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Xi Aide Likely to Be Next Economy Czar Stresses Need for Growth – BNN Bloomberg

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(Bloomberg) — As doubts grow over whether Xi Jinping still prioritizes expanding China’s economy over other goals, he’s tipped to appoint a new economic adviser who’s vowed to put growth first.

He Lifeng, who’s known Xi for more than four decades, runs China’s powerful planning agency, the National Development and Reform Commission. He’s seen by economists and China watchers as a likely successor to Liu He, Xi’s economic czar who could retire after the Communist Party’s congress in mid-October. 

Liu is well known to international investors, acting as China’s chief negotiator with the Trump administration during the trade war. Liu earned a reputation as willing to tolerate slower growth for the sake of financial sector reforms aimed at curbing debt growth, a campaign that’s contributed to the current property market slump.

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Parsing through recent speeches from He Lifeng (pronounced Her-Lee-Fung), he appears to be more pro-growth than his predecessor, with a willingness to boost credit and ramp up infrastructure spending. However, when it comes to real estate, he seems to favor shrinking the market.

He, 67, is likely to have “more focus on growth,” than his predecessor, said Victor Shih, associate professor of political science at the University of California San Diego, “which in the short term will be positive for the economy.”

He would gain influence as analysts increasingly question whether economic growth remains a policy priority for Xi. His strict Covid Zero policy, a crackdown on large private technology companies, and willingness to challenge elements of the Washington-led international order, which has deterred US investment, have led economists to lower long-term forecasts.

In an article last year, He said increasing economic development was the party’s “number one task” and “the foundation and key to solving all our country’s problems” — two phrases used by Communist Party leaders in recent decades to signal a growth-first approach to the economy.

Xi has avoided those slogans in major speeches since 2017, instead emphasizing that growth and national security have equal status. Liu He has stressed the importance of “quality” growth over its pace and a need to balance growth with reducing economic risks.

As head of the NDRC, He’s overseen a series of massive infrastructure projects. Before that, he’d worked as a senior official in several large Chinese cities, relying on construction of expressways, bridges and tunnels to boost growth. That earned him the nickname “big demolisher He,” according to a note from analysts at consultancy Trivium. 

“Given He’s local government experience, it’s safe to say that he’d be pro-investment, (relatively) outward-looking, and business-friendly,” the analysts wrote.

His friendship with Xi goes back to the 1980s, when they were both local officials in the coastal province of Fujian. He is seen as one of Xi’s closest confidantes, regularly accompanying him on domestic trips and foreign missions, including the president’s first travel outside of China since the pandemic. 

He, who has a Phd in economics from Xiamen University, was one of the few guests invited when Xi married folk singer Peng Liyuan in 1987, the Wall Street Journal reported. The two often played basketball together, Japanese media Nikkei reported.

“All the signs point to him replacing Liu He” as Xi’s top economic official, said Cheng Li, an expert on elite Chinese politics at the Brookings Institution, although secrecy around the ruling party’s congress means there is still some uncertainty about the promotion. 

He would inherit Liu’s powerbase as a member of the Politburo, the Communist Party’s 25 most-senior officials, and a director of the party’s Central Financial and Economic Affairs Commission. Under Xi, party committees have usurped the role of the State Council, headed by China’s premier, in setting economic policy.

If he replaces Liu, He would likely also become head of the State Council’s financial stability committee and possibly take the title of vice premier at a government meeting in March.

As He has less international experience than Liu and is associated with a state-led approach to the economy, international investors may not see his promotion as “market friendly,” Li said. As a result there could be efforts to balance his appointment by keeping a figure more familiar to foreign audiences — perhaps Liu He or current Vice Premier Han Zheng — in a senior economic role, said Li. 

He has argued in speeches that the key task of the government is to steer investment enabling workers to produce higher-value products, especially in technologies where China could be cut off from international supply. He supports China’s goal of peaking carbon emissions by 2030, and of Xi’s “common prosperity” drive to reduce inequality, although he warned against the risk of “raising lazy people,” by providing too much government welfare.

He is already closely linked to China’s Belt and Road Initiative, as director of the State Council’s leading committee overseeing the project. Xi and He “may adjust some of the policies, but other than that they will continue to push the BRI,” Li said. 

He’s promotion won’t comfort investors in China’s huge real estate sector, which is suffering from its worst-ever slump. The excessive flow of money into property development is one of the “three imbalances” in China’s economy which He has railed against in speeches.

The other two imbalances identified by He are the flow of credit toward speculative assets rather than the real economy, and companies inability to meet consumer demand for high-end goods. He has condemned reliance on generating economic growth by increasing economic inputs such as land and energy, rather than using those inputs more efficiently.

He became a senior official in the northern city of Tianjin in the aftermath of the global financial crisis, overseeing the construction of a massive new district billed as “China’s Manhattan,” which helped drive the city’s economic growth above 16%. The project left a legacy of empty buildings, non-performing loans and Tianjin’s growth has subsequently underperformed other large cities.

With growth slowing sharply this year, Beijing has already signaled greater flexibility about Liu He’s signature de-leveraging drive aimed at reducing debt-levels in the economy, allowing the government to borrow more while continuing to reduce corporate leverage. That is a trend that could continue under He. 

Over the course of his career, “He clearly showed that he would not hesitate to expand credit to boost growth,” Shih, the political science professor, said.

©2022 Bloomberg L.P.

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Surprise Growth Makes South Africa’s Economy Bigger Than Before Pandemic Struck – BNN Bloomberg

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(Bloomberg) — South Africa’s economy is bigger than before the coronavirus pandemic struck, after growing faster-than-expected in the third quarter on increased farm output.

Gross domestic product expanded 1.6% in the three months through September, compared with a contraction of 0.7% in the previous quarter, Statistics South Africa said Tuesday in a report released in the capital, Pretoria. The median of 12 economists’ estimates in a Bloomberg survey was for growth of 0.4%. The economy grew 4.1% from a year earlier.

Full-year growth may also surprise on the upside. The central bank forecasts an expansion of 1.8% and the National Treasury 1.9%. For the nine months through September, an early indicator of where full-year growth may land, GDP grew by 2.3% from last year.

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The 2.3% expansion in the first three quarters is a “reasonable indicator” of the annual number, said Joe de Beer, deputy director-general of economic statistics at the agency. “I can’t see it differing by more than” half a percentage point “from just a mathematics point of view,” he said.

“After taking into account the firmer-than-expected third-quarter figure, we expect growth to average closer to 2.5% in 2022, before slowing to just above 1% next year,” said Sanisha Packirisamy, an economist at Momentum Investments.

At an annualized 4.6 trillion rand ($265 billion) in the third quarter, GDP is about 53 billion rand bigger than the fourth quarter of 2019, before the pandemic struck. A contraction in the prior three months had reversed gains made in the first quarter that made it bigger.

The quarterly expansion comes even after Africa’s most-industrialized economy experienced record power cuts because state electricity utility Eskom Holdings SOC Ltd. couldn’t keep pace with demand from its old and poorly maintained plants. Industries behind the better-than-expected growth were agriculture and transport, which grew 19.2% and 3.7% quarter-on-quarter respectively.

Strong exports of mineral, vegetable and paper products also contributed.

Still, South Africa’s economy remains stuck in its longest downward phase since World War II and hasn’t grown by more than 5% annually in 15 years. The government’s National Development Plan, a 2012 economic blueprint co-authored by President Cyril Ramaphosa, says that level of expansion is needed for sustainable job creation in a nation where almost a third of the workforce is unemployed.

Slow structural reforms, political uncertainty and high levels of crime continue to weigh on fixed-investment spending in South Africa, with private companies wary of committing large sums of money to domestic projects. Gross fixed capital formation climbed 0.3% from the previous quarter.

Household spending, which comprises about two-thirds of GDP, declined 0.3% in the third quarter. It’s likely to come under further strain from high inflation and interest rates that are at a level last seen more than five years ago.

Weak growth is forecast for the final quarter because of continued rolling blackouts and a strike over wages that took place at Transnet SOC Ltd., South Africa’s state-owned logistics company that operates most of the harbors in the nation, in October. The central bank forecasts expansion of 0.1% this quarter.

Lackluster economic growth and mounting price pressures pose a threat to social stability in one of the world’s most unequal societies and may stymie efforts to reduce fiscal deficits and debt.

–With assistance from Simbarashe Gumbo and Rene Vollgraaff.

(Updates with economist comment in paragraph five. An earlier version corrected household spending figure in paragraph 11)

©2022 Bloomberg L.P.

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World Economy Heads for One of Its Worst Years in Three Decades – BNN Bloomberg

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(Bloomberg) — The world economy is facing one of its worst years in the three decades as the energy shocks unleashed by the war in Ukraine continue to reverberate, according to Bloomberg Economics.

In a new analysis, economist Scott Johnson forecasts growth of just 2.4% in 2023. That’s down from an estimated 3.2% this year and the lowest — excluding the crisis years of 2009 and 2020 — since 1993.

However, the headline figure is likely to mask diverging fortunes, with the euro area starting 2023 in recession and the US ending the year in one. By contrast, China is projected to expand more than 5%, boosted by a faster-than-expected end to its zero-tolerance Covid strategy and support for its crisis-hit property market.  

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Differences will also be on display when it comes to monetary policy after a year in which central banks “dashed toward restrictive territory in a pack,” Johnson wrote.

“In the US, with wage gains set to keep inflation above target, we think the Fed is headed toward a terminal rate of 5%, and will stay there till 1Q24. In the euro area, meanwhile, a more rapid decline in inflation will mean a lower terminal rate and the possibility of cuts at the end of 2023.”

In China, where authorities are torn between a desire to support the recovery and concern about the weakness of the currency, “limited” rate cuts are on the cards.

Read more: Global Growth Set to Slow From 3.2% in 2022 to 2.4% in 2023

©2022 Bloomberg L.P.

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Securing good jobs, clean air, and a strong economy – Prime Minister of Canada

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Autoworkers have been a keystone of the Canadian economy for generations. By investing in the future of the auto industry, we are not only securing good middle-class jobs, we are fighting climate change, and building an economy that works for generations to come. 

Since January alone, Canada has secured several historic manufacturing deals for electric vehicles (EVs), hybrids, and batteries – deals that will create and secure thousands of good, middle-class jobs and provide the world with clean vehicles. Today, we are seeing the results of one of those deals start to roll off the line.

The Prime Minister, Justin Trudeau, was joined today by Premier of Ontario, Doug Ford, to open Canada’s first full-scale EV manufacturing plant, General Motors of Canada Company’s (GM) CAMI assembly plant in Ingersoll, Ontario. Starting today and going forward, the plant will build fully electric delivery vans – the BrightDrop Zevo 600 – which will help cut pollution and keep our communities healthy for our children and grandchildren.

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Thanks in part to a $259 million investment from the Government of Canada, GM’s CAMI assembly plant was able to retool its operations to build these electric vans. By 2025, the plant plans to manufacture 50,000 EVs per year. This investment has helped secure thousands of well-paying, high-quality jobs across GM facilities, and is helping advance the electrification of Canada’s automotive sector.

The Government of Canada will continue to work to attract investment from companies around the world as we build our EV supply chain – from mining critical minerals to manufacturing batteries, and vehicles. By taking action today, we are positioning Canada as a global leader in EVs, fighting climate change, securing good jobs, and building an economy that works for all Canadians – now and into the future.

Quotes

“When we invested in GM’s project to build Canada’s first full-scale electric vehicle manufacturing plant in Ingersoll, we knew it would deliver results. Today, as the first BrightDrop van rolls off the line, that’s exactly what we’re seeing. This plant has secured good jobs for workers, it is positioning Canada as a leader on EVs, and will help cut pollution. Good jobs, clean air, and a strong economy – together, that’s the future we can build.”

The Rt. Hon. Justin Trudeau, Prime Minister of Canada

“Today is proof that our historic investments in EV manufacturing are paying off. With the first BrightDrop vans coming off the assembly line, we’re seeing the skill of Canadian workers making a huge difference as the world moves to EVs. Our government, in partnership with GM, is cementing Canada’s leadership in the EV supply chain.”

The Hon. François-Philippe Champagne, Minister of Innovation, Science and Industry

“This milestone represents GM at our best – fast, flexible and first in the industry. The BrightDrop Zevo is a prime example of GM’s flexible Ultium EV architecture, which is allowing us to quickly launch a full range of electric vehicles for our customers. And, as of today, I am proud to call the CAMI EV Assembly team the first full-scale all-electric manufacturing team in Canada.”

Mark Reuss, President, General Motors

“This is a very exciting moment – a revolution in the way we transport people and goods. Today marks a huge day for BrightDrop, as we expand our footprint and begin producing the Zevo electric vans at scale, and a huge milestone for Canada on the road to a brighter future. Opening the CAMI plant is a major step in providing EVs at scale and delivering real results to the world’s biggest brands, like DHL Express, who will be our first Canadian customer.”

Travis Katz, President and CEO, BrightDrop

Quick Facts

  • The Government of Canada’s $259 million investment supports GM’s more than $2 billion project to reignite production at its Oshawa assembly plant, after operations stopped in 2019, and transform its CAMI assembly plant in Ingersoll.
  • The investment is being made through both the Strategic Innovation Fund and its Net Zero Accelerator Initiative.
  • The Government of Ontario made a matching contribution of up to $259 million toward the project.
  • Founded in 1918, General Motors of Canada Company (GM) is one of the largest automotive manufacturers worldwide. It is headquartered in Oshawa, Ontario, and is one of Canada’s largest automotive manufacturers.
  • GM is planning to introduce 30 new electric vehicles by 2025, eliminate tailpipe emissions from new light-duty vehicles by 2035, and become carbon neutral in its global products and operations by 2040.
  • The automotive sector contributes $16 billion to Canada’s gross domestic product and is one of the country’s largest export industries.
  • The automotive sector supports the employment of nearly 500,000 Canadians.
  • The 2030 Emissions Reductions Plan, released in March, puts Canada on track to achieving our goal of cutting emissions by 40 to 45 per cent below 2005 levels by 2030 while continuing to build a strong economy.
  • To make zero-emission vehicles more affordable and accessible, the Government of Canada offers incentives of up to $5,000 off the purchase or lease of a light-duty zero-emission vehicle through the Incentives for Zero-Emission Vehicles (iZEV) Program. Since May 2019, close to 176,000 Canadians have taken advantage of this program.
  • Since 2015, the Government of Canada has invested $400 million in building approximately 35,000 zero-emission vehicle charging stations across the country.

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