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China’s Slow Recovery Points to Hard Road Back for Global Economy



(Bloomberg) — The fragile recovery in China’s economy is pointing to a long road back for the rest of the world too.

A string of top-tier data all showed that China’s factory output, consumer spending and investment continued to improve in May, but there are few signs of a broad based rebound needed to spur a V-shaped recovery.

The worry for the global economy is that if China’s apparent success in containing the coronavirus can’t stoke confidence and a quick return to normal activity, then where can. Those concerns will be compounded by news of an outbreak of virus cases in Beijing that has raised fears of a resurgence of the pandemic.

“China’s experience so far suggests that it will be a hard road back for the global economy,” said Shaun Roache, Asia-Pacific chief economist at S&P Global Ratings, who notes that confidence among Chinese consumers and privately-owned firms remains low. “We still expect a rebound in the second half, but expectations for a surge in pent-up demand may be disappointed.”

Bright spots in China include new house prices, which rose at the fastest pace in seven months in May as the coronavirus shutdowns were unwound. Other key metrics also show improvement.

  • Industrial output rose 4.4% from a year earlier in May
  • Retail sales fell 2.8% compared to a drop of 7.5% in April
  • Fixed-asset investment declined 6.3% in the first five months
  • Steel output surged to a record

Persistent weakness in China’s private sector investment and the clear wariness among consumers reflects both weak domestic conditions and the absence of robust global appetite for Chinese-made goods.

“The lack of demand is the main problem for the Chinese economy right now,” Shen Jianguang, online retailer Inc.’s chief economist, told Bloomberg Television.

Policy makers in Beijing continued their cautious support. The People’s Bank of China supplied banks with 200 billion yuan ($28 billion) in fresh liquidity Monday while letting some previous loans expire, leaving the financial system needing further injections if a looming cash crunch is to be avoided.

What Bloomberg’s Economists Say…

“China’s official survey showed that China’s big companies are yet to return to full capacity four months after the government started to lift social distancing restrictions. The challenges are likely to be greater for smaller firms. The constraints are driven by the demand side, both weak domestic consumption and external demand.”

— Chang Shu, chief Asia economist

The latest read on China comes amid mixed views on how the global recovery is playing out. White House economic director Larry Kudlow on Sunday told CNN there’s a “very good chance” for a V-shaped rebound in the U.S., only days after Federal Reserve Chairman Jerome Powell cautioned the recovery will take time.

Morgan Stanley economists said the global economy is in a new expansion cycle and output will return to pre-coronavirus crisis levels by the fourth quarter as they predict a “sharp but short” recession.

“We have greater confidence in our call for a V-shaped recovery, given recent upside surprises in growth data and policy action,” economists led by Chetan Ahya wrote in a mid-year outlook research note.

The International Monetary Fund warned last week that the global economy is recovering more slowly than expected and there remains “profound uncertainty” around the outlook. The OECD forecast a global slump of 6% this year, providing the virus is contained.

Economists at JPMorgan Chase & Co. led by Bruce Kasman highlighted a risk that surging debt and deficits may force governments to wind back their massive fiscal stimulus.

“This turn in fiscal policy, together with the limited steps expected from central banks, is an important factor underlying our forecast for an incomplete recovery through 2021,” JPMorgan economists said in a note.

Much will depend on how the virus plays out. Chinese officials are racing to control a new outbreak in Beijing that reached nearly 100 infections over the weekend after starting in a wholesale food market, providing the biggest test of the country’s coronavirus containment strategy since the virus first emerged in Wuhan.

“May data showed further improvement, although the magnitude may not be as strong as we and the market were expecting,” said Helen Qiao, chief Greater China economist at Bank of America. “The virus outbreak in Beijing highlights the lingering risks of economic activities being affected again.”



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Croatia holds election amid sharp economic downturn, rising coronavirus infections – The Guardian



By Igor Ilic

ZAGREB (Reuters) – Croatia held an election on Sunday at a time of rising coronavirus infections and a sharp economic downturn from the pandemic, with the outcome likely to lead to political negotiations to form a new government.

The ruling centre-right Croatian Democratic Union (HDZ) has had a slight advantage in most opinion polls over its main rival, the Social Democrats (SDP), but neither party is seen being able to govern on its own.

“At these challenging times both for public health and the economy Croatia deserves to be led by experienced and responsible people,” Prime Minister and HDZ leader Andrej Plenkovic told supporters this week, hinting at his two top opponents’ lack of vision and experience.

They are SDP leader Davor Bernardic and popular singer Miroslav Skoro, whose nationalist and eurosceptic Domovinski Pokret (Homeland Movement) has fared third in the opinion polls with just above 10% support, compared with close to 30% for the two top parties.

Polling stations opened at 0500 GMT and will close at 1700 GMT when the exit polls will be released. The first preliminary official results are expected around two hours later.

“My choice is Skoro as I believe his party wants stability and to stop the young people from moving to seek jobs abroad,” said Ilija Grlic, a voter from the Zagreb area.

The new government will have an uphill task to keep a grip on the coronavirus while trying to restore the economy, expected to shrink some 10% this year. Tourism revenues are forecast to slump 70%.

“I think that the SDP could be a relative winner, but that the HDZ could be the one to eventually form a (coalition) cabinet,” said Kristijan, a teacher, before casting a ballot.

Some analysts believe that the two biggest parties may be forced to join forces, as the alternative of trying to form a stable government with junior partners, such as Skoro’s Homeland or the conservative Most (Bridge) party, may prove difficult.

Both Plenkovic and Bernardic have firmly rejected the idea of a “grand coalition”.

Croatia has reported a relatively small number of coronavirus infections — 3,000 COVID-19 cases and around 100 deaths recorded so far — but infections have accelerated in the past two weeks, with the daily number of new cases currently peaking at around 80.

(Reporting by Igor Ilic; Editing by Frances Kerry)

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German economy minister sees economic recovery from October –



FRANKFURT (Reuters) – Germany’s economy may recover from October onwards from the coronavirus pandemic, Economy Minister Peter Altmaier said in a newspaper interview on Sunday.

“I am sure that the downturn of our economy can be stopped after the summer break and that from October onwards, the economy can start growing again in Germany,” he told the mass circulation Bild am Sonntag in an interview.

While the economy would shrink by 6% in 2020, growth by over 5% would be possible in 2021, Altmaier said.

His goal was to reach the level that employment was at before the crisis by 2022, and to start heading for regaining full employment after that date, he said.

Altmaier also said that the rate of the spread of the virus in the United Status was a major concern.

“A pandemic that gets out of control there, has big consequences for the world economy,” he said.

(Reporting by Vera Eckert; Editing by Chizu Nomiyama)

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Germany is first major economy to phase out coal and nuclear – CTV News



German lawmakers have finalized the country’s long-awaited phase-out of coal as an energy source, backing a plan that environmental groups say isn’t ambitious enough and free marketeers criticize as a waste of taxpayers’ money.

Bills approved by both houses of parliament Friday envision shutting down the last coal-fired power plant by 2038 and spending some 40 billion euros ($45 billion) to help affected regions cope with the transition.

The plan is part of Germany’s `energy transition’ – an effort to wean Europe’s biggest economy off planet-warming fossil fuels and generate all of the country’s considerable energy needs from renewable sources. Achieving that goal is made harder than in comparable countries such as France and Britain because of Germany’s existing commitment to also phase out nuclear power by the end of 2022.

“The days of coal are numbered in Germany,” Environment Minister Svenja Schulze said. “Germany is the first industrialized country that leaves behind both nuclear energy and coal.”

Greenpeace and other environmental groups have staged vocal protests against the plan, including by dropping a banner down the front of the Reichstag building Friday. They argue that the government’s road map won’t reduce Germany’s greenhouse gas emissions fast enough to meet the targets set out in the Paris climate accord.

“Germany, the country that burns the greatest amount of lignite coal worldwide, will burden the next generation with 18 more years of carbon dioxide,” Greenpeace Germany’s executive director Martin Kaiser told The Associated Press.

Kaiser, who was part of a government-appointed expert commission, accused Chancellor Angela Merkel of making a “historic mistake,” saying an end date for coal of 2030 would have sent a strong signal for European and global climate policy. Merkel has said she wants Europe to be the first continent to end its greenhouse gas emissions, by 2050.

Germany closed its last black coal mine in 2018, but it continues to import the fuel and extract its own reserves of lignite, a brownish coal that is abundant in the west and east of the country. Officials warn that the loss of mining jobs could hurt those economically fragile regions, though efforts are already under way to turn the vast lignite mines into nature reserves and lakeside resorts.

Schulze, the environment minister, said there would be regular government reviews to examine whether the end date for coal can be brought forward. She noted that by the end of 2022, eight of the country’s most polluting coal-fired plants will have already been closed.

Environmentalists have also criticized the large sums being offered to coal companies to shut down their plants, a complaint shared by libertarians such as Germany’s opposition Free Democratic Party.

Katja Suding, a leading FDP lawmaker, said the government should have opted to expand existing emissions trading systems that put a price on carbon, thereby encouraging operators to shut down unprofitable coal plants.

“You just have to make it so expensive that it’s not profitable anymore to turn coal into electricity,” she said.

This week, utility companies in Spain shut down seven of the country’s 15 coal-fired power plants, saying they couldn’t be operated at profit without government subsidies.

But the head of Germany’s main miners’ union, Michael Vassiliadis, welcomed the decision, calling it a “historic milestone.” He urged the government to focus next on an expansion of renewable energy generation and the use of hydrogen as a clean alternative for storing and transporting energy in the future.


David Rising contributed to this report.

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