Aurelia Butler

BEIJING (Reuters) – Chinese Commerce Minister Wang Wentao urged Japan to halt semiconductor export controls, calling it a “wrongdoing” that “seriously violated” international economic and trade rules, a statement from his ministry said on Monday.China’s latest condemnation of the export restrictions was made during Wang’s talks with Japanese Trade Minister Yasutoshi Nishimura on May 26 at the Asia-Pacific Economic Cooperation (APEC) conference in Detroit.Japan, along with the Netherlands, in January agreed to match U.S. export controls that will limit the sale of some chipmaking tools to China, and has placed restrictions on the export of 23 types of semiconductor manufacturing equipment to its neighbour. The U.S. imposed the restrictions last year aiming to slow China’s work on supercomputers that can be used to develop nuclear weapons systems and artificial intelligence systems.Japan has not singled out China in its statements about the export controls, saying only that it is fulfilling its duty to contribute to international peace and stability.Monday’s statement from the Chinese commerce ministry also said, however, that China “is willing to work with Japan to promote practical cooperation in key economic and trade areas.”On Friday, Nishimura met with U.S. Secretary of Commerce Gina Raimondo and the two agreed to deepen cooperation in the research and development of advanced chips and technologies such as quantum computing and artificial intelligence.Wang also met Raimondo and U.S. Trade Representative Katherine Tai while at the summit, criticising U.S. economic and trade policies towards China, including the U.S.-led Indo-Pacific Economic Framework that excludes China and aims to provide a U.S.-centered alternative to its influence.The U.S., Japan and other members of the Group of Seven (G7) advanced nations this month agreed to “de-risk” but not decouple from China, reducing their exposure to the world’s second-largest economy in everything from chips to minerals. More

WASHINGTON (Reuters) – When Kevin McCarthy was struggling early this year to get enough votes from his own Republicans to become Speaker of the House of Representatives, Democratic President Joe Biden called the prolonged saga a national embarrassment, then had a little fun.”I’ve got good news for you,” Biden said, pointing playfully at a reporter after a speech in Kentucky. “They just elected you speaker.”During months of tense exchanges over the U.S. debt ceiling, McCarthy has also taken some swipes at Biden. Arguing that Biden should meet him to discuss his demands for lifting the debt ceiling in March, McCarthy made fun of the 80-year-old president’s advanced age.”I would bring lunch to the White House. I would make it soft food if that’s what he wants. It doesn’t matter. Whatever it takes to meet,” McCarthy told reporters.In the last few weeks, however, both men have stopped the put-downs and cobbled together an agreement that will now lead to a congressional vote to suspend the U.S. debt ceiling and avoid a default that would wreak economic havoc on the country.Like the deal they crafted, the relationship the two men forged does not look pretty but appears to have gotten the job done. “I think he negotiated with me in good faith,” Biden said of McCarthy on Sunday. “He kept his word. He said what he would do. He did what he said he would do.” The deal caps federal spending and forces more poor people to work for food aid, concessions that Democrats hate. But it also preserves much of Biden’s Inflation Reduction Act and punts the next debt ceiling showdown into 2025, which Republicans hate.STRANGE POLITICAL BEDFELLOWS Biden, a veteran former senator from Delaware, talks about the days when both parties would often come together to solve pressing problems, and he has pushed his fellow Democrats to find across-the-aisle agreements as part of his larger attempts to re-center the country. Although he initially called for the debt ceiling to be raised without negotiations, he ended up making compromises.McCarthy, a 58-year-old Californian, is representative of a pugilistic style of Republican politics that took root with the “Tea Party” and blossomed under former President Donald Trump.He came up through the party ranks pushing tax cuts for companies and reduced government spending and is now presiding over an unruly Republican Party in which radical lawmakers have threatened to force him out of the Speaker job unless he takes a hard line with the White House.After an initial Feb. 1 meeting at the White House, an optimistic McCarthy predicted that he and Biden would find common ground and meet again soon. Instead, a three-month stand-off ensued. Biden refused to negotiate as the White House bet that investors and business groups would persuade Republicans to back off their threat to drive the United States into default. Both McCarthy and Biden spent that time accusing the other of putting the U.S. economy at risk. McCarthy complained of his own isolation from the White House. “I never had somebody from the White House reach out to me. Not one person from the administration called me. I called them,” the House speaker told reporters at a Republican retreat in March.Even after negotiations finally began in earnest, McCarthy portrayed the president as the captive of “socialists” intent on default. “He’d rather be the first president in history to default on the debt than to risk upsetting the radical socialists who are calling the shots for Democrats right now,” McCarthy tweeted last week. But his tone changed as both sides moved toward a deal last week, expressing his respect for White House negotiators: “These are highly intelligent, highly respected on both sides. They know their work, they know their job, they know the numbers.” House Republican Patrick McHenry, a key negotiator in the talks, noted that Biden and McCarthy were “two Irish guys that don’t drink” but had found a way to work together.”What I saw in the Oval Office yesterday was a willingness to engage with each other in a sincere way – air disagreements, listen,” McHenry said after one of the meetings last week. Biden aides say the relationship between Biden and McCarthy is largely cordial and businesslike and that Biden recognizes the Speaker has a struggle on his hand presiding over the various factions within the Republican Party.TRUMP, PELOSI CONNECTIONSIt may not help their relationship that both men were very close to the other’s predecessor. Biden idolized former Democratic House Speaker Nancy Pelosi, a woman “who I think will be considered the greatest Speaker in the history of this country,” he said at his Feb. 7 State of the Union address.McCarthy was an enthusiastic supporter of Biden’s predecessor, Republican Donald Trump, and a frequent flyer on Air Force One when Trump was president. He was among 147 Republicans who voted to overturn Biden’s 2020 election win over Trump’s claims of election fraud, although he eventually acknowledged Biden as the legitimate president.He criticized Trump over his failure to rein in his own supporters during the Jan. 6, 2021, attack on the U.S. Capitol, but remains in touch with him. More

Tight labour markets and loose fiscal policies will prolong inflation in some developing countries, warn analysts, with underlying price pressures remaining stubbornly entrenched even as food and energy prices fall from last year’s highs.After a round of tightening to tackle soaring inflation fuelled by the lifting of Covid-19 restrictions and Russia’s full-scale invasion of Ukraine, politicians and some central bank policymakers are keen to cut interest rates quickly to boost weak growth. But analysts warn that cutting too soon will backfire on developing economies.“In monetary policy, [showing] resolve up front saves you more pain later,” said David Hauner, head of emerging market cross-asset strategy at Bank of America Global Research. “If you let go too early, you have to go back and inflict more pain [by raising rates again].”Analysts say inflation is being entrenched by structural issues, such as a longstanding shortage of labour in central Europe and the use of indexation in Latin America, in which contracts such as rental agreements are automatically adjusted in line with higher prices. Wage inflation is high in both regions.The fall in energy prices has helped to bring headline inflation down. In Brazil, the headline rate fall from 12 per cent last year to just over 4 per cent last month, inside the central bank’s target range. But underlying core inflation, which strips out volatile items such as energy and food, has fallen more slowly as last year’s global surge in commodity prices feeds through into services and wages. Core inflation in Brazil is running at more than 7 per cent. Wages rose 13 per cent in the year to March, according to the most recent data.

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As price rises become widespread, people expect inflation to stay high, exacerbating the challenges for policymakers.“Central banks are not fooled by headline rates moving down but are looking at high prints for core and services,” said Alberto Ramos, Latin American economist at Goldman Sachs. “They give a better idea of how strong and intense the pressures are.”Despite such pressures, some policymakers in Latin America and central Europe — many of whom were among the first to raise rates — are eager to kick-start growth. Hungary’s central bank reduced its main policy rate by 1 percentage point last week to 17 per cent, despite headline inflation running at 24 per cent in April. Core inflation was higher, at almost 25 per cent. Wages rose about 17 per cent in the year to March.Thierry Larose, senior portfolio manager at Vontobel, speaking before the cut, said the central bank’s dovish stance was “very concerning”. “It is way, way too early for the central bank to think of loosening.”Larose highlighted Hungary for pursuing “high-pressure” fiscal policies, such as household energy price caps, aimed at “boosting growth at any cost for populist reasons”.In contrast with Hungary, policymakers in Poland have stressed that interest rates will have to remain high until inflation is under control. Poland’s main index of core inflation shows it to be lower than the headline rate, although an alternative index that strips out other volatile items shows it more than a point higher, at 15.3 per cent in April.Emerging market policymakers were the first to raise rates as the lifting of Covid lockdowns boosted demand and inflationary pressures. Brazil’s central bank began increasing in March 2021, a full year before the first rise from the US Federal Reserve. Despite political pressure to cut, it has retained the rate of 13.75 per cent hit last August.

William Jackson, chief emerging markets economist at Capital Economics, said persistent high wage growth in central Europe and Latin America is “one of the great unknowns” for policymakers. While he expected more central banks to begin cutting this year, he said policy will be loosened “more gradually” than anticipated.Over next 12 months, Hauner predicted interest rates to be reduced by less than market prices indicate in Hungary, the Czech Republic, Peru, Mexico, Colombia and Chile. In Brazil, he saw room for a bit more loosening than the roughly 2.5 percentage points of cuts that have been priced in.He said rates would have to stay high “for a couple of years at least, to bring inflation back to where it should be”.Many countries, he warned, will have to get used to rates at levels last seen before the 2008-09 financial crisis.“We are not going back to the pre-Covid paradigm [of very low interest rates] any time soon.” More

Scores of the world’s biggest companies have left or scaled back their operations in Russia in response to Moscow’s invasion of Ukraine in February 2022. Last week, the central bank played down the impact of foreign company exits, saying that around 200 sale deals had been completed in the March 2022-23 period, with just 20% involving large asset sales, those in excess of $100 million.Moscow calls its actions in Ukraine a special military operation, while Kyiv and its West allies call it an unprovoked aggression to grab land. More

The deal targets recipients of the Supplementary Nutrition Program, or SNAP, between the ages of 50 and 54, adding new requirements that they work 20 hours a week to receive the aid.Previously, work requirements to receive SNAP ended at age 50.After weeks of negotiations, McCarthy and Biden forged a tentative agreement late on Saturday. The deal needs to still pass through the narrowly divided Congress before the Treasury Department runs short of money to cover all its obligations. People who have dependents, including children under age 18 or elderly people who rely on them, or people with disabilities, are already exempt from these work requirements, and will remain so. The deal also exempts veterans and homeless people. “The agreement phases in and then sunsets SNAP time limits to people up to age 54, which the president fought hard against,” one source briefed on the negotiations said. Republicans argue that the work requirements encourage people to get back to work.The U.S.’s approximately 65 million members of Gen X, those born between 1965 and 1980, are sandwiched between Baby Boomers, the generation born after World War II, and millennials. As a group, they saw their wealth jump during the Trump administration and even during the COVID pandemic. However, hundreds of thousands of GenXers living below or near the poverty line are likely to be impacted by the new work requirements. SNAP benefits are available for Americans whose income is less than 130% of the federal poverty line, or about $1,500 a month for a one person household, or $2,000 for a two-person household in many areas. Before temporary increases during the COVID pandemic that have since been reversed, these benefits averaged about $121 per person per month, or about $4.00 per person per day, the Center on Budget and Policy Priorities found. More

The deal would shift $10 billion each in fiscal years 2024 and 2025 in funding away the Internal Revenue Service, but officials believe the IRS can make due in the near term since they were funded over a 10-year period. They may need to seek more funding from Congress for future years, one of the officials said.The text of the House of Representatives legislation released on Sunday showed the deal would take back just $1 billion from the IRS, but the White House agreed to the additional cuts as part of the appropriations process that will take place over the next two years. More

For Anna Li, this year has been the worst she can remember for finding a job in China — harder even than during the pandemic.“I’ve been applying for jobs for half a year. I’m really exhausted but I’ve not received an offer yet,” the 25-year-old graduate in the country’s wealthy eastern Shandong province said, adding that even if she did land a position, salaries for office jobs were often unlivable. Five years ago, China’s economy was growing fast enough that many graduates were able to snap up good jobs. Now, their prospects are less certain, as the country’s economic recovery is failing to pick up pace six months after authorities began to roll back President Xi Jinping’s tough zero-Covid regime. Industrial production and profits, property sales and credit growth have all fallen short of analysts’ projections in April and early May, recent data showed, sapping confidence in the growth prospects for the world’s second-largest economy. The slowing momentum has already dented markets, with the price of commodities such as copper and iron ore falling, stocks down and the renminbi weakening to more than seven to the dollar. Consumer spending, which initially jumped after the Covid-19 controls were eased at the beginning of the year, has also fallen back on a gloomy economic outlook. “Confidence is a big problem,” said Hui Shan, chief China economist at Goldman Sachs. “For consumers, there are concerns about the future — you don’t really want to spend. Private investment is also very weak. You talk to entrepreneurs, there is still a reluctance to engage.”

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The tremors come just months after Chinese policymakers adopted a conciliatory tone in hopes of bolstering business confidence to restart the country’s economic engine as it emerged from three years of pandemic restrictions that stifled activity.They also unveiled a cautious growth forecast following a disappointing performance last year, when the economy grew just 3 per cent, the lowest mark in decades, as it was stricken by sporadic lockdowns, a property market collapse and travel curbs. This year started off on a stronger track, with gross domestic product expanding 4.5 per cent in the three months to March on booming exports and retail sales. But in recent weeks the outlook has weakened, with the property market in particular showing signs of fragility. Sales fell to 63 per cent of their 2019 levels in April, down from 95 per cent in March, research firm Gavekal said.The property woes have spilled over to industrial production, which declined in April relative to the seasonally adjusted 2019 figures as demand for cement, glass and other goods fell. Household consumption, one of the main intended drivers of the recovery, also lost ground.The flagging momentum has driven up youth unemployment, which hit a record of 20.4 per cent last month. 

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But while youth joblessness has become the poster child for China’s economic woes, the picture in the broader labour market is more nuanced, economists said. The headline unemployment rate actually declined to 5.2 per cent in April, with employment among migrant workers, who staff China’s factories, up 3.1 per cent on pre-Covid levels in the first quarter, according to Citi.With the wider job market strengthening, there was still hope that consumption and real estate would find their feet in the coming months, some analysts said.“The consumption-recovery engine is intact: a tightening labour market will eventually push up incomes and lead to more household consumption in the coming quarters,” said Gavekal.For Chinese policymakers, the question is whether recent sluggishness is a “hiccup” or if the government will need to step in with more support, said Robin Xing, chief China economist at Morgan Stanley. Xing said officials would wait to monitor factory activity over the next two months before making a decision. Stimulus measures could take the form of targeted subsidies for vehicle purchases, relaxations of restrictions on property purchases and funding for infrastructure projects.

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Beijing’s full-year growth target of 5 per cent for 2023 should still be achievable, given the low base from last year, when authorities shut down Shanghai, China’s biggest city, and other metropolises for months on end, experts forecast.The government will not let growth decline below that level, which would boost longer-term unemployment and risk causing social problems, according to Xing at Morgan Stanley. “Social stability is the hard constraint,” he said.

Whatever the policy direction, for China’s youth, this year looks bleak. Changes in the government’s priorities, such as a shift towards engineering and electronic hardware manufacturing and away from finance and internet platforms, have already altered the labour market and left many graduates flat-footed, analysts said. Christina Liu, a student in her 20s from the southern province of Hunan, decided to pursue a PhD after she was unable to find work following her master’s degree. She is studying in Hong Kong but said many of her friends were either struggling to find work or change jobs.“Some of them wanted to resign but they don’t really dare to do that without another job already lined up,” Liu said.Additional reporting by Wang Xueqiao in Shanghai More

Profits fell 20.6% in January-April from a year earlier, compared with a 21.4% decline in the first three months, according to data from the National Bureau of Statistics (NBS).In April alone, industrial firms posted a 18.2% drop in profit year-on-year, according to the NBS, which only occasionally gives monthly figures. Profits shrank 19.2% in March.”Overall, today’s data shows that industrial enterprises, especially private and equity-owned enterprises, continue to be affected by a combination of unfavourable factors such as the base effect, short-term pressure on the economic recovery and the downward trend of PPI (producer prices),” said Bruce Pang, chief economist at Jones Lang Lasalle (NYSE:JLL).Chinese companies are struggling with both weak demand at home and softening demand in the country’s major export markets. Producer deflation deepened in April, with the producer price index (PPI) falling at the fastest clip since May 2020.Lenovo, the world’s largest PC maker, said this week that quarterly revenue and profit tanked in January-March and it had cut 8% to 9% of its workforce to reduce costs, as global demand for personal computers (PCs) continued to slump.Producers of steel and other industrial metals are also hurting. Prices for steel reinforcing bars used in construction hit the lowest level in three years this week, and only a third of the country’s mills are currently operating at a profit, according to consultancy Mysteel.”There is still some pressure felt in May due to the difference between the purchase and sales prices, with steel prices falling in the month because of the slower-than-expected demand recovery,” Baosteel, a subsidiary of the world’s largest steelmaker-China Baowu Steel Group, said in an investor interactive platform on May 22.Foreign firms saw their profits slide 16.2% in January-April from a year earlier, while private-sector firms recorded a 22.5% plunge, according to a breakdown of the data.Profits sagged for 27 of 41 major industrial sectors during the period, with the ferrous metal smelting and rolling processing industry reporting the biggest slump at 99.4%.In the next stage, China will focus on restoring and expanding demand, further improve the level of production and marketing, and boost business confidence, NBS statistician Sun Xiao said.The grim profit readings came after a batch of April economic indicators, spanning industrial output, retail sales and property investment, suggested that a recovery in the world’s second-largest economy is losing momentum. Beijing has set a modest growth target of around 5% for this year. Signs of a brisk recovery in the wake of the country’s abrupt end of COVID curbs late last year had prompted many institutions including the World Bank to raise their China growth estimates for 2023.Nonetheless, some investment banks have recently lowered their 2023 China growth forecasts after the April data disappointment, with Nomura ratcheting down its prediction to 5.5% from 5.9% previously and Barclays (LON:BARC) revising its view down to 5.3% from 5.6%.Earlier this month, Premier Li Qiang vowed more targeted measures to expand domestic demand and stabilise external demand in an effort to promote a sustained economic rebound.Industrial profit numbers cover firms with annual revenues of at least 20 million yuan ($2.89 million) from their main operations.($1 = 6.9121 Chinese yuan renminbi) More