The Poon Report - News Articles Aug 21
News Summary
Taken from Reuters News Monday, 21 August 2023
The People's Bank of China is expected to cut interest rates on Monday, but it may have to throw caution to the wind and 'go big' if it is to soothe the nervousness and concern around China currently sweeping through financial markets.
But whatever Xi says will likely be more political in nature. The assurances investors want from Chinese officials probably center more on monetary and fiscal policy.
Economists at #GoldmanSachs and #Barclays are among the many who expect the PBOC to lower its one-year loan prime rate by 15 basis points to 3.40%, which would be a new low.
Despite Chinese #policymakers' conservative nature, the skew is surely for a bigger move on Monday, and further cuts and wider easing in the months ahead. The risk here would be to the currency, which is already extremely weak and vulnerable.
#Economists are slashing their Chinese #GDP growth forecasts and many doubt Beijing will meet its 2023 goal of 5.0%. Deflation, slumping trade activity and an imploding property sector are the familiar and increasingly serious risks.
Beijing is taking steps to bolster confidence, but so far these measures seem no more than tinkering around the edges. Chinese blue chip stocks are down 6% in the last two weeks, and financial conditions are the tightest since early December, according to Goldman.
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#Netherlands and #Denmark confirm plans to provide Kyiv with first F-16s
Taken from FT Monday, 21 August 2023
Lengthy pilot training process means fighter jets are unlikely to arrive in time to bolster summer counteroffensive
The Netherlands and Denmark confirmed plans to provide Kyiv with more than 40 multipurpose F-16 fighter jets, Ukrainian president Volodymyr #Zelenskyy said after visiting both countries.
But the first transfers of the American-made jets for which Kyiv has long pleaded are likely to involve a lengthy pilot training process, meaning they will not arrive in time to help Ukraine during a tough summer counteroffensive that has only delivered moderate gains since it began in June.
The announced transfers, approved by Washington on Friday, mark the first time #Ukraine’s western allies will provide Nato-grade aircraft to Kyiv. #Slovakia and #Poland have given Ukraine their fleets of Soviet jets.
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Standing alongside Mark Rutte, the outgoing Dutch prime minister, Zelenskyy said: “We will use these jets to keep Russian terrorists away from Ukrainian cities and villages,” referring to a Saturday Russian ballistic missile strike on a theatre in central Chernihiv, north of Kyiv. Seven people were killed and more than 100 injured.
Zelenskyy in a separate post on social media platform X said his country would receive 42 of the jets being retired by the Netherlands. Rutte said his country had that amount in stock, but he declined to specify exactly how many would be delivered to Kyiv. He said “around 15” were needed for training.
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Taken from FT Monday, 21 August 2023
Leaders from bloc of developing economies will gather this week to debate expansion
China will push the #Brics bloc of emerging markets to become a full-scale rival to the #G7 this week, as leaders from across the developing world gather to debate the forum’s biggest expansion in more than a decade.
#SouthAfrica’s President #CyrilRamaphosa has invited more than 60 heads of state and government to a summit in Johannesburg from Wednesday when several countries could be invited to join the bloc of Brazil, Russia, India, China and South Africa, said several officials familiar with talks.
But in the run-up to the summit New Delhi has clashed with Beijing over the expansion. Tensions are mounting over whether the Brics should be a non-aligned club for the economic interests of developing countries, or a political force that openly challenges the west, said people briefed on India and China’s positions. South African officials said 23 countries are interested in joining.
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Naledi Pandor, South Africa’s foreign minister, said this month it was “extremely wrong” to see a potential Brics expansion as an anti-western move. However, western capitals are likely to regard the possible additions of Iran, Belarus and Venezuela as a move to embrace allies of #Russia and #China.
#Argentina, #SaudiArabia and #Indonesia are vying to be the first new members since South Africa was invited into the original group of #Brazil, #Russia, #India and #China in 2010.
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#XiJinping will travel to Johannesburg on Monday for the summit and other discussions with African leaders, China’s foreign ministry said, marking a rare trip abroad for the Chinese president this year. Xi’s only other international travel so far in 2023 was to Russia in March.
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Taken from FT Monday, 21 August 2023
Deputy chancellor urges stricter controls on overseas groups’ operations in critical sectors such as semiconductors and AI
Germany’s deputy chancellor has set out proposals to increase scrutiny of Chinese investments as Europe’s largest economy grapples with increased geopolitical risks surrounding its biggest trading partner.
The measures put forward by #RobertHabeck, a Green who also serves as economy minister, would toughen restrictions on foreign direct investment in Germany in critical sectors such as semiconductors and artificial intelligence, and come just weeks after Berlin warned that Beijing was becoming “more repressive internally and more aggressive externally”.
The proposals, confirmed by a government official, come at a time of intense debate in #Europe and the US about western economic relations with Beijing but risk stoking fresh tensions within chancellor #OlafScholz’s bickering coalition as well as with business groups.
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The proposed legislation is being circulated across government departments for consultation and follows the publication last month of Berlin’s long-awaited China strategy, which said that the government was assessing the effectiveness of existing investment screening as part of a broader evaluation of ties.
Germany’s three ruling parties are already at loggerheads over a series of issues, from child support payments to industrial policy.
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The new measures do not focus on outbound investment in China’s technology industries, which was recently subjected to new rules by the White House. Germany is part of EU discussions about how to respond to those measures.
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But Habeck’s proposals would aim to simplify and consolidate an array of existing rules.
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Habeck is also seeking to crack down on what Berlin sees as China’s efforts to circumvent existing rules, such as the acquisition of intellectual property under licensing agreements, by expanding the definition of what types of investments are subject to screening.
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Eight years of hurt: #Canada’s swelling disillusionment with #JustinTrudeau
Taken from The Telegraph Monday, 21 August 2023
Canadian prime minister swept to power on promises of a golden era of reform, but he has failed to deliver on so many counts
Canadians have finally fallen out of love with Trudeau. The shine has come off a career that at times seemed to defy political gravity. Instead of Trudeaumania, the nation is suffering from Trudeau fatigue.
The Liberal prime minister’s approval ratings have slumped below 30pc among voters aged 18 to 34, according to national polling group the Angus Reid Institute. This is the group whose enthusiasm helped get Trudeau elected in 2015, re-elected in 2019 and again – just about – in 2021.
Voting intentions tell the same story, with a widening gap between the ruling Liberals and the Conservative opposition. Disillusionment has been fuelled by economic factors, including soaring interest rates and a housing crisis.
From a British perspective, Canada may not seem to be doing too badly. Inflation is running at less than half the UK level and there are no major public sector strikes, NHS waiting lists or small boats. But Canada has its own problems.
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America’s #Tech Giants Rush to Comply With New Curbs in Europe
Taken from WSJ Monday, 21 August 2023
#Google, #Meta Platforms and others are set to face regulations that resemble the detail and sweep of those imposed on banks
The hammer is about to come down on some of the world’s biggest tech companies.
Meta Platforms, #Apple, Alphabet’s Google and other large—and largely American—tech companies will by next week start facing the first of new European Union tech rules set to come into effect over coming months, marking the largest expansion in digital regulation ever in the West.
The new EU laws aim to push big tech companies to better police online content and to open them up to more competition—with regular oversight from regulators empowered to issue fines.
The hundreds of provisions resemble the detail and sweep of those the U.S. imposed on the financial sector nearly a century ago and again more recently.
While the new laws apply only in Europe, their effect will ripple globally. Brussels’ regulations are often templates for others, which typically leads tech platforms to implement some changes worldwide. And the breadth of the rules is feeding a shift toward a compliance culture within some companies that originated in the techno-libertarian hothouse of Silicon Valley.
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Some of the impact will hit right away, changing how users scroll, search and shop online. Other changes could take years to sink in, as markets reshape around broader edicts for companies to identify and reduce systemic risks their services pose to fields from the electoral process to users’ mental well-being.
Google is working on a choice screen for smartphone internet browsers, a requirement that the EU hopes will open up competition against the company’s widely used Chrome browser. Apple is developing a way for users to install on their iPhones apps from outside its App Store, to comply with a provision aimed at prying open its mobile business model.
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Taken from Nikkei Asian Review Monday, 21 August 2023
Vacancies are rising in China's most exclusive office buildings as businesses look to reduce rental expenses during the country's disappointing economic recovery.
While the cost-cutting by companies represent a sensible response to tougher times, it threatens to make things worse in China just as growing fears about the property sector have prompted global banks to scale back their forecasts for growth in Asia's largest economy.
"Activity began to cool down again in the second quarter," Soho China, a Hong Kong-listed owner of office buildings in Beijing and Shanghai, said on Friday as it reported at 93% fall in first half profits to 13.61 million yuan ($1.89 million). "Rents and occupancy rates will be under continuous pressure."
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Beijing experienced its third consecutive quarter of rising Grade A office vacancies, leaving 13,461 sq. meters unoccupied at the end of June, the highest figure since 2015, according to #Savills.
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#CBRE estimated that the value of office properties in China's tier-1 cities has dropped between 15% and 20% since 2018.
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Among leading Chinese cities, #Shenzhen and #Guangzhou, hubs for high-tech and manufacturing companies, were doing relatively better, said James MacDonald, Shanghai-based head of China research for Savills. Landlords in those places had locked in more leases in advance, he said.
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#China taps public funds to ease risks from small, midsize banks
Taken from Nikkei Asian Review Monday, 21 August 2023
Local governments increase special bond issuances as bad loans squeeze lenders
Chinese provinces and other local governments are escalating fundraising efforts to support small and midsize banks, hoping to curb risks to the financial system as bad loans become a serious problem.
Local governments issued 147.3 billion yuan ($20.3 billion) in special bonds meant to finance injections into banks during the January-July period, Chinese media report. The bonds were issued by 13 provinces, autonomous regions and prefecture-level cities, with the money going to 125 banks.
The seven-month figure is 130% higher than the full-year total for 2022, which puts the total bond issuance for all of 2023 on track to surpass the record of 159.4 billion yuan set in 2021.
These bonds are sold to domestic commercial banks and feature a premium on the yield on 10-year government bonds, which now stands in the mid-2% range. Since they are issued by local governments themselves, the yields are said to be lower than bonds issued by local government financing vehicles (LGFVs).
Special bonds originally were issued mainly to finance infrastructure construction, but China's State Council cabinet in 2020 allowed their use for rescuing small and midsize banks.
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Signs of #Chinese President #XiJinping delegating more to hand-picked deputies at start of third term
Taken from SCMP Monday, 21 August 2023
Chinese leader Xi Jinping appears to be delegating more responsibilities to his chosen deputies, with fewer reported appearances at top-level meetings in the first stage of his unprecedented third term.
While Chinese politics is opaque, meetings are the main platform for the leader to voice specific goals and policy points, reflecting how deeply involved he is in those areas.
According to publicly available information, Xi had chaired 38 domestic meetings between the end of the Communist Party’s 20th national congress in October – the start of his third five-year term as the party’s leader – and the annual summer break that ended last week.
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#Yuan slump turns #HongKong into haven as #mainland #Chinese rush for higher bank rates, insurance policies and US dollar
Taken from SCMP Monday, 21 August 2023
The Chinese yuan has weakened this year to near the lowest level since October, and many mainland citizens are rushing to Hong Kong for safety in higher-yielding bank deposits, insurance and investment products and the US currency.
Shi from Beijing was at the Bank of China (Hong Kong) branch in the city’s tourist hotspot, Tsim Sha Tsui, at 7.30am on Friday to open a bank account. He had decided to queue there as online appointments in other branches were already fully booked. As the 9am opening time approached, more than 30 people had made a beeline for the door.
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In the same queue, Chen from Suzhou in eastern Jiangsu province said he was looking to buy an insurance policy to diversify his investments. “You should not put all assets in one basket, that is why I came here.”
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Commercial banks in Hong Kong like HSBC are dangling lucrative incentives to attract more customer deposits, given that the cost of borrowing between lenders in the interbank market has surged. Others have offered Sunday banking to accommodate mainland customers.
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Sales of new life insurance policies in Hong Kong to mainland Chinese visitors jumped 28-fold to HK$9.61 billion (US$1.23 billion) in the first quarter from a year earlier, according to data published by the Insurance Authority.
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Business Council of #Canada urges PM, ministers to better position economy ahead of cabinet retreat
Taken from Globe and Mail Monday, 21 August 2023
Business groups say the federal government should prioritize getting Ottawa’s fiscal house in order and implementing tax incentives aimed at ensuring competitiveness with the United States’ clean-energy programs at this week’s cabinet retreat in Prince Edward Island.
Ahead of the three-day gathering in Charlottetown, the Business Council of Canada sent Prime Minister Justin Trudeau, Finance Minister Chrystia Freeland and Treasury Board President Anita Anand a letter laying out key steps the organization believes the government needs to take to better position the economy amid concerns of a downturn.
Failing to address the group’s priorities “invites greater uncertainty and risks exposing Canadians to a further erosion of their living standards,” writes the council’s CEO and president, Goldy Hyder, in the letter obtained by The Globe and Mail.
The group, which represents Canada’s largest companies, argues that the federal government needs to set a hard target on the level of debt it’s willing to take on, citing rising interest rates. Such a target is commonly called a fiscal anchor. The council wants the government to commit to limiting debt servicing costs to 10 per cent of government revenue, as recommended by former Bank of Canada governor David Dodge.
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Asking prices for UK homes suffer sharpest August drop since 2018
Taken from FT Monday, 21 August 2023
Glimmer of hope for prospective buyers along with easing mortgage rates and rising wages
Asking prices for UK homes recorded their sharpest August drop since 2018, in another sign that the property market is slowing after four consecutive months of house price falls.
New sellers listed their homes for ￡364,895 on average in the five weeks to August 12, ￡7,012 less than in the previous month, representing the biggest fall at this time of the year since the Covid-19 pandemic, according to data from property portal Rightmove.
The drop in asking prices comes at a time of record wage growth and easing mortgage rates, suggesting tentative signs of improved affordability for UK homebuyers who have been hit with high borrowing costs after successive interest rate rises by the Bank of England.
The average house price fell 0.3 per cent in July, according to lender Halifax, and most analysts expect house prices to continue to fall throughout the year.
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Don’t say hostile state, #ForeignOffice tells staff
Taken from The Times Monday, 21 August 2023
Effective ban in government papers is seen as a sop to China
The UK Foreign Office has told government officials not to use the term “hostile state” in case it upsets China.
Use of the phrase has been effectively banned in government documents and routine internal communications on email and WhatsApp between civil servants, ministers and advisers.
A government official in another department had a recent submission knocked back by the Foreign Office and asked for an explanation. The Foreign Office told the official: “States aren’t inherently hostile themselves, they just do hostile things.”
The change in language is understood to be part of an effort to improve diplomatic relations with China. However, it has also meant that the government no longer refers to Russia, North Korea or Iran as “hostile states”.
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Officials have described the change as “ludicrous” as it weakened Britain’s criticism of China, Russia and Iran. One described the stance as “extraordinary” and said it had caused “a lot of bemusement across government”. A Whitehall source said: “Does anyone think Russia isn’t a hostile state?”
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#RishiSunak wins no credit from voters for lower inflation
Taken from The Times Monday, 21 August 2023
Voters do not think Rishi Sunak is responsible for reducing inflation even though he said last week that his plan was behind the rate falling to its lowest level since Russia invaded Ukraine.
A #YouGov poll for #TheTimes found that only 8 per cent of voters credited government policy for the fall in inflation, which dropped to 6.8 per cent last month, according to figures from the Office for National Statistics last week.
More people, 17 per cent, believe the #BankofEngland is responsible despite criticism of its response to high inflation. In June Jeremy Hunt, the chancellor, blamed flaws in the Bank’s economic forecasting after it failed to get a grip on runaway inflation.
The polling suggests that the most commonly believed reason for the fall in inflation is external factors such as global oil and gas prices. Thirty-eight per cent cited external factors, but 31 per cent said they did not know what was responsible for the easing of price rises.
Even Conservative voters do not think Sunak or his government is responsible, with only 12 per cent of those who voted Tory in 2019 citing government policy as responsible for the drop.
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U.S. insurance broker Marsh to buy Australia's Honan
Taken from Reuters News Monday, 21 August 2023
U.S. insurance broker Marsh, a unit of Marsh & McLennan, said on Sunday that it would acquire Australia's Honan Insurance Group, it said in a statement on Sunday.
Marsh didn't disclose terms of the acquisition. However, Bloomberg News which first reported about the deal said that the transaction could value Honan around A$700 million ($448.70 million).
Marsh said that on completion, Andrew Fluitsma, chief executive officer (CEO) of Honan, will report to Nick Harris, Marsh's CEO of Pacific.
“The addition of Honan’s highly complementary capabilities, particularly in corporate risk and strata insurance, will enable Marsh to deepen the specialist expertise we provide to clients across Australia and New Zealand," Nick Harris, Marsh's CEO, Pacific said in a statement.