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Vanuatu’s citizenships-for-sale scheme keeps economy afloat

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By Colin Packham

SYDNEY (Reuters) – Soaring demand for Vanuatu’s controversial passport scheme has kept the South Pacific island nation’s budget in surplus despite the COVID-19 pandemic and a damaging cyclone crippling its dominant tourism sector, budget papers show.

Vanuatu late on Thursday reported a budget surplus for the first six months of 2020 of 3.8 billion vatu ($34.16 million), led by 32% rise in sales of citizenship, worth 7.1 billion vatu.

The jump in passport sales has helped Vanuatu avoid the mounting debts some Pacific island states have racked up with China and other lenders, but experts warn the practice risks harming Vanuatu’s beneficial relationship with countries such Australia.

“Some of the people buying these passports have been on Interpol red notices and the more that happens, the more it undermines the value of the passport,” said Jonathan Pryke, Director, Pacific Islands Program at the Lowy Institute.

Vanuatu charges $130,000 for local citizenship, giving access to a passport that is highly valued as holders can travel visa-free to over 100 countries and territories including the European Union, Britain, Russia and Hong Kong – countries that can be difficult to visit for some nationalities.

There are no residency requirements on people who acquire Vanuatu citizenship.

The Vanuatu government did not immediately respond to requests for comment.

The scheme is controversial, however, with four Chinese people stripped of their citizenship last year after records showed they were on Interpol’s wanted list.

But Vanuatu, which has no personal or corporate income tax, says the scheme has allowed it to issue a 4.2 billion vatu stimulus package – one of the most generous in the Pacific – amid estimates that tens of thousands of locals have lost their jobs after the closure of the country’s border.

(Reporting by Colin Packham; Editing by Lincoln Feast.)

Source: – TheChronicleHerald.ca

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China is on a construction binge and that's good news for the global economy – Economic Times

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By Matt Phillips

The coronavirus pandemic forced China to bring industrial activity to a halt earlier this year, but the country is revving its engines again — and global prices of metals are reflecting that renewed appetite for growth.

China consumes roughly half of the world’s industrial metals, according to analysts. As the country emerged from the worst of the pandemic in March, the Chinese government unleashed a program of enormous fiscal stimulus aimed at building bridges, roads, utilities, broadband and railroads across the country. As a result, the prices of iron ore, nickel, copper, zinc and other metals used to build infrastructure have surged in recent months.

Since late March, prices of iron ore — the key ingredient in steel — have risen more than 40%. Nickel, needed for stainless steel, and zinc, used to galvanize metal, are up more than 25%. Copper, which is used in wiring for power transmission, construction and car manufacturing, and has long been seen as a barometer for the world’s industrial economy, is also up around 35%.

“China, as usual, went the investment route and is massively investing in metals-intensive infrastructure,” said Caroline Bain, a commodities market analyst with Capital Economics in London. “So there’s been a very strong pick up in China’s demand for metals.”

Last month, China’s state railway operator announced plans to double the size of its high-speed rail network over the next 15 years. In July, investment from China’s state-owned enterprises, including giants such as China National Offshore Oil Corporation and China Mobile, surged by 14% compared with the prior year, according to Standard & Poor’s analysts. (Private companies, by comparison, bolstered investment by just 3%.)

In Guangdong, the country’s most populous province, regional officials plan to spend some 700 billion yuan — about $100 billion — this year on public medical facilities, 5G networking and transportation infrastructure.

In February, the coronavirus outbreak prompted a lockdown of much of the country’s economy, the second largest in the world after that of the United States. From January to March, China’s economy contracted by 6.8%, the first decline the country has acknowledged in roughly half a century. Industrial activity stopped, causing metal prices to plunge. Copper and aluminum prices all dove roughly 20% in that period, while iron ore fell about 15%. The sudden pause in demand from such a big buyer immediately strained several countries that have built large parts of their economy around digging ore out of the ground and shipping it to China.

Australia’s exports to China — mostly iron ore and coal — tumbled roughly 20%, as the country fell into its first recession in nearly 30 years. Metal exports from Brazil, Chile and Peru also slumped, driven by cratering demand from China and declines in mining production, but also because miners were forced to halt operations as the coronavirus spread locally. The share prices of global mining giants, which get large portions of their revenue from China, cratered. In local currency terms, Vale in Brazil and the Anglo-Australian giant Rio Tinto both tumbled roughly 40% from January to March.

But the response of the authoritarian government in China — its state-led model that gives Beijing significant influence over the direction of the economy — was enormous, helping China post one of the fastest recoveries of any of the world’s largest economies in recent months.

Goldman Sachs’s estimates of Chinese budget deficits — a measure that includes both official budget deficit numbers and a variety of off-balance sheet government support that is common in China — ballooned to 20% of gross domestic product in the first half of 2020 from about 10% at the end of 2019, as the country pumped money into the economy.

Recent economic reports from China show where that government money has flowed. August data on industrial production revealed 5.6% growth over the same month last year, firmly establishing a V-shaped recovery for the sector. Industrial production in sectors tied to infrastructure, such as cement, steel and iron, all posted strong gains. Other official data on investment showed growth in utilities, road and rail construction.

Economists at the Organization for Economic Cooperation and Development expect that China’s GDP will actually grow by 1.8% this year, making it the only member of the Group of 20 nations that will not suffer a recession this year. That’s the best expected performance of any of the countries the organization tracked in its latest economic update.

“The recovery in GDP is much faster and stronger than elsewhere,” said Bain of Capital Economics.

That’s good news not only for metals markets, but could also herald better times for the global economy. Analysts have studied the prices of some metals as a leading indicator of global economic growth, even referring to copper as “Dr. Copper” because of its supposed ability to predict the direction of the economy as well as any economist with a doctorate.

“People’s perception of the economy is how weakened it is, yet all the industrial metals are telling you a very different story,” said Chris Verrone, an analyst and partner at Strategas Research in New York. “We think copper is the market trying to tell us that the economy is stronger than we expect.”

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U.S. September job report is going to show economy entering a weaker phase – MarketWatch

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American households are used to television dramas where difficult problems are resolved in one hour, or perhaps eight one-hour episodes on Netflix.

So it is with the economy, and there is a growing perception the U.S. economy has been suffering for long enough that the worst must be behind us.

Gregory Daco, chief U.S. economist at Oxford Economics, said he routinely comes across people now who think the economy is out of the woods, given that the unemployment rate has dropped to 8.4% a peak of 15%.

They don’t seem to realize that the unemployment rate is still higher than the peak unemployment rate of prior recessions, Daco said, in an interview.

The fact is that even after what has been a fairly strong first phase of recovery, the economy has only recovered to reach levels close to the worst part of the 2008-2009 financial crisis, he added.

The economy now is closer to the gnarly 2009 period than the slow but steady recovery of 2014-2016.

“I think that is often times an eye opener for clients,” he said.

Daco said the September jobs report from the U.S. Labor Department due this coming Friday will signal the economy is entering a critical phase, with less assistance from government and a number of uncertainties from the November elections, the coronavirus pandemic, and uncertain financial markets.

“There are a number of risks and we are going into the fall without much insulation,” he said.

The rough consensus among economists is for September nonfarm payroll gains to moderate to slightly under one million in September from 1.37 million gains in the prior month.

Daco is forecasting a sharper slowdown to a gain of 600,000 jobs. He sees the unemployment rate dipping to 8%, but due in part to workers giving up looking for work and dropping out of the labor force.

While 600,000 jobs would be considered strong in an ordinary environment, it is not strong enough to put a dent in the 11 million Americans who have lost jobs during the pandemic and millions more who are underemployed, he said.

“I continue to view the glass as half-empty. We’re still a long ways from where we were pre-Covid,” Daco said.

Richard Moody, chief economist at Regions Financial Corp., thinks it may be hard to gauge the strength of the September report given the technical cross-currents in the data.

September is usually the month that summer vacation resort employment declines as the season ends, and without those job losses this year, the reported gain might look stronger. In addition, there was also a decline in temporary census workers in the month that may skew the data to the downside.

The job report will be released Friday at 8:30 a.m. Eastern on October 2. There will also be critical data during the week on the manufacturing sector for September from IHS Markit and ISM on Thursday, and on consumer spending and inflation for August.

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Alberta cities warned 'fiscal reckoning' is ahead as COVID-19 shakes economy – Calgary Herald

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Article content continued

In the UCP government’s fall budget that year, cities saw their capital transfers and grants slashed, with Edmonton and Calgary taking the largest reductions.

AUMA president Barry Morishita said Thursday that the organization is looking forward to “resetting” the relationship between the advocacy group and the minister. AUMA declared its relationship with Madu “broken” over the summer after he didn’t respond to concerns on changes to local election rules and passed amendments into law over its objections.

In prerecorded remarks, Premier Jason Kenney touted the province’s infrastructure stimulus plan — $500 million that will be doled out to cities for projects that will spur job creation. Calgary is submitting a list of projects for a total of $152.8 million in funding.

But the premier also scolded local governments that have not embraced pro-growth policies. He said he wouldn’t “name names” but revealed a manufacturer complained that a municipal noise bylaw is preventing it from setting up shop.

“In the depth of a crisis like this, those 400 jobs matter a lot more than a few noise complaints from local residents,” he said.

He added cities should focus on getting rid of “unnecessary rules, red tape and costs” that might stand in the way of job creation.

“When I speak to major business leaders about prospective investment in Alberta, very often a message that I hear back is the greatest impediments they’ve experienced are at the local level, at the municipal level,” he said.

masmith@postmedia.com

Twitter: @meksmith

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