China’s Central Economic Work Conference (CEWC), held at Beijing from December 8 to 10, 2021, decided that all stakeholders should work actively to maintain stability in the macro-economy in view of new challenges as the country holds the Winter Olympics from February 4 to 20, 2022, and the 20th Congress of the Communist Party of China (CPC) later this year. What made the economic planners to rethink the policy direction was the sharp dip in China’s GDP growth rate from 18.3% in Quarter 1 of 2021 to 7.9% in Q2, 4.9% in Q3 and 4% in Q4.
Structural changes ordered by President Xi Jinping such as reducing loans to the real estate sector, lower emission targets resulting in power cuts and the zero tolerance to Covid-19 had played an important role in decelerating the economic growth. Xi is personally involved in directing the real estate policies as he considers the unchecked growth of this sector as posing a threat to China’s economic stability.
New measures undertaken by the Xi regime included severe restrictions on giving bank loans, allow hugely indebted developers to default to rein in large unproductive expenditure and announcement of a property tax on a trial basis in certain provinces to discourage the purchase of multiple properties to curb speculation. Given that the real estate sector accounts for 29% of the Chinese economy, these measures, according to some economists, may reduce China’s GDP growth by about 0.5% in 2022 and thereafter. These restrictions have strained the local government’s finances, as selling land is an important source of revenue. Several local governments slashed the salaries of their staff, weakening the consumption.
In the last two years, China has undertaken several measures to reduce its greenhouse emissions, including controlling of its coal-fired power plants to meet its targets of peaking carbon dioxide emissions by 2030, lower the carbon dioxide emissions per unit of GDP by over 65% (from 2005 level) by 2030, increase the share of non-fossil fuels and forest stock. Decrease in power generation by coal-fired plants and rationing since September 2021 disrupted industrial production in many provinces as several industries were forced to cut production and reduce jobs. Recurrent outbreaks of Covid in some areas and China’s zero tolerance approach again forced several businesses to close and confined about 20 million people at home. The working of several companies in technology, education and gaming sectors was adversely impacted due to the regulatory actions, resulting in lower earnings and loss of jobs.
At the CEWC, it was felt that new external challenges had arisen as President Biden had not only continued the policies of his predecessor but also taken a harder line with his allies towards China. The Comprehensive Investment Agreement with the EU had remained frozen and China’s relations with Australia and Japan had deteriorated. These countries had become more vociferous in criticism of China’s human rights record and applied a number of sanctions against the Chinese companies and individuals for investments and exports. Several Chinese leaders appeared nervous about the slowing of economic growth in 2022 as Xi is expected to seek an unprecedented third term as President. They advised him that priority should shift to maintaining growth and stability so that the Chinese economy could convey a picture of strength.
Amid deterioration in China’s external environment, the conference identified securing supplies of primary products such as food, soybean, minerals and energy as a priority to prepare for the post-Covid world. “The Chinese people’s rice bowl must be firmly held in their own hands at all times,” Xi emphasised. He underlined the need to establish a strategic materials reserve to secure minimum needs at critical moments and work on a comprehensive conservation strategy. Other four priorities agreed were “common prosperity, capital regulation, defusing major financial risks and carbon neutrality. Concerns were expressed at the high level of unemployment among the migrants, the youth and possible outflow of foreign exchange as the US dollar strengthened following rise in the interest rates.
In view of these reasons, it was agreed that the government would have to give bigger policy support to the economy. China’s central bank had also conveyed dovish signals, cutting the reserve requirement ratio to the banks in a departure from central banks in the developed countries. Though the policymakers remained committed to structural reforms, it was agreed to slow down the regulatory crackdown and provide targeted support to SMEs, first time homebuyers, more funding for technology innovation and green investments.
China’s foreign trade made impressive gains in 2021, reaching $6.05 trillion as it functioned as a supply house to the rest of the Covid-stricken world. Trade with the US soared by 28.7% ($755.6 billion) and India by 43.3% (total $125.66 billion, Indian exports $28.14 billion, imports $97.52 billion). The increased global demand was chiefly responsible for 8.1% growth of China’s economy in 2021.
Chinese leaders are worried that external demand may not sustain as other major economies come out of Covid and start exporting this year. Consumption in China has not moved beyond 55% of the GDP (54.3% in 2020) in recent years due to the saving habits of the Chinese people for expenditure on health, education and old age. The government is, therefore, forced time and again to resort to big investments to drive up the growth rates.
It is now trying to increase investments in research and innovation (its R&D expenditure reached 2.4% of GDP in 2020), adoption of intelligent technologies and digital economy. While these technologies will yield efficiencies and mitigate to some extent the adverse impact of declining workforce, these will not lessen the latter’s adverse impact on lowering consumption. China will, therefore, be forced to accept sub-5% economic growth in the coming years as it rebalances its economy away from non-productive expenditures and starts experiencing the negative effects of population decline.
German economy dodges recession as war, pandemic weigh – Financial Post
BERLIN — The German economy grew slightly in the first quarter from the previous one, data showed, with higher investments offset by the twin impacts of war in Ukraine and COVID-19 that experts predicted would weigh more heavily in the three months to June.
Europe’s largest economy grew an adjusted 0.2% quarter on quarter and 3.8% on the year, the Federal Statistics Office said on Wednesday. A Reuters poll had forecast 0.2% and 3.7%, respectively.
The reading meant that Germany skirted a recession, often defined as two quarters in a row of quarter-on-quarter contraction, after gross domestic product (GDP) fell by 0.3% at the end of 2021.
While household and government spending remained mostly at the same level as in the previous quarter and exports were down at the start of the year, investments grew.
Construction investments, boosted by mild weather, were up 4.6% from the previous quarter, despite price increases, and machinery and equipment investments rose 2.5%.
German business morale rose unexpectedly in May as its economy showed resilience, according to an Ifo institute survey published this week that found no observable signs of a recession.
However, there is no upswing in sight either, and Sebastian Dullien, director of the Macroeconomic Policy Institute (IMK), predicted the effect of the war and pandemic-linked restrictions in China – Germany’s biggest trading partner last year, according to official data – would be much greater in the second quarter.
ING economist Carsten Brzeski said he was sticking with his baseline scenario of a slight GDP contraction in the second quarter after Wednesday’s reading.
“The build-up of inventories and weak consumption in the first quarter, as well as very weak consumer confidence, clearly dampen the optimism that traditional leading indicators are currently conveying,” he said.
A consumer sentiment index by the GfK institute inched up slightly heading into June from an all-time low in May, with household spending burdened by inflation.
The government forecasts economic growth of 2.2% in 2022. (Reporting by Miranda Murray and Rene Wagner; Editing by Paul Carrel and John Stonestreet)
5 reasons why the G20 needs a sustainable blue economy – World Economic Forum
- Ocean-based climate solutions should be a critical part of the G20’s COVID-19 recovery plans.
- “The blue economy” can create jobs, spur economic growth, mitigate the impacts of climate change and help meet the food needs of a growing global population.
- From sustainable fisheries to maritime renewable energies, there are five crucial areas where the G20 would benefit from investing in the ocean.
The G20 has vowed to rebuild the global economy in the aftermath of the COVID-19 pandemic and to fight climate change by investing in sustainable development. Yet one of the most powerful tools available to achieve these goals is largely missing from national economic recovery plans: ocean-based climate solutions.
The ocean has tremendous potential to spur economic growth, create jobs and mitigate some of the most severe climate impacts if we protect it and use its resources sustainably. This is often referred to as “the blue economy”.
For instance, it is estimated the world’s wetlands alone provide $47 trillion worth of ecological services annually, services such as coastal flood defences, carbon sequestration and breeding grounds for commercial fish, and support at least 1 billion jobs. But climate change, habitat destruction and plastic pollution – to name just a few problems – threaten to undermine their ecological integrity and destroy a remarkably effective buffer against some of the most severe climate change impacts.
A similar story is playing out on the ocean’s coral reefs and in our global fisheries. So-called “blue” food (food from the ocean and other aquatic sources) offers immense potential to help meet the food needs of a growing population in a way that is nutritious, sustainable, equitable and affordable. To do so successfully requires a concerted effort from the global community to ensure that fishing is sustainable.
The G20, which comprises 45% of the world’s coastline and 21% of its exclusive economic zones, has a special obligation to protect marine ecosystems and is well-positioned to deploy ocean-based climate solutions as the world continues its post-pandemic recovery.
Creating a blue economy
There are five crucial areas where the G20 would benefit from investments in ocean-based climate action to create a blue economy:
1. Maritime renewable energy sources, such as offshore wind, floating solar arrays and wave and tidal power, hold enormous promise to build energy independence and help countries meet their emissions reduction commitments under the Paris Climate Change Agreement.
2. We must decarbonize global shipping. If this industrial sector were a country, it would be the world’s eighth-largest in terms of carbon emissions. The good news is that emerging technologies can vastly reduce emissions from vessels and port facilities. The international community needs to set new standards to ensure best practices are implemented evenly around the world.
Our ocean covers 70% of the world’s surface and accounts for 80% of the planet’s biodiversity. We can’t have a healthy future without a healthy ocean – but it’s more vulnerable than ever because of climate change and pollution.
Tackling the grave threats to our ocean means working with leaders across sectors, from business to government to academia.
The World Economic Forum, in collaboration with the World Resources Institute, convenes the Friends of Ocean Action, a coalition of leaders working together to protect the seas. From a programme with the Indonesian government to cut plastic waste entering the sea to a global plan to track illegal fishing, the Friends are pushing for new solutions.
Climate change is an inextricable part of the threat to our oceans, with rising temperatures and acidification disrupting fragile ecosystems. The Forum runs a number of initiatives to support the shift to a low-carbon economy, including hosting the Alliance of CEO Climate Leaders, who have cut emissions in their companies by 9%.
Is your organization interested in working with the World Economic Forum? Find out more here.
3. Coastal wetlands and ecosystems – such as salt marshes, seagrass meadows, coral reefs and mangrove forests – need urgent protection in order to maintain their critical environmental services. It is estimated that these ecosystems sequester as much as five times the amount of carbon as terrestrial forests per unit area while shielding coastal populations from increasingly powerful storms and sea-level rise.
4. Investing in sustainable fisheries and, in particular, aquaculture will create well-paid jobs and help promote food security and economic fairness, especially in developing countries.
5. Sustainable and regenerative tourism can form a critical building block in ensuring a lasting economic recovery for coastal nations in a way that supports the ocean and nature – and the countless people who depend on them.
A 2021 report by the High Level Panel for a Sustainable Ocean Economy found that ocean-based climate and nature-based solutions such as these could collectively reduce around 4 billion tonnes of greenhouse gas emissions annually by 2030 and more than 11 billion tonnes by 2050 – equivalent to closing all the world’s coal-fired power plants for a year.
Even modest investments in these solutions to create a sustainable blue economy would go a long way toward achieving UN Sustainable Development Goal 14 (life below water), including gender equity and fair access to the economic benefits of the world’s marine resources.
As this year’s G20 president and host of the group’s next leaders’ summit in November, Indonesia must lead by example, making major investments in marine and coastal ecosystem governance, promoting equal economic access, reducing marine debris, and working to restore and conserve mangrove and other wetlands.
Indonesia, Australia and all other G20 countries must expand these efforts and increase collaboration, to further strengthen and implement a robust and sustainable global blue economy that benefits everyone.
General (Ret.) Luhut Binsar Pandjaitan is Coordinating Minister for Maritime Affairs and Investment for Indonesia, which is this year’s G20 President and host of the group’s 17th Heads of State and Government Summit in November.
Dr Andrew Forrest AO is Founder and Chair of the Minderoo Foundation, Australia, and a Member of Friends of Ocean Action at the World Economic Forum.
License and Republishing
Mexico's Economy Rebounded in First Quarter on US Demand – BNN
(Bloomberg) — Mexico’s economic growth was in line with expectations for the first three months of 2022, a positive sign for a country that narrowly avoided falling into recession late last year.
Gross domestic product grew 1% in the first quarter from the previous three-month period, above the 0.9% preliminary reading released in April, according to final data published by Mexico’s statistics institute Wednesday. Analysts in a Bloomberg survey had estimated 1% quarter-on-quarter growth.
On an annual basis, GDP expanded 1.8% in the January-March period, compared to the 1.6% flash reading reported last month. The manufacturing and services sectors led the recovery, as exports to the US, Mexico’s largest trading partner, continued to be a boon for Latin America’s second-largest economy, especially once past the late January peak of the highly infectious omicron variant.
“It would be desirable for us to grow more, but it’s not bad growth,” said Janneth Quiroz Zamora, vice president of economic research at Monex Casa de Bolsa. “There was an impact of Omicron, but it wasn’t as strong or as pronounced as was expected.”
While doling out aid to farmers, dropping tariffs and kicking in for subsides against rising fuel and energy prices, President Andres Manuel Lopez Obrador has been hesitant to emulate Latin America’s other big economies by taking steps to spur the economy. His government’s attempts to woo companies from abroad with the appeal that they’ll have shorter supply chains and be closer to US consumers has seen limited results so far.
Looking ahead, gathering headwinds to growth abound. Russia’s invasion of Ukraine has already had an alarming impact on food and energy prices in Mexico and exacerbated snarls in disrupted global supply-chains, which impact the country disproportionately as it’s one of the world’s largest exporters. Economic factors in the US also stand to impact Mexico’s performance.
“There was some forward momentum heading into Q2,” said Nikhil Sanghani, a Latin America economist at Capital Economics. “Growth will be sluggish though as activity cools in the US and high inflation and tighter monetary policy weigh on domestic demand.”
Assessing the mounting challenges, the International Monetary Fund in April lowered its 2022 GDP forecast for Mexico to 2%, down from 2.8% in January, and half its forecast of 4% made in October 2021. Economists polled by Citibanamex earlier this month were even less upbeat still, with a 2022 GDP forecast of 1.8%, only marginally better than the 1.73% estimate in the central bank’s most recent survey of economists.
Since the IMF’s last forecast, however, the US Federal Reserve raised its key rate for a second meeting and vowed to keep hiking until officials see “clear and convincing” cooling in inflation, raising the specter of recession in the world’s largest economy and a fall-off in demand for Mexico’s exports.
At the same time, persistent inflation at home has Mexico’s central bank engaged in an aggressive tightening cycle that’s taken the key rate up to 7% from 4% last June, with a possible terminal rate of 10%, by the reckoning of Deputy Governor Jonathan Heath.
Read More: Banxico’s Heath Sees Additional 200-300 Basis Point Rate Hikes
(Updates with analyst comments starting in seventh paragraph.)
©2022 Bloomberg L.P.
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