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China's economy is the envy of the world – CNN

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A version of this story first appeared in CNN Business’ Before the Bell newsletter. Not a subscriber? You can sign up right here.
The pace of growth was a tad slower than economists had expected. But there were plenty of signs of strength, with the services and construction sectors performing especially well.
China’s economy has now recovered from its historically bad first quarter, when the coronavirus forced the country to shut down. GDP grew a cumulative 0.7% through the first nine months of 2020, the data show.
“China’s economy continued its rapid rebound last quarter, with the recovery broadening out and becoming less reliant on investment-led stimulus,” said Julian Evans-Pritchard, senior China economist for Capital Economics.
Growth of less than 5% would normally be a cause for real concern in China, which is accustomed to much quicker expansion. But it’s pretty good considering the circumstances, and even more remarkable when compared to the extremely fragile recoveries underway in most other big economies. 
The big picture: The International Monetary Fund expects China’s economy to expand by 1.9% in 2020. That compares to contractions of 5.8% in the United States and 8.3% in the 19 countries that use the euro. 
Benefits of control: The way Beijing handled the initial outbreak of coronavirus late last year has been criticized by some Western politicians. But China’s stringent lockdown and population tracking policies helped bring the virus under control within its borders. The country also set aside hundreds of billions of dollars for major infrastructure projects to fuel economic growth. The central bank has done its part, too.
The blueprint for controlling the virus has proved difficult for other countries to replicate, especially in places where leaders do not wield the same level of control over their populations as Beijing.
Europe and the United States are now facing another surge of coronavirus cases. Paris has imposed an overnight curfew. In London, people from different households are banned from meeting indoors. The United States is averaging more than 55,000 new cases a day — up more than 60% since a mid-September dip, and pretty much every state is trending the wrong direction.
What’s next: The United States is probably not headed for a national lockdown anytime soon, but its economy will remain hamstrung until there’s a dramatic reduction in the number of coronavirus cases. 
China, meanwhile, will continue to power ahead. Economic data for the month of September indicated the country’s recovery is gaining even more strength. Industrial production and retail sales figures were particularly robust.
“We think growth will continue to pick-up in the near-term,” said Evans-Pritchard. “Fiscal policy is set to remain supportive until at least the start of next year, which should keep activity in industry and construction strong. Meanwhile, tightening labour market conditions and improving consumer confidence mean that the recovery in consumption and services activity probably has further to run.”
Looking even further ahead: The International Monetary Fund predicts that China’s economy will grow by 8.2% in 2021, a much faster pace than the United States or the eurozone. 

Alibaba spots an opportunity

Alibaba (BABA) has taken a controlling stake in one of China’s leading supermarket chains as it tries to fend off rival JD.com in the fast growing online grocery industry, my colleague Sherisse Pham reports. 
Alibaba is spending 28 billion Hong Kong dollars ($3.6 billion) to up its stake in Sun Art Retail Group from 36% to 72%, the company said in a statement Monday. Alibaba will then make a general offer to shareholders to buy out the rest of the the retail company.
The news sent shares in Sun Art up nearly 20% in Hong Kong. Alibaba’s Hong Kong listed shares rose about 1%.
Alibaba is in a fierce battle with JD.com for China’s online food market. The e-commerce giants are both using a mixture of physical supermarkets and online platforms to win shoppers.
The play: The Sun Art deals signals that Alibaba is pushing for the “accelerated digitization” of Chinese consumers post-pandemic, according to Jefferies analyst Thomas Chong. Sun Art operates nearly 500 hypermarkets and supermarkets across China.
Alibaba “has been highlighting digitization as the greatest opportunity to change how people live and work,” and seeking “opportunities in traditional retail” by solving problems such as scalability and sustainability, said Chong. 
What’s next: Ant Group, a crown jewel of Alibaba co-founder Jack Ma’s empire, is preparing to go public in what could be the biggest IPO in history. 
Ant Group is one of the biggest technology firms in the world and the biggest online payments platform in China. The app has established its presence in every aspect of financial life in China, from investment accounts and micro savings products to insurance, credit scores and even dating profiles.
The company has secured a key approval from the China Securities Regulatory Commission for its listing in Hong Kong, Bloomberg reported on Monday. The IPO is expected to include a listing in Shanghai.

US debt hasn’t been this high since World War II

The amount of money that the United States owes investors has hit record levels in more than a few ways, my colleague Jeanne Sahadi reports. 
Both the annual deficit and total debt accumulated over the years has topped levels not seen since World War II.
Last week, the US Treasury reported that for fiscal year 2020, which ended September 30, the US deficit hit $3.13 trillion. As a share of the economy, the 2020 deficit is more than triple what the annual deficit was in 2019.
Having topped $21 trillion, the country’s total debt owed to investors is now estimated to have outpaced the size of the economy, coming in at nearly 102% of GDP, according to calculations from the Committee for a Responsible Federal Budget. Debt hasn’t been that high since 1946 when it hit 106% of GDP.
Extraordinary times: With millions of Americans still out of work and struggling to get by as a result, the country’s burgeoning debt is understandably no one’s top concern at the moment. Even deficit hawks are urging a dysfunctional Washington and a chaotic White House to approve another round of badly needed stimulus to the tune of trillions of dollars.
Big picture: The problem with such high debt levels going forward is that they will increasingly constrain what the government can do to meet the country’s needs.
“There is no set tipping point at which a fiscal crisis becomes likely or imminent, nor is there an identifiable point at which interest costs as a percentage of GDP become unsustainable,” Congressional Budget Office director Phillip Swagel said last month. “But as the debt grows, the risks become greater.”
Halliburton and Philips will report their latest quarterly results before the bell.
Also today:
  • IBM and PPG Industries report after the close.
  • The NAHB Housing Market Index for October is out at 10:00 a.m. ET.

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Economy

U.S. economic growth for last quarter revised up slightly to healthy 3.4% annual rate

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The U.S. economy grew at a solid 3.4 per cent annual pace from October through December, the government said Thursday in an upgrade from its previous estimate. The government had previously estimated that the economy expanded at a 3.2 per cent rate last quarter.

The Commerce Department’s revised measure of the nation’s gross domestic product – the total output of goods and services – confirmed that the economy decelerated from its sizzling 4.9 per cent rate of expansion in the July-September quarter.

But last quarter’s growth was still a solid performance, coming in the face of higher interest rates and powered by growing consumer spending, exports and business investment in buildings and software. It marked the sixth straight quarter in which the economy has grown at an annual rate above 2 per cent.

For all of 2023, the U.S. economy – the world’s biggest – grew 2.5 per cent, up from 1.9 per cent in 2022. In the current January-March quarter, the economy is believed to be growing at a slower but still decent 2.1 per cent annual rate, according to a forecasting model issued by the Federal Reserve Bank of Atlanta.

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Thursday’s GDP report also suggested that inflation pressures were continuing to ease. The Federal Reserve’s favoured measure of prices – called the personal consumption expenditures price index – rose at a 1.8 per cent annual rate in the fourth quarter. That was down from 2.6 per cent in the third quarter, and it was the smallest rise since 2020, when COVID-19 triggered a recession and sent prices falling.

Stripping out volatile food and energy prices, so-called core inflation amounted to 2 per cent from October through December, unchanged from the third quarter.

The economy’s resilience over the past two years has repeatedly defied predictions that the ever-higher borrowing rates the Fed engineered to fight inflation would lead to waves of layoffs and probably a recession. Beginning in March 2022, the Fed jacked up its benchmark rate 11 times, to a 23-year high, making borrowing much more expensive for businesses and households.

Yet the economy has kept growing, and employers have kept hiring – at a robust average of 251,000 added jobs a month last year and 265,000 a month from December through February.

At the same time, inflation has steadily cooled: After peaking at 9.1 per cent in June 2022, it has dropped to 3.2 per cent, though it remains above the Fed’s 2 per cent target. The combination of sturdy growth and easing inflation has raised hopes that the Fed can manage to achieve a “soft landing” by fully conquering inflation without triggering a recession.

Thursday’s report was the Commerce Department’s third and final estimate of fourth-quarter GDP growth. It will release its first estimate of January-March growth on April 25.

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Canadian economy starts the year on a rebound with 0.6 per cent growth in January – CBC.ca

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The Canadian economy grew 0.6 per cent in January, the fastest growth rate in a year, while the economy likely expanded 0.4 per cent in February, Statistics Canada said Thursday.

The rate was higher than forecasted by economists, who were expecting GDP growth of 0.4 per cent in the month. December GDP was revised to a 0.1 per cent contraction from zero growth initially reported.

January’s rise, the fastest since the 0.7 per cent growth in January 2023, was helped by a rebound in educational services as public sector strikes ended in Quebec, Statistics Canada said.

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WATCH | The Canadian economy grew more than expected in January: 

Canada’s GDP increased 0.6% in January

41 minutes ago

Duration 2:20

The Canadian economy grew 0.6 per cent in January, the fastest growth rate in a year, while the economy likely expanded 0.4 per cent in February, Statistics Canada says.

“The more surprising news today was the advance estimate for February,” which suggested that underlying momentum in the economy accelerated further that month, wrote CIBC senior economist Andrew Grantham in a note.

Thursday’s data shows the Canadian economy started 2024 on a strong note after growth stalled in the second half of last year. GDP was flat or negative on a monthly basis in four of the last six months of 2023.

More time for BoC to assess

The strong rebound could allow the Bank of Canada more time to assess whether inflation is slowing sufficiently without risking a severe downturn, though the central bank has said it does not want to stay on hold longer than needed.

Because recent inflation figures have come in below the central bank’s expectations, “it appears that much of the growth we are seeing is coming from an easing of supply constraints rather than necessarily a pick-up in underlying demand,” wrote Grantham.

“As a result, we still see scope for a gradual reduction in interest rates starting in June.”

WATCH | Bank of Canada left interest rate unchanged earlier this month: 

Bank of Canada leaves interest rate unchanged, says it’s too soon to cut

22 days ago

Duration 1:56

The Bank of Canada held its key interest rate at 5 per cent on Wednesday, with governor Tiff Macklem saying it was too soon for cuts. CBC News speaks with an economist and a couple who might be forced to sell their home if interest rates don’t come down.

The central bank has maintained its key policy rate at a 22-year high of five per cent since July, but BoC governors in March agreed that conditions for rate cuts should materialize this year if the economy evolves in line with its projections.

The bank in January forecast a growth rate of 0.5 per cent in the first quarter, and Thursday’s data keeps the economy on a path of small growth in the first three months of 2024. The BoC will release new projections along with its rate announcement on April 10.

Growth in 18 out of 20 sectors

Growth in January was broad-based, with 18 of 20 sectors increasing in the month, StatsCan said. The agency said that real estate and the rental and leasing sectors grew for the third consecutive month, as activity at the offices of real estate agents and brokers drove the gain in January.

Overall, services-producing industries grew 0.7 per cent, while the goods-producing sector expanded 0.2 per cent.

In a preliminary estimate for February, StatsCan said GDP was likely up 0.4 per cent, helped by mining, quarrying, oil and gas extraction, manufacturing and the finance and insurance industries.

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Economy

Yellen Sounds Alarm on China ‘Global Domination’ Industrial Push – Bloomberg

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US Treasury Secretary Janet Yellen slammed China’s use of subsidies to give its manufacturers in key new industries a competitive advantage, at the cost of distorting the global economy, and said she plans to press China on the issue in an upcoming visit.

“There is no country in the world that subsidizes its preferred, or priority, industries as heavily as China does,” Yellen said in an interview with MSNBC Wednesday — highlighting “massive” aid to electric-car, battery and solar producers. “China’s desire is to really have global domination of these industries.”

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