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China’s economic growth is expected to slip this year to 5.6 percent, down from 6.1 percent last year, according to a conservative forecast from Oxford Economics that is based on the impact of the virus so far. That would, in turn, reduce global economic growth for the year by 0.2 percent, to an annual rate of 2.3 percent — the slowest pace since the global financial crisis a decade ago.
Returning from a long holiday for the first time since the coronavirus’s threat became clear, Chinese investors sent shares in China down about 8 percent on Monday. Stock markets around the world have plunged in recent days as the sense takes hold that a public health crisis could morph into an economic shock.
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The impact on China’s economy will be considerable. Quarantine and internal border controls have been imposed, and local officials are now overcompensating in response to criticism from Beijing that they were slow to respond to the initial outbreak. Businesses and schools are likely to remain closed for weeks. Economic activity in many Chinese cities is sharply reduced.
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Companies in other countries dependent on Chinese supply chains are already facing a slowdown: Japan, Australia, New Zealand, Singapore, Italy and the U.S. have all imposed travel restrictions. Asian countries will see a sharp reduction in the number of arriving Chinese tourists, an important source of growth.
Oil prices have fallen 20% over the past month on expectations of lower demand from China and reduced sales of jet fuel as flights are grounded. Press reports suggest that China’s daily crude-oil consumption has fallen by 20%, an amount equal to consumption in Britain and Italy combined. OPEC and Russian officials are now debating whether to cut oil production to buoy prices. Prices for metals and other construction materials have fallen.
This is also a hit to the “Phase 1” trade deal the U.S. and China concluded last month. China was already unlikely to purchase the additional $200 billion of U.S. goods over two years that it committed to buying. The slowdown will make that figure hard to achieve.
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We’re moving closer to the day when it is China’s increasingly hefty economy, not America’s, that’s most to blame for a global recession.
OPEC has dramatically lowered its forecast for oil demand growth this year, citing China's coronavirus outbreak as the "major factor" behind its decision.
In a closely-watched monthly report published Wednesday, the Middle East-dominated producer group downwardly revised its outlook for global oil demand growth to 0.99 million barrels per day (bpd) in 2020. That's down by 0.23 million bpd from the previous month's estimate.
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The coronavirus outbreak in China has generated economic waves that are rocking global commodities markets and disrupting the supply networks that act as the backbone of the global economy.
“We’re seeing a rippling out,” said Ed Morse, global head of commodities research at Citigroup in New York. “And we don’t see it stopping.”
Prices for key industrial raw materials such as copper, iron ore, nickel, aluminum and liquid natural gas have plummeted since the virus emerged. Currencies of countries that export these goods at high rates, including Brazil, South Africa and Australia, are near their lowest levels in recent memory. And manufacturers, mining companies and commodity producers of all stripes are weighing whether they will be forced to cut back on production for fear of adding to a growing inventory glut.
The woes of the commodities markets — arguably the worst-performing asset in financial markets this year — reflect the basic reality that China’s industry-heavy economy is the most important consumer of raw materials on earth.
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Commodities markets have tumbled as those factories idled. Iron ore is down more than 10 percent this year. Copper is down about 8 percent, as is nickel, a key ingredient for stainless steel. Zinc and aluminum are both down more than 5 percent in 2020.
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One of China’s largest importers of liquefied natural gas, China National Offshore Oil Corporation, or CNOOC, was one of the entities to invoke a “force majeure” clause, according to multiple news reports. Asian gas prices tumbled in response; benchmark prices for North Asian liquid natural gas are down more than 30 percent in 2020.
Copper prices have also been tested as China’s construction and automotive industries have stalled. BHP said it was monitoring the situation and was “working closely with our copper customers” as they returned from the holiday.
For some, the decline in copper is an ominous sign: Copper has long been considered an unofficial leading indicator of the direction of the global economy, because of its close connection to the industrial sector.
On Tuesday, the Federal Reserve chair, Jerome H. Powell, told House Financial Services Committee members that the central bank was “closely monitoring the emergence of the coronavirus, which could lead to disruptions in China that spill over to the rest of the global economy.”
Whether the downturn is a blip or a serious shock is as much a question of epidemiology as economics.
If the spread of the virus starts to slow — as many expect it will — commodities will most likely rebound as production returns to normal and inventories that have been built up over the past few weeks gradually shrink.
“A lot of what’s happened in some of these commodity prices is more speculation that it gets worse before it gets better,” said John LaForge, the head of real asset strategy at Wells Fargo Investment Institute. “My guess is that commodity prices bounce pretty quickly.”
Others are not so sure.
Mr. Morse, at Citigroup, said several key markets — like crude oil — had already been showing softness, suggesting that the global economy was weak even before the virus hit. That could complicate any quick rebound for commodities prices.
“The market has been thinking that there’s going to be a V-shaped recovery at some point,” he said. “And we don’t think that’s in the cards.”
Chinese President Xi Jinping warned top officials last week that efforts to contain the new coronavirus had gone too far, threatening the country’s economy, sources told Reuters, days before Beijing rolled out measures to soften the blow.
With growth at its slowest in nearly three decades, China’s leaders seem eager to strike a balance between protecting an already-slowing economy and stamping out an epidemic that has killed more than 1,000 people and infected more than 40,000.
After reviewing reports on the outbreak from the National Development and Reform Commission (NDRC) and other economic departments, Xi told local officials during a Feb 3 meeting of the Politburo’s Standing Committee that some of the actions taken to contain the virus are harming the economy, said two people familiar with the meeting, who declined to be named because of the sensitivity of the matter.
He urged them to refrain from “more restrictive measures”, the two people said.
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... there is a very high probability that China's GDP in Q1 will not only flatline, but crater deep in the red for one simple reason: there is no economic activity taking place whatsoever. ...
... back in November, we reported that as part of a stress test conducted by China's central bank in the first half of 2019, 30 medium- and large-sized banks were tested; In the base-case scenario, assuming GDP growth dropped to 5.3% - nine out of 30 major banks failed and saw their capital adequacy ratio drop to 13.47% from 14.43%. In the worst-case scenario, assuming GDP growth dropped to 4.15%, some 2% below the latest official GDP print, more than half of China's banks, or 17 out of the 30 major banks failed the test. ...
... with GDP set to print negative if Goldman is right (with risk clearly to the downside as China's economy remains completely paralyzed), every single Chinese bank is set to fail a "hypothetical" stress test, and the immediate result is an exponential surge in bad debt. The result, as we discussed in detail last week, is that the bad loan ratio at the nation's 30 biggest banks would soar at least five-fold, and potentially far, far more, flooding the country with trillions in non-performing loans, and unleashing a tsunami of bank defaults.
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China's central bank said on Saturday that the country's lenders will tolerate higher levels of bad loans, part of efforts to support companies hit by the coronavirus epidemic.
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"Corporate debt defaults jumped in 2019 and another spike is likely this year," Enodo Economics said in a research note emailed to Al Jazeera.
"Smaller banks have been stumbling in quick succession since May, with one failed bank, two bailouts and a number of localised bank runs," it added. "Beijing knows it needs to get to grips with its debt problems, and 2020 was shaping up to be a year of decisive bank recapitalisation as well as sector consolidation. Now, the impact of the Wuhan coronavirus on the economy looks set to make China's debt problems worse."
Research firm S&P Global said in a report in June 2019 that rural Chinese banks face a particularly large problem of bad debts, known as non-performing loans.
"China's rural commercial banks, whose asset quality is the poorest among the nation's lenders, could be sitting on even more bad loans amid a slowing economy and potentially tighter rules on debt classification," S&P said.
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A comparison of the latest forecasts from the world’s three big oil agencies — the International Energy Agency, the U.S. Energy Information Administration and the Organization of Petroleum Exporting Countries — highlights the huge uncertainty that exists over the virus’s repercussions for oil demand. As may be expected for a body representing oil producers, OPEC sees the impact as minimal, having just cut its first-quarter forecast for global oil demand by only 400,000 barrels a day. That looks like wishful thinking. The IEA’s revision is three times as big, and if its forecast bears out, it’s deep enough to tip the world into its first year-on-year drop in demand in more than a decade.
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A growing number of China’s private companies have cut wages, delayed paychecks or stopped paying staff completely, saying that the economic toll of the coronavirus has left them unable to cover their labor costs.
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Across China, companies are telling workers that there’s no money for them -- or that they shouldn’t have to pay full salaries to quarantined employees who don’t come to work. It’s too soon to say how many people have lost wages as a result of the outbreak, but in a survey of more than 9,500 workers by Chinese recruitment website Zhaopin, more than one-third said they were aware it was a possibility.
The salary freezes are further evidence of the economic hit to China’s volatile private sector -- the fastest growing part of the world’s second-biggest economy -- and among small firms especially. It also suggests the stress will extend beyond the health risks to the financial pain that comes with job cuts and salary instability. Unsurprisingly, hiring has all but ground to a halt: Zhaopin estimates the number of job resumes submitted in the first week after the January outbreak was down 83% from a year earlier.“The coronavirus may hit Chinese consumption harder than SARS 17 years ago,” said Chang Shu, Chief Asia Economist for Bloomberg Intelligence. “And SARS walloped consumption.”
By law, companies have to comply with a full pay cycle in February before cutting wages to the minimum, said Edgar Choi, author of “Commercial Law in a Minute” and host of a legal-advice account on WeChat. For companies that aren’t making enough to cover payroll, it’s permissible to delay salaries, as long as staff get the money they’re owed eventually. Choi said he’s heard from thousands of foreign workers who say their payments have been cut in half this month or halted althogether. That, he said, is illegal. “A lot of these employees are foreigners, they don’t know Chinese,” he said. “Whatever their boss tells them, that’s it. It’s easy for them to get bullied. ”NIO Inc., an electric car-maker based in Shanghai, recently delayed paychecks by a week. The company’s chairman William Li also encouraged employees to accept restricted stock units in lieu of a cash bonus.
At Foxconn Technology Group’s Shenzhen factory, workers returning from the Lunar New Year break are quarantined in the dorms before they can return to work. They’re getting paid, but only about one-third of what they’d earn if they were working.Without full, regular paychecks and few places to spend them these days anyway, Chinese consumers could cut spending in some categories to zero, said Bloomberg’s Shu. And it may not bounce back: For example, she said, if you skip your daily latte for two months, you’re not likely to make up for those missed drinks later in the year.
With limited reserves and less by way of remote technologies, the smaller companies that underpin China’s vast private sector are particularly vulnerable. Among broader efforts to help firms stay afloat, policy makers have called on state-run banks to make loans at cheaper rates to small businesses in particular.
In the case of Pei Binfeng, co-founder of the Hangzhou coding and robotics academy, the outbreak forced them to suspend all in-person classes for students in kindergarten through grade 12. With the loss of revenue, the company will withhold 50% of salary for key executives and 30% for other employees until business resumes. “What we teach isn’t a must-have for a lot of parents, so expenses like this are usually the first to go when things get tough,” said Pei.
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(Natural News) What follows is one of the most important interviews of the year. Biological warfare expert Prof. Frances Boyle appeared as a guest with Alex Jones on the Alex Jones Show, sharing his “smoking gun” findings about the coronavirus being engineered as a weapon that’s designed, “for efficient spreading in the human population,” according to one of the science papers he references.
We confirmed Prof. Boyle’s findings by purchasing the full PDF of that paper and reviewing it in a detailed article we posted yesterday at this link.
That paper describes the CoVid-19 novel coronavirus as possessing unique “gain-of-function” properties that make it the perfect bioweapon, while confirming these new properties were from artificial origins, not natural viral evolution. (In other words, it was engineered.)
Below, we print the full transcript of the Frances Boyle / Alex Jones interview, along with the video of the full exchange below, via Brighteon.com. (The full show is also posted on Banned.video)
Retail sales of passenger cars in China crumbled 92 percent on an annual basis in the first 16 days of February, according to China Passenger Car Association (CPCA), as the coronavirus outbreak slammed the brakes on businesses across the country.
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Hong Kong’s embattled government on Wednesday offered cash handouts, tax breaks and a raft of subsidies in a HK$120 billion package aimed at easing the financial burden on citizens and injecting new life into an economy ravaged by months of social unrest and now a spreading coronavirus crisis.
Unveiling the most difficult and politically charged spending blueprint of his career, Financial Secretary Paul Chan Mo-po announced an eye-catching, one-off payment of HK$10,000 to around 7 million adult permanent residents, as well as a much-needed lifeline to small and medium-sized enterprises.
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Tanker charter rates have plunged more than 80% as the coronavirus outbreak slams the brakes on major economies, costing the sector hundreds of millions of dollars in lost business, a senior shipping industry official said.
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Rising Chinese pollution levels measured from space are showing a gradual but uneven industrial pickup after the economic slowdown caused by the nation’s fight to contain the deadly novel coronavirus.
Though the measure of nitrogen dioxide in China’s atmosphere has risen nearly 50% from Feb. 17, it’s still roughly 20% below the equivalent period last year, according an analysis from the Helsinki-based Centre for Research on Energy and Clean Air, which used satellite data from NASA.
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China’s central bank said on Wednesday that the property sector will not be used as a means of short-term stimulus to jumpstart the economy, adding that financing policies for the sector will be consistent and stable.
A prudent monetary policy will be more flexible while liquidity will be kept reasonably ample, the People’s Bank of China (PBOC) said in a statement summarizing remarks from a meeting on Tuesday with the finance ministry and the banking and insurance regulator.
Funding support to medium-sized and small firms would be stepped up and financing costs would be lowered, the PBOC said.
The coronavirus epidemic is accelerating a shakeout in China’s property sector as a cash crunch forces distressed developers to throw in the towel.
With lockdowns across the world’s most-populous nation entering their third month, smaller home builders are being pushed to the brink because they can’t get enough money from pre-sales of apartments to cover their costs. In the first two months of this year, around 105 real estate firms issued bankruptcy filing statements, after almost 500 collapses in 2019, data compiled by Bloomberg show.
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According to S&P, new home sales in China will register their first drop in 12 years this year, with transactions down as much as 15%. That’s if the virus reaches a turning point this month. If the nadir isn’t until April, sales could be down around 20%, akin to the hit taken during the 2008 global financial crisis.
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Gao’s firm, Shandong Pangu Industrial Co., makes tools like hammers and axes, 60% of which go to the European market. As the virus ravages the continent from Spain to Italy, the shutdowns there are cutting off orders to Chinese factories just as they were beginning to get back on their feet. It’s a story playing out across the country.
“It’s a complete, dramatic turnaround,” lamented Gao, estimating sales in April to May will plunge as much as 40% from last year. “Last month, it was our customers who chased after us checking if we could still deliver goods as planned. Now it’s become us chasing after them asking if we should still deliver products as they ordered.”
This emerging pattern poses a grave risk to the chances the world’s second-largest economy can repair the damage from the closures in February to curb the virus. ...
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Bass said the economic fallout in China could be even more severe, laying bare what he sees as a desperate shortage of U.S. dollars in the Chinese economy at a time when the Chinese Communist Party is beating back a political crisis in Hong Kong, a key conduit of foreign capital.
Bass argued that the Chinese economy has evolved in several fundamental ways over the past decade as wages for its workers have risen, making Chinese exporters less competitive relative to rivals in countries like Vietnam and Mexico. Meanwhile fears about the health of the Chinese economy, which has required ever higher debt loads to fuel ever lower levels of economic growth, have led wealthy Chinese citizens to try to move money abroad to jurisdictions that protect against government expropriation.
This behavior peaked in 2016, when a worrying decline in China’s foreign-exchange reserves led the government to impose strict controls on moving funds out of the economy. At the same time, Chinese companies have taken on increasing levels of dollar-denominated debt to enable their purchases of foreign commodities like oil and agricultural products.
“They are starting to look like a traditional emerging market, with a closed capital account and huge dollar-based borrowing,” Bass said. China’s four largest banks “in the last two years switched from huge dollar-based asset surpluses to now they have dollar-based deficits across the board.”
While the coronavirus epidemic will cause untold damage to the global economy, Bass hopes that it will help focus Americans’ minds on the unsustainability of the U.S.-China economic relationship, as American efforts to combat the disease have been hampered by an overreliance on Chinese and other foreign sources for key medical equipment and pharmaceuticals.
He said U.S. government should aid companies in efforts to bring critical supply chains back within U.S. borders and should continue to discourage American investment in Chinese firms, as the Trump Administration recently did when it restricted a federal pension fund from investing in Chinese securities.
Bass said the U.S. should go further and bar Chinese companies from raising money from the U.S., unless it submits to U.S. securities laws, including thorough audits that Chinese firms have avoided since U.S. and Chinese regulators signed a memorandum of understanding in 2013 exempting Chinese firms from those procedures.
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The U.S. and other Western democracies may be forced to confront China more forcefully as a political crisis in Hong Kong continues to brew. ...
Stanley Black & Decker Announces Opening of New CRAFTSMAN Plant in Fort Worth,
Texas
- New 425,000-square-foot facility is expected to be completed in late 2020,
with ground breaking in fall 2019
- The plant will manufacture a range of CRAFTSMAN mechanics tools and
incorporate the latest manufacturing technologies to optimize productivity and
sustainability
- The company will employ approximately 500 full-time employees to support the
facility
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The U.S. and other Western democracies may be forced to confront China more forcefully as a political crisis in Hong Kong continues to brew. ...
The last time they faced a proposal that would have curbed their autonomy from mainland China, Hong Kong residents flooded the city’s streets, stormed its legislature and clashed with police amid flames and clouds of tear gas. They stared down local leaders, who they said were doing the bidding of Beijing, and ultimately the government relented.
But Hong Kong’s pro-democracy opposition movement is now confronting the prospect of Beijing imposing its will regardless of what they think.
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Chinese leaders, enraged by months of protests last year, moved on Thursday night to take on the protesters directly, rather than maneuvering through its handpicked Hong Kong government. Chinese officials said the country’s legislative body would impose national security laws on Hong Kong, a semi-independent territory, after nearly two decades of waiting for Hong Kong’s government to enact them itself.
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Some U.S. senators have called for sanctions on Chinese officials who carry out the security laws, and the Trump administration has warned Beijing against violating Hong Kong’s autonomy. A spokeswoman for the European Union also said officials there were “following very closely” developments related to the national security laws.
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The dramatic moves in Chinese stocks over the past week are inviting comparisons with a bubble that burst spectacularly five years ago.
In many ways, the pace of gains matches the market’s melt-up that started in the final weeks of 2014. ... Shares of brokerages surged as daily turnover exceeded 1.5 trillion yuan ($213 billion) for the first time since 2015, indicating increasing participation from retail investors. ...
Low interest rates and the first losses ever for some popular wealth-management products are driving China’s savers to stocks. The advance is also being aided by an enthusiastic chorus from the nation’s influential state media. A front-page editorial in the China Securities Journal on Monday said that fostering a “healthy” bull market after the pandemic is now more important to the economy than ever. Chinese social media exploded with searches for the term “open a stock account,” with bullish sentiment also boosting the yuan.
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To quantitative ease, or not, is the question. Premier Li Keqiang answered it. In fact, he made China's fiscal and monetary policy for the year ahead perfectly clear. Li said China would "Firmly strengthen anti-monopoly and prevent illogical capital expansion."
Following the closing ceremony of the 2021 two sessions of the National People's Congress and Chinese People's Political Consultative Conference, Premier Li met with both domestic and international press to answer questions and set a tone for the year ahead.
When asked about fiscal and monetary policy he drew the line. China will not be following the United States' model of quantitative easing or the purchase back of debt as a guarantee for issuing more liquidity into the market.
On the contrary, Li said, "Last year China did not use quantitative easing and this year there is no need to make any sharp turn. So China will adopt and draw upon the experience of last year's macro-economic control and continue to keep the policy consistent and sustainable."
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China’s cabinet has appointed Cai Fang and Wang Yiming as new central bank monetary policy committee members, the country’s state council said in a statement on Saturday.
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It appears to be just a matter of time before China’s central bank pulls out a controversial monetary policy tool that it has not used in more than two decades, following newly publicised instructions from President Xi Jinping.
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Instructing the central bank to buy more treasury bonds is a rare and unexpected move in China. Sources say this last occurred around the start of the 21st century. After that, when the central bank sought to inject liquidity into the market, it started relying on relending tools and cuts to the reserve requirement ratio – reducing the amount of cash that commercial banks must hold as reserves and releasing large sums of money into the market as long-term liquidity.
In the five months since Xi’s instruction, public records indicate that the PBOC has not yet started buying treasury bonds in open market operations.
The practice itself is considered controversial because it fans the flames of concern over fiscal monetisation and the so-called modern monetary theory (MMT) that paved the way for Washington’s unprecedented quantitative-easing measures taken since the outbreak of the pandemic.
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Instructing the central bank to buy more treasury bonds is a rare and unexpected move in China.
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