Raphael Stevens

Chinese smartphone company Xiaomi announced Tuesday it would formally launch its long-awaited electric car on March 28.
The company claimed in a social media post the product “would be delivered as soon as it is launched,” according to CNBC’s translation of the post written in Chinese.
Last month, Xiaomi President Weibing Lu told CNBC the company was targeting the premium segment with the car, and indicated deliveries could begin as soon as the second quarter.

Chinese consumer electronics company Xiaomi revealed Thurs., Dec. 28, 2023, its long-awaited electric car, but declined to share its price or specific release date.
CNBC | Evelyn Cheng

BEIJING — Chinese smartphone company Xiaomi announced Tuesday it would formally launch its long-awaited electric car on March 28.
The company claimed in a social media post its SU7 electric car “would be delivered as soon as it is launched,” according to CNBC’s translation of the post written in Chinese.

The post said the company was opening the waitlist for 59 stores in 29 cities in China.
Xiaomi revealed the vehicle’s exterior and tech features in late December, but did not share a price or specific delivery date.

Last month, Xiaomi President Weibing Lu told CNBC the company was targeting the premium segment with the car, and indicated deliveries could begin as soon as the second quarter.
While the company revealed the car to an international audience for the first time at Mobile World Congress Barcelona, Lu said it would likely take at least another two or three years before Xiaomi starts selling the vehicle overseas. More

China recorded its first month of inflation in February after four months of deflation, new figures showed, with the consumer price index climbing 0.7% year-on-year after a 0.8% annual decline in January.
Despite a modest rebound in the last month, Hong Kong’s Hang Seng index is still down more than 14% over the past year, and Rein believes “valuations are way too low.”

China has set a GDP target of around 5% for yet another year, amid analyst concerns of insufficient policy support to reach the goal.
Bloomberg | Bloomberg | Getty Images

Valuations of Chinese stocks are “way too low” and investors should be looking to cautiously re-enter the world’s second-largest economy, according to Shaun Rein, founder and managing director of the China Market Research Group.
China recorded its first month of inflation in February after four months of deflation, new figures showed, with the consumer price index climbing 0.7% year-on-year after a 0.8% annual decline in January.

However, Rein attributed this to the Lunar New Year period, and insisted that deflation “still looms over the Chinese economy.”
“We are still seeing though that Chinese consumers, especially the wealthy ones, are quite nervous — they’re still trading down and skipping big ticket items,” Rein told CNBC’s “Squawk Box Europe” on Monday.
“They’re cautious about whether or not the government is going to launch a bazooka-like stimulus — clearly they’re not going to.”
He suggested that in the short-term, global luxury brands could continue to struggle with a lack of Chinese demand, and that domestic neighborhood electric vehicle (NEV) manufacturers could be in for a tough run.

China’s well-documented economic struggles have led to broad declines in its stock markets over the past year, as growth was weighed down by a slump in real estate and exports. The Chinese government is targeting 5% growth in 2024, having notched 5.2% in 2023.

“Admittedly, the NPC Work Report last week commits to keeping ‘money supply and credit growth in step with the real GDP and inflation targets’, potentially signalling policymakers will try a bit harder to boost inflation towards the 3% target compared to the previous year,” Zichun Huang, China economist at Capital Economics, said in a research note Monday.
“But we think China’s low inflation is a symptom of its growth model built on a high rate of investment. As reducing dependence on investment is still far off, we expect inflation to stay low in the long run.”

‘Too early to call a bull market’

Although the near-term headwinds mean the investment landscape remains tricky, Rein argued that measures taken to reconfigure the Chinese economy away from its traditional reliance on real estate and infrastructure were starting to have an impact, and the longer-term picture is more promising.
“China’s economy is weak but it’s not that weak. If you’re a multinational, if you’re looking to drive growth over the next three to five years, the next China is China. It’s not India — India’s only a sixth of the GDP of China — it’s not Vietnam. These are small markets, so I actually think investors should be looking long-term at China again, it’s definitely investible,” he said.
“It’s too early to call a bull market, you still have to be very cautious, the economy is still weak – don’t get me wrong — again the D word (deflation) looms over China, there is still a weak job market, but the valuations are too low.”
Despite a modest rebound in the last month, Hong Kong’s Hang Seng index is still down more than 14% over the past year, and Rein said he had personally begun investing in Hong Kong-listed A-shares around a month ago on the belief that “valuations are way too low.” More

Two years ago, pretty much everyone agreed that one of the great bubbles was bursting. An era of rock-bottom interest rates was coming to a close, shaking the foundations of just about every asset class. Share prices were plunging, government bonds were being hammered, crypto markets were in freefall. Wall Street’s prophets of doom were crowing with delight. The consensus of the previous decade—that inflation was dead and cheap money here to stay—looked as ludicrous as the groupthink of any previous financial mania. Thus the pendulum was about to swing: from exuberance to scepticism, risk-taking to cash-hoarding and greed to fear. It would take a long time to swing back.image: The EconomistOr not. The trough in American stocks came in October 2022. Less than 18 months later stockmarkets around the world are back at all-time highs (see chart 1). America’s in particular is on an eye-popping run, with the S&P 500 index of large firms having risen in 16 of the past 19 weeks. The value of Nvidia, a maker of hardware essential for artificial intelligence (AI), has risen by more than $1trn in the space of a few months. Bitcoin hit another record on March 11th. Disorientingly for those who blamed the previous mania on near-zero interest rates, this comes after a brutal campaign by central bankers to yank them back to more normal levels (see chart 2). Once again, every conversation about markets veers unerringly back to the same question. Is this a bubble?image: The EconomistFor many, the parallel that springs to mind is not the most recent bull market but that of the late 1990s, when the dotcom bubble inflated. Then, as now, new technology promised to send productivity and profits to the moon, the innovation in question being the internet rather than artificial intelligence. Bulls in the 1990s were correct that advances in telecommunication would transform the world and spawn a new generation of corporate giants. Yet plenty still ended up losing their shirts—even by betting on firms that went on to be phenomenally successful. The canonical example is Cisco, which, like Nvidia, made hardware crucial for the new tech age. Although in the most recent fiscal year its net profit was $12.8bn, up from $4.4bn in 2000 (both in today’s money), those who bought shares at their peak in March 2000 and are still holding today have taken a real-terms loss of nearly 66%.Cisco therefore illustrates the defining feature of bubbles. They inflate when investors buy assets at prices that are entirely unmoored from economic fundamentals such as supply and demand or future cash flows. The question of what the asset is “worth” goes out the window; all that matters is whether it can later be sold for more. That in turn depends on how many people the speculative frenzy can pull in and how long it can last—in other words, on just how mad the crowd becomes. Once buyers run out, the craze dissipates and there is nothing holding prices up. Predicting the size of the subsequent fall is as much of a fool’s game as trying to time the top.The good news is that this sort of mania is some way off. Researchers at Goldman Sachs, a bank, have analysed the valuations of the ten biggest stocks in America’s S&P 500 index, around which much of the AI hype has revolved. With prices at an average of 25 times their expected earnings for the coming year, they are on the expensive side. But they are cheaper than they were last year, and a bargain compared with the peak of the dotcom bubble, when prices were 43 times earnings.There are other tell-tale signs that, in spite of soaring share prices, euphoria is absent. Bank of America’s latest monthly survey of fund managers finds them more bullish than they have been for around two years, but not particularly so by long-term standards. Their average cash holdings are low, but not extremely so, meaning that they have not piled into the market with everything they have (and are also not hoarding cash in anticipation of a plunge, which they were in the late 1990s). Among retail investors, the crowd that typically sustains the final and most dangerous stage of a bubble, there has been no repeat of the stampede into tech funds and meme stocks witnessed in 2021.Manic episodesWhat, then, would it look like if things were to take a euphoric turn? A strong signal would be for gains that have so far been concentrated around a few mega-cap stocks to spread through the market more broadly. The winning streak of the past few months has been dominated not by America’s “magnificent seven” tech giants, but by just four of them. Amazon, Meta, Microsoft and Nvidia have left the other 496 stocks in the S&P 500 in the dust. Those others, in turn, have recovered from the shellacking of 2022 far better than the smaller companies represented in the Russell 2000 index (see chart 3). If investors really do start throwing caution to the winds, expect them to start betting on riskier corporate minnows as well as on giants—especially those that manage to shoehorn the letters “AI” into their annual reports.image: The EconomistA corollary is that the pipeline of initial public offerings (IPOs) ought at last to start gushing. In both 1999 and 2021 it got going, with rising share prices and ebullient investors proving irresistible to the bosses of companies searching for capital. A puzzling feature of the current bull market is that it has taken place amid an ipo drought. EY, a consultancy, estimates that firms going public in America raised just $23bn in 2023, compared with $156bn in 2021. It might be that company bosses are simply more worried about economic headwinds than investors are. In a euphoric market such level-headedness becomes impossible to maintain.Similar dangers stalk professional money-managers, whose job is to beat the market whether or not they think it is moving rationally. If pockets look dangerously overvalued, it makes sense to avoid them. But in a bubble, avoiding overvalued stocks—which, after all, are the ones rising the most—starts to look suspiciously like routine mediocrity. As the dotcom frenzy reached its peak, Julian Robertson, one of the 20th century’s most revered hedge-fund managers, stalwartly refused to buy tech stocks. His investors eventually revolted and withdrew their money, forcing his fund to close right as the crash was about to start. Hence another sign that a bubble is about to pop: some of the market’s gloomier voices are fired.image: The EconomistInvestors do not yet seem excitable enough for any of this to take place. But as in 2021, cheaper debt could help get them in the mood. Lenders are shovelling money towards risky high-yield (or “junk”) corporate borrowers, narrowing the spread they pay above the yield on government debt (see chart 4). When the Federal Reserve’s officials meet on March 20th, any hint that rate cuts are imminent could be exactly the sort of high for which investors are looking. Just have some paracetamol on hand for the comedown. ■ More

A proposed “Texas Central” bullet train would shuttle passengers from Dallas to Houston in under 90 minutes.
The project is expected to cost at least $33.6 billion, a sum that private investors have not yet raised.
Amtrak announced plans to revive the Texas Central project, which went virtually dormant in 2022.

The U.S., despite decades of research and studies, remains without authentic high-speed rail options.Since 1987, investors have attempted to introduce bullet train service to Texas. In 2014, a group organized under the name Texas Central launched the most recent attempt to connect Dallas to Houston with a bullet train that travels more than 200 miles per hour, shortening a three and a half hour drive to a 90-minute train ride.”You cannot do that in a car,” said Andy Byford, senior vice president of high-speed rail programs at Amtrak. “You cannot do that if you fly, if you factor in going to the airport, going through security, getting back in from the airport at the other end.”Byford is the latest in a long line of U.S. policy experts to call for more high-speed rail connections in the U.S. In 2023, Amtrak revived hopes for the bullet train in the Texas Triangle, when it announced its intention to broaden its partnership with Texas Central.The fast-growing region contains both the Dallas-Fort Worth metroplex and Houston, two of the largest population centers in the country.”If you don’t build high-speed rail between Dallas and Houston, then you only have two options,” said Congressman Seth Moulton, D-Mass., a former managing director at Texas Central. “You can either expand the airport or expand the highway. It’s not going to decrease the travel time between those cities. It’s still going to take at least three hours to get between Dallas and Houston”Local experts told CNBC that the swelling population of Texas drivers has taken a toll on roads in the area, leading to traffic congestion and safety issues.”Our transportation system is just really trying to keep up with our population growth” said Brianne Glover, senior research scientist at Texas A&M University’s Transportation Institute. “Commuters experience somewhere around 40 hours of delay each year.”The Texas Central project has been repeatedly delayed as its backers navigate various regulatory hurdles, including environmental reviews and disputes over property rights. In 2022, the Texas Supreme Court declared that Texas Central, a private entity, met the legal definition of a public interurban electric railway company, giving it the power of eminent domain.”When I was notified by my nephew through an article about eminent domain, I was absolutely shocked,” said Jody Berry, a Dallas-based farmer who has opposed the Texas Central initiative. The proposed alignment for the Texas high-speed rail project crosses Morney-Berry Farm, which Berry’s family has cultivated for generations.”Finding out that the high-speed rail could potentially go through our property has made it very difficult for me to sleep,” Berry said.
The project is expected to cost at least $33.6 billion dollars, according to a March 2023 estimate from the Reason Foundation. Similar high-speed rail projects around the world have faced substantial cost overruns in development, including Japan’s Tokaido Shinkansen system. The route in Texas is designed to leverage N700 cars found on the Shinkansen system.The Texas effort has received substantial support from firms in Japan and the U.S. government. In 2018, the Japan Bank for International Cooperation issued a $300 million loan to support the project. And in late 2023, Texas Central received a Corridor ID program grant to study the route’s potential for partnership with Amtrak.With a historic $66 billion commitment to passenger rail, the U.S. government under Biden appears to have its best bet in generations to build high-speed rail systems. But the project and other publicly subsidized ones, such as the California project connecting Los Angeles to San Francisco, remain uncertain. The California project’s estimated cost skyrocketed from $33 billion to over $100 billion amid delays and pushback from rural landowners, according to the California High-Speed Rail Authority.”The Biden Administration’s aspirations for high-speed rail fail to account for several realities, including lack of customer demand, economic viability, and impact on existing rail infrastructure,” said Rep. Troy Nehls, R-Texas, in a November 2023 congressional hearing on intercity passenger rail systems.The backers of Texas Central declined repeated requests from CNBC for a comment on the project’s progress and expected completion date.Watch the video above to learn about the long effort to bring high-speed rail system to the Texas Triangle. More

The Financial Conduct Authority said Monday that it wouldn’t object to requests from recognized investment exchanges to create crypto-backed exchange traded notes, or ETNs.
Bitcoin’s price surged over 3% to $71,726.49 at around 4:30 a.m. ET, hitting a fresh all-time high. Ether climbed nearly 2%, to $4,014.90.
The move from U.K. regulators comes after the U.S. Securities and Exchange Commission gave the green light for the first-ever U.S. spot bitcoin ETFs.

Chesnot | Getty Images News | Getty Images

Bitcoin prices rallied on Monday to hit a fresh record high above $72,000, after the British financial watchdog said it would allow exchanges to list cryptocurrency-linked exchange-traded products for the first time.
The Financial Conduct Authority said in a notice Monday that it would not object to requests from recognized investment exchanges to create a U.K.-listed market segment for crypto-backed exchange traded notes, or ETNs.

Exchanges would need to ensure they have sufficient controls in place, so that trading is orderly and proper protection is afforded to professional investors. They must meet all the requirements of the U.K.’s listings regime, issuing prospectuses and ongoing disclosures.
Bitcoin’s price surged over 3% to $72,211.51 at around 6:50 a.m. ET, hitting a fresh all-time high. It has since receded slightly and was back below $71,530.13 as of 7:15 a.m. ET.
Ether climbed more than 2%, to $4,041.23.
The London Stock Exchange acknowledged the FCA’s statement Monday, saying in a separate statement that it would accept applications for the admission of bitcoin and ether ETNs from the second quarter of this year.
The FCA clarified that only professional investors would be able to buy ETNs. The U.K. currently doesn’t allow retail investors to buy crypto-linked ETNs or derivatives, as it says they are too risky for consumers.

The FCA said it continues to believe cETNs — crypto ETNs —and crypto derivatives are “ill-suited for retail consumers due to the harm they pose.”
It noted, “As a result, the ban on the sale of cETNs (and crypto derivatives) to retail consumers remains in place.”
The FCA added it “continues to remind people that cryptoassets are high risk and largely unregulated. Those who invest should be prepared to lose all their money.”

Why it’s a big step for crypto

The move from U.K. regulators comes after their U.S. counterparts approved the first-ever spot bitcoin exchange-traded funds.
The Securities and Exchange Commission gave the green light for ETFs from BlackRock, Fidelity, Grayscale, and other major firms, which are now live and being traded.
Unlike an ETF, which is a fund that holds assets, an ETN is an unsecured debt security issued by a bank. It is typically linked to a market index or other benchmark. An ETN promises to pay out at maturity the full value of the index, minus management fees.
Bitcoin bulls note this will lead to increased institutional investment into bitcoin and other cryptocurrencies. They say this will, in turn, impact the price positively as more serious money floods into the market.
The FCA’s decision to allow for crypto-linked bitcoin ETNs follows pushback from the regulator. The FCA in 2020 banned the sale of crypto-linked ETNs and derivatives to consumers, saying they were ill-suited for everyday investors.
At the time, the FCA noted extreme price volatility of cryptocurrencies and financial crime in the secondary market as factors, adding consumers “might suffer harm from sudden and unexpected losses.” More

China’s weeklong annual parliamentary meetings ended on Monday and for the first time in decades, the Chinese premier did not host a press conference.
President Xi Jinping did not speak at the closing ceremony.

A soldier in front of the Great Hall of the People on March 11, 2024, the closing day of the National People’s Congress in Beijing, China.
Yin Hon Chow | CNBC

BEIJING — China’s weeklong annual parliamentary meetings ended on Monday and for the first time in decades, the Chinese premier did not host a press conference.
In a break with tradition, the premier will no longer hold a press conference following this year’s parliamentary meetings — at least for the rest of the term, according to an official announcement last week.

Such press conferences were a rare instance of press interaction with the highest levels of China’s government.
President Xi Jinping did not speak at the closing ceremony. He typically speaks only at the closing ceremonies of the first session of each National People’s Congress, the nation’s highest authority which is elected every five years. This year is the second session of the 14th National People’s Congress.
To be clear, the annual gathering of the top leadership is typically ceremonial in nature. The real power lies with the ruling Communist Party, which is headed by Xi, who is general secretary of the party and president of China.
Still, announcements made during the Congress can shed some light on government policy.
Here are some highlights of what was announced at this year’s week-long parliamentary meeting, which started Tuesday last week and ended Monday.

Environment

“Along with the extensive discussions on environmental protection, the Government Work Report (GWR) explicitly pledged to lower energy consumption per unit of GDP by around -2.5% in 2024,” Citi analysts pointed out in a report Sunday.
The report “didn’t set such numeric targets in 2022-23, after the -3.0% target and ‘campaign-style’ execution led to the power outages in 2021,” the analysts said.
But they warned that investors “need to be mindful of the growth risks arising again from potential environmental policy tightening.”

Economic focus on manufacturing

China has set a 2024 growth target of around 5%, Premier Li Qiang at the start of the meetings on Tuesday when he released the much-anticipated government work report.
Industrial support clearly ranked first on Beijing’s priority list for the year ahead, according to three major plans released as part of the parliamentary meetings.
The top economic planner also noted how a push to upgrade equipment would generate a market of more than 5 trillion yuan (about $694.5 billion).
Real estate, in contrast, received less emphasis.
However, the Minister of Housing and Urban-Rural Development said property developers “that must go bankrupt should go bankrupt.” In a press conference on Saturday, Ni Hong warned that those who “harm the interests of the masses” will be probed and punished.

State Council changes

The Chinese Communist Party has increased its oversight of the government under Xi.
At the 2023 parliamentary meeting, Beijing announced an overhaul of finance and tech regulation by establishing party-led commissions to oversee the two sectors. Xi also gained an unprecedented third term as president at last year’s meeting.
This year, the National People’s Congress rubber stamped changes to revise the structure of the State Council, which has been the government’s top executive body led by the premier. At the ceremonial closing on Monday, the amended State Council Organic Law passed with 2,883 delegate votes — with eight rejecting the amendments and nine abstentions.
The changes include vice premiers and the head of the People’s Bank of China among the council’s top leadership group.
It was not immediately clear what impact such changes would have.
— CNBC’s Clement Tan contributed to this story. More

“For real estate companies that are seriously insolvent and have lost the ability to operate, those that must go bankrupt should go bankrupt, or be restructured, in accordance with the law and market principles,” Ni Hong, Minister of Housing and Urban-Rural Development, said at a press conference Saturday.
That’s according to a CNBC translation of his Mandarin-language remarks published in an official transcript of the press conference, held alongside China’s annual parliamentary meetings.
Ni’s comments come as major real estate developer from Evergrande to Country Garden have defaulted on their debt, while plunging new home sales have put future business into question.

China’s real estate sector has employed many construction workers, who typically live in temporary housing nearby.
Bloomberg | Bloomberg | Getty Images

BEIJING — China’s struggling real estate developers won’t be getting a major bailout, Chinese authorities have indicated, warning that those who “harm the interests of the masses” will be punished.
“For real estate companies that are seriously insolvent and have lost the ability to operate, those that must go bankrupt should go bankrupt, or be restructured, in accordance with the law and market principles,” Ni Hong, Minister of Housing and Urban-Rural Development, said at a press conference Saturday.

“Those who commit acts that harm the interests of the masses will be resolutely investigated and punished in accordance with the law,” he said. “They will be made to pay the due price.”
That’s according to a CNBC translation of his Mandarin-language remarks published in an official transcript of the press conference, held alongside China’s annual parliamentary meetings.
Ni’s comments come as major real estate developers from Evergrande to Country Garden have defaulted on their debt, while plunging new home sales have put future business into question.

In 2020, Beijing cracked down on developers’ high reliance on debt for growth in an attempt to clamp down on property market speculation. But many developers soon ran out of money to finish building apartments, which are typically sold to homebuyers in China ahead of completion. Some buyers stopped paying their mortgages in a boycott.
Authorities have since announced measures to provide some developers with financing. But the national stance on reducing the role of real estate in the economy hasn’t changed.

This year’s annual government gathering has emphasized the country’s focus on investing in and building up high-end manufacturing capabilities. In contrast, the leadership has not mentioned the massive real estate sector as much.
Real estate barely came up during a press conference focused on the economy last week, while Ni was speaking during a meeting that focused on “people’s livelihoods.”
Ni said authorities would promote housing sales and the development of affordable housing, while emphasizing the need to consider the longer term.
Near-term changes in the property sector have a significant impact on China’s overall economy.

Real estate was once about 25% of China’s GDP, when including related sectors such as construction. UBS analysts estimated late last year that property now accounts for about 22% of the economy.
Last week, Premier Li Qiang said in his government work report that in the year ahead, China would “move faster to foster a new development model for real estate.”
“We will scale up the building and supply of government-subsidized housing and improve the basic systems for commodity housing to meet people’s essential need for a home to live in and their different demands for better housing,” an English-language version of the report said. More