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Next China: Wealth Redistribution in an Economy for 'Common Prosperity' – Bloomberg

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China’s economy created tremendous wealth at great speed over the last decade. Just a few years ago, UBS put the pace at two new billionaires a week.

This week, President Xi Jinping spelled out in the clearest terms yet that he has a very different vision for the future. Instead of minting billionaires, China’s economy should create “common prosperity,” pronounced the Communist Party’s top policy-setting body for economic affairs.

While it remains unclear how exactly the government will go about achieving that objective, it does seem fairly certain that Beijing will be undertaking a campaign of wealth redistribution in which taxes increase for the rich so that more can be provided to the poor.

That’s not necessarily a bad idea. China’s wealth gap has grown enormously over the past few decades, with the wealthiest 20% of society earning more than 10 times the bottom 20%. Avoiding the social upheavals that such disparities can engender has benefits for everyone.

Billionaire Wealth Surged Globally

Fortunes of China’s billionaires grew at fastest pace

Source: UBS, PWC

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But there are risks as well. Equity investors aren’t waiting around to find out what the implications will be for corporate profits. They’re selling. The mood is so bearish that Bank of America recently identified shorting Chinese stocks as one of the most crowded trades among fund managers it surveyed.

If that sentiment persists and limits the ability of Chinese companies to raise financing, it could depress both innovation and entrepreneurship. So too, of course, could the prospect of heavy taxes on the wealthy.

Much will depend on how the government executes on Xi’s vision. Done well, China could become a more equitable society that also affords businesses the conditions they need to thrive. Done poorly, Beijing’s efforts to take from the rich and give to the poor could undermine the economy. One thing that seems almost certain for either scenario: Fewer billionaires will be minted.

Afghanistan and Taiwan

The chaotic events that unfolded in Afghanistan this week had a notable resonance in Taiwan, thanks in no small part to some goading from Beijing. Hu Xijin, editor of the blustery Global Times newspaper, said it pointedly in a tweet: Watching Kabul fall, the authorities in Taiwan should wonder if they can depend on the U.S. to protect them.

It wasn’t only newspaper editors in the Chinese capital voicing that opinion. In Taipei, Beijing-friendly opposition figures began asserting that neither Washington nor Taiwanese President Tsai Ing-wen would fight in the event of a conflict with the mainland.

Taiwan Outgunned in Matchup of Military Might

Source: U.S. Department of Defense

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While there are many obvious differences between Afghanistan and Taiwan, there are enough parallels at least to put both Taiwan’s ruling party and the U.S. on the back foot. In Taipei, Premier Su Tseng-chang rejected the comparison, arguing instead that the lesson Afghanistan offered was that no one would be able to help if Taiwan is embroiled in internal chaos. In Washington, U.S. National Security Advisor Jake Sullivan shot back that America’s commitment to Taiwan is “sacrosanct” and as strong as ever. In Beijing, it’s not hard to imagine there were at least a few smiles.

A Green Conundrum

President Joe Biden’s ambition of making America’s power sector carbon-free by 2035 ran headlong into a tricky reality this week, as it became ever more clear that renewable-energy supply chains get rather shaky without China.

That conundrum came especially into focus in the solar industry as U.S. customs began detaining incoming components as part of a ban on equipment containing materials from Hoshine Silicon Industry. This prohibition was imposed in June as part of the Biden administration’s effort to penalize China for alleged human-rights abuses in Xinjiang.

Doing Just Fine

Hoshine’s shares have so far shrugged off the U.S. ban

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The problem is that Hoshine is the world’s largest producer of metallurgical silicon, which is refined into polysilicon, the key material in solar panels. Metallurgical silicon is so many steps removed from completed panels that it’s very difficult to prove what is or isn’t in any piece of gear. That’s causing headaches for importers and threatening to push solar panel prices in the U.S. even higher.

Worries About Delta

Hong Kong’s decision this week to tighten its quarantine requirements for most travelers was met with much dismay. That reaction was due in large part to how unexpected the decision was as the city had just started to loosen its measures less than two months earlier. This quick reversal left many people scrambling to either reorganize or cancel their travel plans.

#lazy-img-377558978:beforepadding-top:66.7%;Operations at Hong Kong Airport as City Eases Entry for Vaccinated Residents and Tourists
A deserted hall at Hong Kong International Airport on Aug. 10.
Photographer: Paul Yeung/Bloomberg

The decision, authorities explained, stemmed from their concerns about the spread of the more infectious delta variant. Hong Kong is not alone in that respect. New Zealand, for example, instituted a national lockdown this week after discovering a single case of the strain.

China has been similarly cautious. The port in the city of Ningbo has remained partially closed since last week after a dock worker there was infected by the delta variant. The resulting loss of capacity at the world’s third-busiest container port increased congestion across the region as ships diverted to other cities with uncertainty about how long the Meishan terminal at Ningbo port would be shut.

With the world now a year and a half into this pandemic, things still look quite some way from normal.

What We’re Reading

And finally, a few other things that caught our attention:

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    Economy

    What is a recession? Your economy questions, answered. – The Washington Post

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    The U.S. economy is back in the headlines, with more economists and financial experts warning of an impending downturn at some point in the next year. But what is a recession — and what happens during one?

    The answers can be complicated and vague.

    “Recessions are notoriously hard to predict in advance,” said Tara Sinclair, an economics professor at George Washington University. “It’s pretty easy to say a recession is coming at some point in the future. … It’s much harder to quantify exactly when, how long and how deep.”

    For nearly two years, the U.S. economy has notched blockbuster gains, with millions of new jobs and wage hikes adding to the streak of good news. Families and businesses were flush with cash, which they used to buy houses, cars, electronics and other big-ticket items. That extra spending — combined with lingering supply chain shortages and delays from the pandemic — helped drive up prices and contributed to the highest inflation in 40 years.

    Now policymakers are trying to tackle some of those skyrocketing prices with higher interest rates. They’re hoping that by making it more expensive for families and businesses to borrow — for investments, homes and cars, for example — that demand for those things will go down. The question is whether they will be able to slow things down just enough, without sending the country into a recession.

    Here, we answer some common questions on economic downturns and how they affect Americans.

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    Economy

    Ontario premier Ford vows to rebuild economy, unveils new Cabinet – Reuters.com

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    OTTAWA, June 24 (Reuters) – Doug Ford took the oath of office for a second term as the premier of Canada’s most populous province on Friday with a promise to build highways and homes, and rebuild Ontario’s economy.

    Ford’s right-leaning Progressive Conservatives returned to power with a sweeping victory in a provincial election on June 2, winning 83 seats in the 124-seat legislature.

    He unveiled a larger 30-member Cabinet, moving former solicitor general Sylvia Jones to role of minister of health and deputy premier, while keeping Peter Bethlenfalvy in post as the debt-laden province’s finance minister.

    Ford said he had an “ambitious plan” for his second stint, as his government faced challenges posed by inflation rates hitting a nearly 40-year high in Canada.

    “That plan starts with rebuilding Ontario’s economy,” Ford said at his swearing-in ceremony.

    He reiterated pledges made in the lead-up to the election, including new spending on highways, transit and the auto sector.

    “We’re investing to connect every part of our auto supply chain … the cars of the future will be built right here, Ontario, from start to finish,” Ford said.

    Ontario, home to just under 40% of Canada’s 38.2 million people, is Canada’s manufacturing heartland. It is also one of the world’s largest sub-sovereign borrowers, with publicly held debt in excess of C$400 billion ($309.6 billion).

    Ford also pledged to address soaring home prices in the province by building more affordable housing.

    Canada’s national housing agency projects Ontario to be one of the worst affected by a housing shortage over the next decade. Provincial capital Toronto is already one of the most expensive cities to live in globally.

    “Too many families are frozen out of the housing market … we need to build more attainable homes,” Ford said.

    ($1 = 1.2921 Canadian dollars)

    (This story was refiled to fix typo in headline)

    Reporting by Ismail Shakil in Ottawa

    Our Standards: The Thomson Reuters Trust Principles.

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    Economy

    Northern Shootout's return provides a big boost to Orillia's economy – CTV News Barrie

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    The return of an annual slo-pitch softball event marks the unofficial start of summer in Orillia.

    The Northern Shootout is back for its 13 edition after a pandemic-driven hiatus.

    The tournament consists of 78 men’s, women’s and co-ed teams from Ontario and Quebec and promises a big boost to the economy in the city.

    “Especially after two years of pandemic restrictions,” said Mike Ladouceur, City of Orillia. “This helps our tourism recover, puts heads in beds, hotels are filled, restaurants filled, this is really the big event that begins our summer of events.”

    Organizer Mike Borrelli said the tournament has grown to become one of the biggest in Canada.

    “We’re pretty much at capacity for participants. We can’t accommodate anymore,” he added. “We’re using the other diamonds, we got all the diamonds in Orillia, and we’re using the Rama diamond, so if we had more diamonds, we could accommodate more teams.”

    The owners of Adovo Pizza in Orillia say the increase in tourism has done wonders for their business this year.

    This being the first big event of the season, they’re excited to welcome so many people into the city.

    “Everyone has just been waiting to get out,” said Adam Zimmerman, co-owner. “Especially for sporting events and vendors, have a cold beer. There’s nothing wrong with it.”

    The tournament culminates with an annual home run derby, which organizers said typically draws 1,200 fans to watch.

    Sixteen participants will compete to walk away with a championship belt.

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