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Meet the new Chinese economy, same as the old Chinese economy

The moving parts in China’s latest growth figures are very similar to those in place before the pandemic. Firing up the old industrial model helped the country return to 2019 levels of output while the global economy was still depressed, but it also shows off long-festering fragilities. Chinese economic data for May came in slightly weaker than economists expected, but still seem strong by Western standards. It is best to compare the numbers released on Wednesday to their equivalents from 2019 for a clear picture, since those aren’t distorted by ...

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China’s economic growth moderates as consumers stay cautious

China’s economic growth moderated in May as flattering comparisons to the pandemic-hit economic figures early last year tapered off and Chinese consumers continued to keep a close eye on their pocketbooks. Factory output, a key growth pillar in China’s pandemic recovery for more than a year, remained resilient last month, but investment and domestic consumption fell short of expectations despite a boost from a long holiday, weighed down by a fresh wave of Covid-19 infections. China’s industrial production rose 8.8% from a year earlier in May, slowing from April’s 9.8% ...

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PIMCO: June FOMC Meeting – Flexible Expectations Targeting

Amid faster-than-expected growth and progress against COVID-19, U.S. Federal Reserve officials indicated that the next hike in interest rates could come around the middle of 2023 and began talking about the prospect of tapering asset purchases. Released on 16 June, the Federal Open Market Committee’s (FOMC’s) Summary of Economic Projections (SEP) implies that the Fed could hike interest rates twice in 2023 instead of 2024 or later, as it had projected in March. In addition, Fed Chair Jerome Powell told reporters that the committee started to discuss the FOMC’s options ...

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China’s new shadow banking rules signal fresh push to clamp down systemic risk

China’s latest rules on so-called cash wealth management products, or cash WMPs, signal renewed efforts by regulators to reduce risk in the shadow banking system, a major funding source for weak or highly leveraged companies that are unable to secure loans from traditional banks. The rules, announced June 11, have banned banks and wealth management companies from using money raised by cash WMPs to invest in stocks, convertible bonds, asset-backed securities and low-rated corporate bonds, according to the China Banking and Insurance Regulatory Commission, or CBIRC. Those products will also ...

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Earlier Federal Reserve rate hikes will not jack up low projected borrowing costs: White House

The White House on Wednesday said it did not expect the Federal Reserve’s projections for earlier post-pandemic interest rate hikes to significantly alter its own forecasts for longer-term rates and the cost of borrowing to fund planned investments. A White House official welcomed the Fed’s forecast for 7 per cent growth in the US economy given an improved health situation, saying it showed that President Joe Biden’s push to accelerate vaccinations and get people back to work was paying off. Fed officials on Wednesday projected an accelerated timetable for interest ...

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China’s New Home Prices Remained Largely Stable in May

Home-price growth in China remained largely stable in May amid Chinese authorities’ efforts to cool the market and tackle a buildup in developers’ debt. Average new home prices rose 4.47% in May from a year earlier, after a 4.45% increase in April, the National Bureau of Statistics said Thursday. New home prices rose in 62 of 70 cities in May from a year earlier, down from 63 cities in April. On a month-over-month basis, average new home prices rose 0.51% last month, slightly higher than the 0.48% increase in April. ...

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Manufacturing Activity in Philly Fed’s District Holds Up at Solid Expansion Levels in June

Manufacturing activity in the Philadelphia area continued to expand at a robust pace in June, data from a survey released Thursday by the Federal Reserve Bank of Philadelphia showed. The index for current general activity decreased to 30.7 in June from 31.5 in May, broadly matching the 30.0 consensus forecast from economists’ polled by The Wall Street Journal. The survey polls manufacturers in the Third Federal Reserve District–which covers eastern Pennsylvania, southern New Jersey and Delaware–about the direction of change in overall business activity at their plants on a monthly ...

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U.S. leading indicator points to further economic recovery in May

A gauge of future U.S. economic activity increased for the third consecutive month in May, suggesting the economy continued to recover from the recession caused by the novel coronavirus outbreak. The Conference Board on Thursday said its index of leading economic indicators (LEI) rose 1.3% last month to 114.5, topping its previous peak reached in January 2020. That was in line with economists’ expectations, according to a Reuters poll. “Strengths among the leading indicators were widespread, with initial claims for unemployment insurance making the largest positive contribution to the index; ...

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China Jan-May fiscal revenues up 24.2% year on year

China’s fiscal revenues rose 24.2% in January-May from a year earlier, the finance miinstry said on Thursday. China fiscal expenditures rose 3.6% in the first five months from a year earlier, the ministry said. Source: Reuters (Reporting by Judy Hua and Kevin Yao; Editing by Himani Sarkar)

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ECB’s Lane cools expectations for September policy meeting

The European Central Bank (ECB) may not have the data it needs by its Sept. 9 meeting to decide the future of its emergency bond-buying program, ECB Chief Economist Philip Lane said on Thursday, cooling expectations for what is widely seen as a crucial meeting. The ECB last week decided to maintain an elevated level of bond buying, but as the economy rebounds and the pandemic retreats some policymakers are already making the case to start a discussion about rolling back emergency stimulus. “We’re not necessarily going to have every ...

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U.S. won’t back global tax plan with carve-outs for China – Yellen

The United States will not agree to any type of special treatment for China or other countries that would weaken a global minimum tax regime, U.S. Treasury Secretary Janet Yellen said on Wednesday. Yellen said the United States and other countries were continuing their efforts to convince China to support plans endorsed on Sunday by the Group of Seven advanced economies. She said she was hopeful Beijing would decide it was in its interest to support the plans – which calls for a global corporate mininum tax of at least ...

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Goldman moves up forecast for U.S. rate hike but not fully convinced

Goldman Sachs has adjusted its forecast for the timing of the first post-pandemic interest rate hike by the U.S. Federal Reserve to 2023, in line with the latest projection by central bank policymakers. However, Goldman, in a daily briefing late on Wednesday, said chances the Fed will hike rates by the end of 2023 are “only modestly better than 50% because a liftoff could easily be derailed by lower-than-expected inflation or a sharper deceleration in growth as fiscal support fades.” The investment bank said it revised its forecast for an ...

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Vaccines will be the ‘most important’ economic policy this year, IMF chief says

Vaccine policy will top all other economic polices this year as the world tries to recover from the coronavirus crisis, International Monetary Fund chief Kristalina Georgieva said Wednesday at CNBC’s Global Evolve Summit. “Vaccine policy this year, probably next year, is going to be the most important economic policy, may beat even monetary and fiscal policy in terms of significance,” Georgieva told CNBC’s Geoff Cutmore. “A prerequisite to bring the world to a sustained high level of growth everywhere is to vaccinate all people and that’s not yet done. We ...

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Asia has wary welcome for G7’s answer to Belt and Road

A plan by the Group of Seven nations to counter Beijing’s Belt and Road Initiative has been welcomed by countries in China’s immediate orbit of influence but will need to overcome doubts about Western commitment to emerging market projects. The Build Back Better World initiative, or (B3W), was promoted at last week’s G7 summit in the UK but remains light on details and is not expected to become a reality for some years. The push, however, is seen as a challenge by the world’s richest democracies to China’s growing influence ...

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Corporate tax isn’t working – how can we fix it, globally?

“In this world, nothing is certain except death and taxes,” said US Founding Father Benjamin Franklin in a letter to a French friend in 1789. His much-quoted bon mot feels as relevant today as it has ever been – and maybe even more so. That’s because taxation will play a big part in the post-pandemic rebuild of the world economy, and apportioning this tax burden fairly and inclusively will be critical to a successful recovery. Corporate tax in particular has been a thorny topic for some time, as large multinationals ...

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