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Coronavirus: China tries to go back to work to heal illness-inflicted economy – Sky News

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The world’s workshop is trying to get back to work. 

But not only does China have to make up for lost time – a month for most companies – it’s still subject to strict coronavirus restrictions.

To get her workers back to the factory, Kate Wong, chief executive of vape company RELX, paid them 20% extra. They are still two weeks away from full capacity.

Speaking to Sky News, she said that due to coronavirus: “The production side had a lot of impact.

Image:
Kate Wong said production at her company has been delayed

“Production got delayed by 15 days. The reason is the workers have to stay at home for quarantine to come to the factory.”

Some of RELX’s suppliers are in Hubei province – the epicentre of the outbreak – and meant new sources had to be found. Despite this, Ms Wang remains optimistic.

She said: “We think the recovery is going to be strong. I think we can catch up but we’re definitely one month behind our original forecast.”

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Weeks spent on lockdown has throttled the economy in China. The country recently released its latest manufacturing purchasing managers index (PMI) – a measure showing the direction in which the economy is heading.

A reading above 50 on the index represents growth, whereas anything below, is a contraction.

It went from 50 in January to just 35.7 a month later – even worse than the previous low recorded during the financial crisis of 2008.

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Other metrics are also down, with the transport ministry saying on Saturday that passenger volume on the roads, railways and trains had fallen nearly 80% in February.

As a result, China faces a difficult balancing act between restarting the economy and containing the spread of COVID-19.



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Coronavirus: How worried should we be?

Rushing people back to work, or easing off the cumbersome, ubiquitous restrictions, could lead to a second wave of a virus that appears to be diminishing here.

State media this week highlighted the fact that President Xi Jinping chaired a working meeting about the state of the economy during coronavirus, which marked a rare economic intervention.

The government is so keen to show business is getting back to normal that it invited Sky News on a tour of two sites in Beijing – a milk production facility and a power plant.

The propaganda message was clear: that businesses are being productive while also taking precautions.

Sun Li Feng, the manager of Hua Dian power plant, said: “We have confidence to keep our staff healthy and provide enough electricity for our society.”

But even propaganda can be revealing. The government wanted to show journalists the economy was fine. But the fact they needed to make a show of that betrayed their anxiety.

Others, especially in the private service sector, are struggling.

Mr Zou, who runs a communications company in Beijing with 11 staff, said: “As a service provider, this virus has caused a devastating impact.

“That is to say, if clients don’t give us commissions, we won’t have any financial source or income.”

Mr Zou is concerned about his communications business if things don't improve by April
Image:
Mr Zou is concerned about his communications business if things don’t improve by April

When the outbreak began, Mr Zou chose not to renew the lease on his office and asked his employees to work from home. If the squeeze continues, he will lay-off staff and consider bank loans.

“If it doesn’t get better by April, my company will face financial and economic issues,” he said.

“Small companies can’t face having no businesses for six months, because this means we will definitely face our death.”

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Biden's Burdens Grow: Sagging Global Economy Adds to US Woes – U.S. News & World Report

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Biden’s Burdens Grow: Sagging Global Economy Adds to US Woes  U.S. News & World Report



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How the housing slowdown could hobble Canada's economy – The Globe and Mail

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Home sales fell nationwide by 12.6 per cent in April from March, with even steeper pullbacks seen in Toronto and Vancouver markets.Richard Buchan/The Canadian Press

The housing downturn that’s taking root across Canada will act as a headwind to economic growth this year, following a period in which real estate powered the economic recovery from COVID-19, but was also characterized by fervent speculation and worsening affordability amid ultralow interest rates.

Nationwide home sales fell 12.6 per cent in April from March, with even steeper pullbacks seen in the frothy markets of Toronto and Vancouver. The national home price index, which adjusts for volatility, fell just 0.6 per cent last month, although price drops were larger in some parts of Southern Ontario.

Rising interest rates have put a quick chill on a feverish rally. Given that more rate hikes are on the way, many economists say Canada could be in the early stages of a protracted housing slump, albeit one welcomed by would-be buyers who got priced out.

For an economy that increasingly relies on housing, the downturn will likely weigh on economic growth in the near future – not only through direct channels, such as reduced real estate commissions, but in indirect ways, such as weaker spending from households that gorged on mortgages and now face higher debt-servicing costs.

The pandemic housing boom is winding down. Economists forecast a 10-20% price correction

Toronto housing market ‘suddenly getting into buyers market terrain’: BMO chief economist

“Unfortunately for Canada, we’re in a pretty perilous situation now where our housing activity measures are extremely stretched. … The pandemic basically put what was already stretched on steroids,” said David Doyle, head of economics at Macquarie Group.

As home sales drop and interest rates head higher, “that does create significant downside risks for Canada’s economy,” he added.

Already the largest industry in Canada, real estate became an even bigger chunk of the economy during the pandemic, largely due to record-low mortgage rates that encouraged rabid buying.

Residential investment, as a share of nominal gross domestic product, soared to about 10 per cent at peak times over the past two years, amounting to more than $240-billion in 2021. That’s up from about 7 per cent of GDP before the pandemic – or double the equivalent rate in the United States. For housing bears, it’s a sign that Canadians have become far too infatuated with real estate, and that the country’s economic fortunes are too tied up with those of the sector.

Total residential investment is comprised of three items: new construction, renovations and ownership transfer costs, which include fees to realtors, land transfer taxes and other transaction costs.

This final aspect of investment is most directly exposed to a slump. Mr. Doyle said the April sales drop, if followed by flatter activity in May and June, could curb GDP growth in the second quarter by as much as 1.5 percentage points, on an annualized basis. If sales continue to drop, the drag would be larger.

And that’s before accounting for the potential knock-on effects of weaker home-buying activity, such as fewer renovations and purchases of household appliances.

In its latest forecast, the Bank of Canada estimated the economy would grow by 6 per cent in the second quarter on an annualized basis. “That feels like a stretch to me,” Mr. Doyle said.

Home construction is an aspect of GDP that could hold up well. The federal government wants to double the pace of home building over the next decade, and other levels of government say they also want to add supply. However, Bank of Montreal senior economist Robert Kavcic doubts construction can get much bigger. He pointed to already strong housing starts and a shortage of available workers.

“Physically, there’s no way we can actually double the rate of home construction from what is already the maximum amount of home construction that we can do in this country,” he said.

That said, Mr. Kavcic doesn’t see residential investment, as a percentage of the economy, heading back to the tepid levels of the 1990s. The fundamentals for housing demand are still strong, he said, in part because Canada is targeting a record intake of permanent residents in the coming years.

“I think the issue here is that through 2021, monetary policy was just too easy for too long,” he said. “So, the asset price just ran ahead of what was fundamentally justified.”

The Bank of Canada has raised its policy rate twice this year, taking it to 1 per cent from a pandemic low of 0.25 per cent. Bank officials have said they intend to raise the benchmark rate into a “neutral” range – which neither stimulates the economy nor inhibits it – of 2 per cent to 3 per cent in fairly short order.

The central bank has warned the Canadian economy is likely more sensitive to rising borrowing costs than it used to be. After taking on loads of new mortgage debt over the past two years, the average household now owes a record $1.86 for every dollar of disposable income. During the pandemic, investors have plowed into the housing market, and a growing share of borrowers have steep loan-to-income ratios.

Ultimately, the concern is that debt-addled households will be forced to tighten their belts and drastically reduce their spending.

“Rising interest rates are designed to slow the economy by making borrowing more expensive. That tends to slow sectors like housing,” said Toni Gravelle, a deputy governor at the Bank of Canada, in a speech last week.

“But this slowing might be amplified this time around because highly indebted households will face high debt-servicing costs and will likely reduce household spending more than they would have otherwise. Our base-case scenario includes a slowdown in housing activity. But we could see a larger-than-expected slowdown due to higher indebtedness and unsustainably high housing prices.”

How those financially stretched households react to higher interest rates could force the Bank of Canada to “pause” its rate-hike cycle, Mr. Gravelle noted.

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China calls for urgent boost to virus-hit economy – FRANCE 24 English

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Issued on: 18/05/2022 – 15:36Modified: 18/05/2022 – 15:35

Beijing (AFP) – China’s premier called for greater “urgency” in rolling out measures to support the virus-battered economy, state media reported Wednesday, days after data highlighted the stark impact of Covid-19 restrictions.

China — the last major global economy sticking to a rigid zero-Covid policy — is battling an economic slump due to prolonged virus lockdowns that have constricted supply chains, quelled demand and stalled manufacturing.

“All localities and departments should step up their sense of urgency, and new measures that can be used should be used,” Li Keqiang said at a symposium on Wednesday, according to state broadcaster CCTV.

He added that efforts to support the economy should bring it “back to normal quickly” after admitting that indicators have “weakened significantly” since March, with a particular dip in April.

On Monday, data showed retail sales and factory output last month had slumped the most since the start of the pandemic, while unemployment edged back toward its February 2020 peak.

Beijing’s unrelenting approach to Covid-19 outbreaks has snarled supply chains and locked down tens of millions of people, hitting major financial, industrial and tourist hubs.

The country’s borders also remain closed to most foreign travellers and a slew of international sports events have been scrapped over pandemic concerns.

China has targeted full-year growth of around 5.5 percent, but data published in April showed that first-quarter growth slowed to 4.8 percent after the world’s second-biggest economy lost steam in the latter half of last year.

And the economic targets have a political dimension for Chinese leader Xi Jinping, who is eyeing another term in power.

Xi has pinned his legacy to China’s strong economic growth and winning the “battle” against Covid.

But the current outbreak is the country’s worst since the virus emerged in Wuhan in late 2019, and the economy is beginning to weaken.

Tech support

Li also called Wednesday for backing Chinese tech companies’ bids to list domestically and abroad, a day after Communist Party leaders doubled down on support for the tech sector in a rare meeting with executives.

China’s economic slowdown appears to have motivated a softer approach toward the vast, money-spinning tech sector, after an 18-month clampdown driven by fears massive internet companies control too much data and expanded too quickly.

Vice Premier Liu He and other Communist leaders addressed executives, including Robin Li of Baidu — universally used for its search engine and mapping service — and Zhou Hongyi of internet security firm Qihoo 360, state media reported late Tuesday.

Liu offered support for “the sustainable and healthy development of the platform economy and the private economy,” CCTV said.

During the tech crackdown, overseas IPOs from Alibaba’s Ant Group and Didi Chuxing — China’s Uber — were spiked, while millions of dollars of fines over anti-trust and data breaches were ladled out to tech giants.

Chinese tech shares surged late April after officials pledged support for internet firms at a Politburo meeting.

Tech giants including Alibaba, Tencent and Baidu were marginally lower Wednesday morning, with e-commerce behemoth JD slumping over 4 percent after it recorded a 3 billion yuan ($444 million) loss in first-quarter earnings.

On Wednesday, Tencent reported record-low quarterly revenue growth at nearly zero, reaching the slowest pace since the company went public in 2004.

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