a Bank of Canada interest rate decision are due on Wednesday.

Analysts see a small chance of a ‘micro rate cut,” with the central bank moving its benchmark rate by less than 25 basis points, avoiding negative rates. The policy rate was last cut in March to a record low of 0.25%.

Canadian government bond yields were mixed across the curve, with the 10-year down half a basis point at 0.805%.

 

(Reporting by Fergal Smith; editing by Jonathan Oatis and Sonya Hepinstall)

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China worries about lagging consumption as broader economy shakes off COVID – Financial Post

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Article content continued

“We should start with stabilizing employment, because we can boost incomes of ordinary people only when employment is secured,” said Xu Hongcai, deputy director of the economic policy commission at China Association of Policy Science.

Xu said that raising minimum wages, allowing more rural residents to settle in cities, and strengthening social safety nets would help increase earnings, and so spending, in the long run.

Some regulations could also be loosened, said Yao, the cabinet adviser.

“In Beijing and big cities, we still restrict auto purchases…there are no such restrictions in London, New York or Tokyo,” he said.

LINGERING FEARS

Incomes suffered under lockdowns and strict movement curbs. Some, especially migrant workers, lost months of wages. Urban disposable income growth slowed to 1.2% in 2020 from 5.0% the previous year.

Consumers chose to fill their bank accounts rather than empty their wallets. Households added 11.3 trillion yuan ($246.69 billion) in new bank savings in 2020, up from 9.7 trillion yuan the previous year, according to central bank data.

Fear of the virus, and continued small-scale outbreaks, continues to dissuade spending.

After a recent rebound in COVID-19 cases in the north of the country, around 30 million people were placed under a form of lockdown. Millions more have been asked to avoid traveling for Lunar New Year, usually a consumption hotspot.

“I won’t go out unless it’s absolutely necessary. This saves me from worry and saves me money too,” said Hou Aiping, a retired woman in her 50s who now only leaves home in Beijing to visit her parents and the supermarket.

“Even though the epidemic is contained, and I always wear my mask, I can’t guarantee I’ll be completely safe,” she said.

($1 = 6.4858 Chinese yuan renminbi)

(Additional reporting by Cheng Leng and Beijing newsroom; Editing by Raju Gopalakrishnan)

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Asian markets gain on hopes Biden will act on economy, virus – 570 News

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TOKYO — Asian shares were mostly higher ahead of Joe Biden’s inauguration as U.S. president Wednesday, though worries about surging coronavirus cases sapped the Japanese market’s early gains.

Japan’s benchmark Nikkei 225 slipped 0.4% to finish at 28,523.26. Australia’s S&P/ASX 200 added 0.4% to 6,770.40, while South Korea’s Kospi edged up 0.6% to 3,112.03. Hong Kong’s Hang Seng added 0.7% to 29,835.04, while the Shanghai Composite rose 0.1% to 3,570.40.

Hopes are growing that Biden’s planned stimulus for the American economy as well as measures to curb the pandemic will boost regional markets.

While many Asian nations have fared better in the pandemic than European countries and the U.S., worries still run high. Main urban areas in Japan, including Tokyo, are under a state of emergency, with evening dining discouraged. Critics say that’s not enough, as deaths related to COVID-19 have been rising.

“Chinese New Year is less than a month away. With COVID infection numbers already on the rise again in parts of Asia, there are concerns about what the holiday season may mean for efforts to contain the virus’s spread,” said Stephen Innes, chief global market strategist at Axi.

On Wall Street, the S&P 500 rose 30.66 points, or 0.8%, to 3,798.91, pulling to within 1% of its record high set earlier this month. The Dow Jones Industrial Average added 116.26 points, or 0.4%, to 30,930.52. The Nasdaq composite gained 198.68 points, or 1.5%, to 13,197.18.

About 60% of the companies in the S&P benchmark index rose. Technology, communication services and health care stocks accounted for much of the rally, though energy sector companies notched the biggest gain.

Traders continued to bid up shares in smaller companies, a sign of confidence in the prospects for future economic growth. The Russell 2000 index picked up 27.94 points, or 1.3%, to 2,151.14.

U.S. markets were closed Monday in observance of Martin Luther King Day.

The gains this week marked a reversal from last week, when stocks ran out of steam after a strong start to the year. Markets have been rising on enthusiasm about a coming economic recovery as more people are inoculated with COVID-19 vaccines and Washington gets set to try for another round of economic stimulus.

Janet Yellen, Biden’s nominee to be Treasury secretary, told the Senate Finance Committee during her confirmation hearing that the incoming administration would focus on winning quick passage of its $1.9 trillion pandemic relief plan.

“More must be done,” Yellen said. “Without further action, we risk a longer, more painful recession now — and long-term scarring of the economy later.”

The plan would include $1,400 cash payments for most Americans. Democrats are also pushing for faster rollout of COVID-19 vaccines, a higher minimum wage for workers and enhanced benefits for laid-off workers. The hope is that such stimulus can carry the economy until later this year, when more widespread vaccinations get life returning to some semblance of normal.

“If most of this is implemented, it does suggest significant pickup in economic growth as we head through to the fourth quarter of this year,” said David Kelly, chief global strategist at JPMorgan Funds.

In energy trading, benchmark U.S. crude added 31 cents to $53.29 a barrel. Brent crude, the international standard, rose 35 cents to $56.25.

In currency trading, the U.S. dollar slipped to 103.74 Japanese yen from 103.99 yen. The dollar cost $1.2146, up from $1.2115.

___

AP Business Writers Stan Choe, Damian J. Troise and Alex Veiga contributed.

Yuri Kageyama, The Associated Press

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