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    This is the ‘billion-dollar blind spot’ of 401(k)-to-IRA rollovers, Vanguard finds

    Moving money from a workplace retirement plan like a 401(k) plan to an individual retirement account is common when switching jobs or retiring.
    Savers are often unaware their 401(k)-to-IRA rollovers sit in cash as a default.
    Holding excess cash is generally a mistake for long-term investors.

    Sergio Mendoza Hochmann | Moment | Getty Images

    Many investors unknowingly make a costly mistake when rolling their money from a 401(k) plan to an individual retirement account: leaving their money in cash.
    Rollovers from a workplace retirement plan to an IRA are common after reaching certain milestones like changing jobs or retiring. About 5.7 million people rolled a total $618 billion to IRAs in 2020, according to most recent IRS data.

    However, many investors who move their money to an IRA park those funds in cash for months or years instead of investing it — a move that causes their savings to “languish,” according to a recent Vanguard analysis.

    About two-thirds of rollover investors hold cash unintentionally: 68% don’t realize how their assets are invested, compared to 35% who prefer a cash-like investment, according to Vanguard.
    The asset manager surveyed 556 investors who completed a rollover to a Vanguard IRA in 2023 and left those assets in a money market fund through June 2024. (Respondents could report more than one reason for holding their rollover in cash.)
    “IRA cash is a billion-dollar blind spot,” Andy Reed, head of investor behavior research at Vanguard, said in the analysis.

    ‘It always turns into cash’

    The retirement system itself likely contributes to this blind spot, retirement experts said.

    Let’s say a 401(k) investor holds their funds in an S&P 500 stock index fund. The investor would technically be liquidating that position when rolling their money to an IRA. The financial institution that receives the money doesn’t automatically invest the savings in an S&P 500 fund; the account owner must make an active decision to move the money out of cash.
    More from Personal Finance:Stocks often drop in September. Why you shouldn’t careDon’t expect ‘immediate relief’ from Fed rate cutMomentum builds to eliminate certain Social Security rules
    “That’s one of the challenges: It always turns into cash,” said Philip Chao, a certified financial planner and founder of Experiential Wealth based in Cabin John, Maryland. “It sits there in cash until you do something.”
    About 48% of people (incorrectly) believed their rollover was automatically invested, according to Vanguard’s survey.

    When holding cash may be a ‘mistake’

    Grace Cary | Moment | Getty Images

    Holding cash — perhaps in a high-yield savings account, a certificate of deposit or a money market fund — is generally sensible for people building an emergency fund or for those saving for short-term needs like a down payment for a house.
    But saving bundles of cash for the long term can be problematic, according to financial advisors.
    Investors may feel they’re safeguarding their retirement savings from the whims of the stock and bond markets by saving in cash, but they’re likely doing themselves a disservice, advisors warn.
    Interest on cash holdings may be too paltry to keep up with inflation over many years and likely wouldn’t be enough to generate an adequate nest egg for retirement.

    “99% of the time, unless you’re ready to retire, putting any meaningful money in cash for the long term is a mistake,” Chao said. “History has shown that.”
    “If you’re investing for 20, 30, 40 years, [cash] doesn’t make sense because the return is way too small,” Chao said.
    Using cash as a “temporary parking place” in the short term — perhaps for a month or so, while making a rollover investment decision — is OK, Chao explained.
    “The problem is, most people end up forgetting about it and it sits there for years, decades, in cash, which is absolutely crazy,” he said.

    Relatively high cash returns over the past year or two in some types of cash accounts — perhaps around 5% or more — may have lulled investors into a false sense of security.
    However, investors are “unlikely to keep those returns for long,” Tony Miano, an investment strategy analyst at the Wells Fargo Investment Institute, wrote Monday.
    That’s because the U.S. Federal Reserve is expected to initiate a round of interest-rate cuts this week. Investors should “start repositioning excess cash,” Miano said.
    Investors should also question if it’s necessary to roll money from their 401(k) plan to an IRA, as there are many pros and cons, Chao said. More

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    in Business

    Charter rolls out new Spectrum pricing and internet speeds, aims to ‘be a better service operator’

    Cable giant Charter Communications, under the brand Spectrum, is unveiling new pricing and customer service changes meant to prove its commitment to reliability.
    The changes come as cable providers are experiencing major shifts in their broadband, TV and mobile businesses.
    Broadband, the bedrock of the cable industry, has experienced a slowdown in customer additions. Meanwhile, the fledgling mobile business has rapidly grown.

    Christopher L. Winfrey, CEO of Charter Communications.
    Courtesy: Charter Communications

    Charter Communications CEO Chris Winfrey said he wants customers to think of reliability and credibility when they think of their cable and broadband provider.
    The cable giant told CNBC it is unveiling a series of changes Monday to bolster that goal, including rolling out new bundles and pricing, increasing internet speeds, offering credits for service outages and promising heightened reliability for customers.

    Charter — which provides broadband, cable TV and mobile services and is known to customers under the name of Spectrum — said it is also trying to make the company more approachable and remove the longtime negative connotations around cable companies by announcing Spectrum’s new “first-of-its-kind customer commitment,” branded as “Life Unlimited.”
    The rollout comes as Charter and its industry peers contend with several trends: slowing broadband customer growth, continued defections from the cable TV bundle, and a young but speedily expanding mobile business.

    “It is hard to be loved when you’re providing a critical service to the household that’s a physical infrastructure that charges over $100 a month,” Winfrey said in an interview with CNBC. “And to the extent there’s a problem, sometimes somebody has to enter your home … in the same vein that it is for an electrician or plumber.”
    The first step to changing a less-favorable consumer view is with “pricing and packaging that creates more value than you can replicate anywhere else in the marketplace,” he said.
    Spectrum said it will charge as low as $30 a month for its 500Mbps internet plan, or $40 a month for 1GB service, when either are bundled with two mobile lines or cable TV. The company is also increasing the baseline internet speed for current customers at no additional cost.

    The company also said it’s planning to be upfront about costs. Under its new plan, taxes and fees are baked in, there are no annual contracts and pricing is guaranteed up to three years, it said. Charter even eliminated the 99 cents it had tacked on to most of Spectrum’s pricing in the past.
    In addition, Spectrum pledged to give customers credits when the company’s customer service doesn’t live up to its promises, or for internet outages that are out of the customer’s control but are due to an issue on the company’s part and last more than two hours. Service issues such as those caused by weather, natural disasters or power outages don’t count.
    Life Unlimited — a new platform for Spectrum’s internet, mobile and TV services — will roll out across its 41-state footprint this week, the company said.
    “We wanted to make a bold statement about our commitment and our capabilities,” Winfrey said. “We also wanted to recognize that we’re not perfect and we’re putting ourselves under pressure, concrete pressure, to make sure that we can be a better service operator every month and every year from here on out.”

    Pricing power

    The Charter Communications logo is displayed on a smartphone.
    Sopa Images | Lightrocket | Getty Images

    The announced changes are some of Charter’s biggest moves since Winfrey took the helm as CEO in December 2022.
    He followed Tom Rutledge, who held the post for a decade and turned a relatively small cable operator into the second-largest cable company in the U.S. through the takeovers of Time Warner Cable and Bright House Networks in 2016. Winfrey was CFO at the time and spearheaded the mergers.
    Winfrey recalled the various investments and advancements cable companies had made over the years: namely in broadband, but also in the pay TV bundle and the landline and mobile phone businesses.
    “For all the value that the industry’s brought over the years, and the service and reliability investments that we’ve made, we haven’t always gotten the full credit that we deserve, and in some cases, we did get the credit we deserve because we could have done things better,” Winfrey said.
    He entered the top job at a moment when it was clear growth was unlikely to return to the cable TV bundle.
    Winfrey had been a low-key and not widely known executive in the media industry, but he started off swinging.
    At an investor day in December 2022, Charter announced an aggressive capital investment plan that included putting $5.5 billion over three years in its broadband infrastructure network. The higher-than-expected spending during a time of growing competition from 5G wireless providers sent alarms through Wall Street, and the stock dropped.
    Charter’s stock price has fluctuated greatly in recent years. On Sept. 12, 2021, the stock price was $787.12. It closed at $340.17 on Friday.

    Stock chart icon

    Charter’s stock has fluctuated in recent years as there’s been a slowdown in broadband subscriber growth.

    That’s in part because broadband customer growth at providers including Charter and Comcast has struggled, according to the companies’ earnings reports. Increased competition from wireless companies such as AT&T and Verizon has also played a role in the stagnation, as has the slowdown in the buying and selling of houses due to high interest rates.
    The third quarter was the worst ever for broadband industry subscriber losses, according to MoffettNathanson. Charter lost 149,000 subscribers and had a total of 30.4 million residential and small business broadband customers as of June 30, according to its second-quarter earnings report.

    While the losses weren’t as substantial as analysts had feared, Charter’s growth bright spot is now its mobile business, which launched in 2018. Spectrum Mobile has 8.8 million total lines and has grown rapidly due to enticing promotional deals and increased mobile usage on reliable Wi-Fi networks, the company said.
    In late 2022, Charter announced its “Spectrum One” plan, the first time it offered broadband, Wi-Fi and mobile in a bundle with promotions that included competitive rates and, in some cases, free mobile lines.
    “For wireless, the ‘Spectrum One’ promotion will almost certainly turn out to have been a home run,” analyst Craig Moffett said in a research note in July. “Despite the fact that it was initially viewed as shockingly aggressive, it was, in fact, a rather modest offer.”
    Moffett called mobile an “underappreciated growth engine” for Charter, not only because of customer additions but also growth in average revenue per user, or ARPU, which is a metric often used by cable companies.
    Winfrey doesn’t expect ARPU to be affected by the new promotions.
    “When I think about Wall Street, I think about the customer,” Winfrey said. “If you focus on the customer, provide great customer service, save them money, provide value, then your capital market strategy, your regulatory strategy, all of that just falls into place.”

    Tough on TV

    A detail view of an ESPN Monday Night Football NFL logo is seen on a tv camera in action during a game between the San Francisco 49ers and the Baltimore Ravens at Levi’s Stadium on December 25, 2023 in Santa Clara, California. 
    Robin Alam/isi Photos | Getty Images Sport | Getty Images

    Customers have been dropping pay TV rapidly across all providers, including Charter. But the company has been vocal about its efforts to preserve the business, especially under Winfrey’s leadership.
    The biggest moment came in 2023 when Disney-owned networks went dark for Charter’s customers and Winfrey called the pay TV ecosystem “broken” as he pushed for a revamped deal with Disney.
    While these disputes are common — Disney and DirecTV on Saturday ended a roughly two-week blackout fight — this one was different in the age of streaming.
    For Charter, the sticking point wasn’t just the fees. The company wanted Disney’s ad-supported streaming options to be part of its TV offering.
    Pay TV providers often say the rates that programming companies such as Disney seek from them are too high, especially since the programmers are also funneling much of their content into streaming platforms. Although the cable bundle loses customers, cable providers note it’s still a cash cow while streaming chases profitability.
    “Credit to Disney, eventually they were willing to lean in and they understood their role in the industry,” Winfrey said, adding that ESPN is considered the linchpin of the cable TV bundle. “They had to be the leader in the space, and we knew that.”
    The deal allowed for ad-supported Disney+ and ESPN+ to be included in “Spectrum TV Select” packages. In addition, when ESPN launches its direct-to-consumer streaming option — which is expected to debut in fall 2025 — these customers will receive access to it, too.
    “I give Charter a ton of credit because they walked into the room and they had very specific ideas. They had a vision that they wanted to execute against, and again, it was a hard negotiation,” ESPN Chairman Jimmy Pitaro said on CNBC on Sept. 3 when discussing the blackout fight with DirecTV.
    Depending on the tier a customer subscribes to, their package can include the ad-supported versions of streamers Disney+, ESPN+, Max, Discovery+, Paramount+, AMC+, BET+ and/or Televisa Univision’s Vix.
    The deals have also given Charter the opportunity to sell and market the streaming services to its broadband-only customers — and includes a revenue share agreement.
    The most recent deals with Warner Bros. Discovery and AMC Networks were early renewals. That’s relatively uncommon in an industry where carriage negotiations often come down to the wire.
    Charter last year also started offering its own streaming devices, known as Xumo, through a joint venture with Comcast. The device gets rid of the cable box and gives consumers a way to access both their cable TV and streaming apps in one place.
    “We still have hurdles to get through,” Winfrey said, noting that Charter’s goal is to offer all ad-supported streaming apps owned by the major programmers it negotiates with on the cable TV bundle in the first half of 2025.
    NBCUniversal’s Peacock is still not part of that roster, however. A Charter representative said the company doesn’t discuss renewals and declined to comment.
    Disclosure: Comcast is the parent company of NBCUniversal, which owns CNBC.
    Correction: A chart in this article showing changes in residential internet subscribers has been updated. More

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    Boeing freezes hiring in sweeping cost cuts as it grapples with factory worker strike

    More than 30,000 Boeing factory workers began a strike on Friday after overwhelmingly voting down a new contract.
    Boeing’s CFO said Friday that the company is focused on conserving cash.
    The strike will impact the company’s aircraft production and deliveries.

    Workers with picket signs outside the Boeing Co. manufacturing facility during a strike in Everett, Washington, US, on Friday, Sept. 13, 2024. 
    M. Scott Brauer | Bloomberg | Getty Images

    Boeing announced sweeping cost cuts Monday, including a hiring freeze, a pause on nonessential staff travel and a reduction on supplier spending to preserve cash as it deals with a strike by more than 30,000 factory workers.
    Boeing factory workers, mostly in the Seattle area, started walking off the job early Friday after overwhelmingly rejecting a tentative labor deal, halting most of Boeing’s aircraft production.

    The manufacturer will make “significant reductions” to supplier spending and stop most purchase orders for its 737 Max, 767 and 777 jetliners, CFO Brian West said in a note to staff. It was the first clear sign of how the strike will affect the hundreds of suppliers that rely on Boeing work.

    Read more CNBC airline news

    “We are working in good faith to reach a new contract agreement that reflects their feedback and enables operations to resume,” West said in his note. “However, our business is in a difficult period. This strike jeopardizes our recovery in a significant way and we must take necessary actions to preserve cash and safeguard our shared future.”
    He added that Boeing is not making cuts to funding for safety, quality and direct customer support work. 

    Boeing factory workers and supporters gather on a picket line during the third day of a strike near the entrance to a Boeing production facility in Renton, Washington, U.S. September 15, 2024. 
    David Ryder | Reuters

    The financial impact of the strike will depend on how long it lasts, but Boeing is focused on conserving cash, West said at a Morgan Stanley conference Friday. He said the company’s new CEO, Kelly Ortberg, wants to get back to the bargaining table right away to reach a new deal.
    “We are also considering the difficult step of temporary furloughs for many employees, managers and executives in the coming weeks,” West said.

    On Friday, Moody’s put all of Boeing’s credit ratings on review for a downgrade and Fitch Ratings said a prolonged strike could put Boeing at risk of a downgrade. That could drive up the borrowing costs of a manufacturer that already has mounting debt.
    Boeing burned about $8 billion in the first half of the year as production slowed in the wake of a near-catastrophic door-panel blowout at the start of the year.

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    Drugmakers bet billions that targeted radiation could become the next cancer breakthrough

    Bristol Myers Squibb, AstraZeneca, Eli Lilly and other pharmaceutical companies have spent some $10 billion on radiopharmaceuticals acquisitions and partnerships over the past year.
    Drugmakers are trying to replicate the success Novartis has found with Pluvicto and Lutathera.
    Radiopharmaceuticals are currently available for some neuroendocrine tumors and prostate cancer. They could one day be used for numerous cancers.

    Drugmakers are betting that delivering radiation directly to tumors will become the next big cancer breakthrough. 
    Bristol Myers Squibb, AstraZeneca, Eli Lilly and other pharmaceutical companies have spent some $10 billion on deals to acquire or work with radiopharmaceuticals makers. They’ve snapped up smaller upstarts to get their hands on technology that, while in its infancy, could treat numerous cancers. 

    “Any large company that has a business presence in oncology or for whom oncology is an important therapeutic category will probably need exposure in this area one way or another,” said Guggenheim Securities analyst Michael Schmidt.
    Two radiopharmaceuticals from Novartis are already available. Another few dozen are in development, according to Schmidt’s count. It’s hard to estimate the total market opportunity because there are so many possible cancers the drugs could treat, he said.
    Schmidt predicts the category could grow to a low end of $5 billion in revenue if the technology stays limited to treating a few types of cancer like prostate and neuroendocrine tumors, to as much as tens of billions if it’s shown to be effective in more cancers.
    The drugs work by attaching radioactive material to a targeting molecule that searches for and attaches to a specific marker on cancer cells. The trick is finding markers that exist on cancer cells but not healthy cells. That can allow the treatment to deliver radiation to cancer cells and spare the rest of the body from the level of damage that comes with many cancer drugs. 
    Proving the technology could work both scientifically and financially has taken time. The first radiopharmaceuticals were approved in the early 2000s. But interest from large pharmaceutical companies didn’t pick up until recently. 

    An employee works at the NSA radiopharmaceutical plant in Aedea Rome, Italy. 
    Franco Origlia | Getty Images

    Making the drugs requires complex manufacturing and logistics, two major drawbacks. Radioactive material degrades quickly, so patients need to be treated within days of their treatment being made. 
    Pharmaceutical companies proved they could manage complex, time-sensitive drugs like CAR-T for blood cancers or gene therapies for rare diseases. Then Novartis showed those strategies could be applied in radiopharmaceuticals. 
    The Swiss pharmaceutical giant won approval in 2018 for a radiopharmaceutical drug called Lutathera for a rare type of cancer in the pancreas and gastrointestinal tract. Then in 2022, Novartis secured another approval in the treatment Pluvicto for prostate cancer. Combined, the drugs are expected to reach about $4 billion in sales by 2027, according to consensus estimates from FactSet. 
    Those successes sparked broader interest in radiopharmaceuticals. 
    “We took all that together and thought, we should do something, we need to do deals here,” said Jacob Van Naarden, president of Eli Lilly’s oncology business. 
    Lilly acquired radiopharmaceutical maker Point Biopharma last year for about $1.4 billion, and also signed a few partnerships with companies developing the treatments. One of the most important factors during Lilly’s initial search was whether companies were prepared to manufacture the drugs, Van Naarden said. Radiopharmaceuticals aren’t easy to make, and Lilly wanted to make sure any initial acquisition could produce the drugs themselves instead of outsourcing the work. 
    Manufacturing was also a key component in Bristol Myers Squibb’s $4.1 billion acquisition of RayzeBio, said Ben Hickey, RayzeBio’s president. At the time of the acquisition, RayzeBio was nearing completion of a factory in Indiana and had secured its own supply of radioactive material needed to develop the experimental drugs in its pipeline. 
    “It was clearly one of the criteria to make sure that we had our destiny within our own hands,” Hickey said. 
    Novartis has shown why that’s so important, as the company initially struggled to make enough doses of Pluvicto. It’s investing more than $300 million to open and expand radiopharmaceutical manufacturing sites in the U.S. so it can produce the drug and get it to patients quickly. The company is now able to meet demand for the treatment, which involves careful planning to distribute. 
    Each dose carries a GPS tracker to ensure it goes to the right patient at the right time, according to Victor Bulto, president of Novartis’ U.S. business. Novartis drives doses to destinations that are within nine hours from the factory to minimize the risk of disruptions from storms, Bulto said. 
    Doctors and patients on the receiving end also feel the complexity. 
    Bassett Healthcare Network in upstate New York needed to upgrade its medical license to handle radioactive material before administering Lutathera and Pluvicto, said Dr. Timothy Korytko, Bassett’s radiation oncologist-in-chief. A certified specialist needs to administer the drugs, which are given intravenously.
    It can take a few weeks from prescribing a radiopharmaceutical to administering one. For Pluvicto, patients come in once every six weeks for up to six treatments.
    Radiopharmaceuticals start decaying once they’re made, so they’re only good for a few days.

    Ronald Coy and his wife Sharon.
    Courtesy: Ronald Coy

    Ronald Coy knows how important it is to make it in for his appointments. Coy, a retired firefighter who’s been battling prostate cancer since 2015, drives more than an hour through upstate New York to receive Pluvicto at Bassett. Coy hasn’t had any issues so far, but he worries a snowstorm could derail one of his appointments between now and the end of January. 
    “Hopefully we won’t get any major storms between now and then or if we do, it’s a week before I go,” Coy said.
    When Coy comes home from treatment, he needs to take precautions like staying away from his wife Sharon so she’s not exposed to radiation. He drinks plenty of water to remove extra radiation from his body. He doesn’t mind little inconveniences for a few days if it means fighting his cancer.
    For Novartis, investing in the infrastructure to produce and distribute radiopharmaceuticals would be worthwhile for Pluvicto and Lutathera alone, Bulto said. But it’s even more attractive because of the potential to treat more cancers. He gives the example of Novartis’ work to develop a drug for a marker that’s found across 28 different tumors, including breast, lung and pancreatic cancers. 
    “If we were able to put all these learnings that we’ve developed from a manufacturing distribution in service of patients with lung cancer, patients with breast cancer, and potentially show these levels of meaningful efficacy and tolerability, we’re talking about a very big potential impact on cancer care. And, of course, a very viable business as well,” he said. 
    At this point, it’s still an if. The field is in its early days, executives say, and the promise of radiopharmaceuticals beyond the current cancers they treat still needs to be proven.
    “If we can be successful in expanding the target and tumor type repertoire, this could be a very big class of medicines,” Eli Lilly’s Van Naarden said, adding that at this point it’s hard to say if the class will be “super important” or “just important.”
    One opportunity Bristol Myers Squibb sees is combining radiopharmaceuticals with existing cancer drugs like immunotherapy, said Robert Plenge, Bristol’s chief research officer. AstraZeneca shares that vision.
    AstraZeneca spent $2 billion to acquire Fusion Pharmaceuticals earlier this year. Susan Galbraith, the company’s executive vice president of oncology research and development, points to existing regimens that combine immunotherapy with radiation. 
    How large AstraZeneca’s radiopharmaceuticals portfolio ultimately becomes depends on its initial prostate cancer program and other undisclosed targets already in the works, Galbraith said. But she thinks the technology will become an important part of cancer drugs in the next decade.
    It could take years to understand the true potential of the technology, as many experimental drugs are still in the early phases of development. One outstanding question is whether other radiopharmaceuticals are as safe and well-tolerated as Novartis’ Pluvicto, especially ones that use other types of radioactive material, the Guggenheim analyst Schmidt said. 

    Ronald Coy has been battling prostate cancer for almost 10 years. He started taking Novartis’ Pluvicto earlier this year.
    Courtesy: Ronald Coy

    Large pharmaceutical companies aren’t waiting to jump into the race. Stories like those from Coy encourage them that the work will pay off. 
    Over almost 10 years, Coy has undergone multiple treatments for prostate cancer that has spread to his bones. After just one Pluvicto treatment earlier this year, bloodwork showed Coy’s cancer level plummeted. 
    Not everyone responds that well to Pluvicto, and things could always change for Coy. But for now, Coy feels fortunate that he’s among the group that responds well to Pluvicto. That’s worth the drives and the precautions for him. 
    “I feel very fortunate every day that I am – as it stands now – I’m part of the third where this is working really good for me,” he said.
    — CNBC’s Leanne Miller contributed to this report. More

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    China’s local government debt problems are a hidden drag on economic growth

    In understanding China’s persistent consumption slowdown, analysts are looking at the connection between China’s real estate slump and local governments’ financing.
    “Macroeconomic headwinds continue to hinder the revenue-generating power of China’s local governments, particularly as related to taxes and land sales,” said Wenyin Huang, director at S&P Global Ratings.
    Often overlooked is that fact that ” investment is creating weak nominal GDP growth outcomes – pressuring the corporate sector to reduce its wage bill and leading to a sharp rise in debt ratios,” Morgan Stanley’s chief Asia economists Chetan Ahya and Robin Xing said in a September report.

    Local governments in China are still building highways, bridges and railways, as pictured here in Jiangxi province on Sept. 6, 2024.
    Cfoto | Future Publishing | Getty Images

    BEIJING — China’s persistent consumption slowdown traces back to the country’s real estate slump, and its deep ties to local government finances — and debt.
    The bulk of Chinese household wealth went into real estate in the last two decades, before Beijing began cracking down on developers’ high reliance on debt in 2020.

    Now, the values of those properties are falling, and developers have reduced land purchases. That’s cutting significantly into local government revenue, especially at the district and county level, according to S&P Global Ratings analysts.
    They predicted that from June of this year, local government finances will take three to five years to recover to a healthy state.
    But “delays in revenue recovery could prolong attempts to stabilize debt, which continues to rise,” Wenyin Huang, director at S&P Global Ratings, said in a statement Friday to CNBC.

    “Macroeconomic headwinds continue to hinder the revenue-generating power of China’s local governments, particularly as related to taxes and land sales,” she said.
    Huang had previously told CNBC that the financial accounts of local governments have suffered from the drop in land sales revenue for at least two or three years, while tax and fee cuts since 2018 have reduced operating revenue by an average of 10% across the country.

    This year, local authorities are trying hard to recoup revenue, giving already strained businesses little reason to hire or increase salaries — and adding to consumers’ uncertainty about future income.

    Clawing back tax revenue

    As officials dig into historical records for potential missteps by businesses and governments, dozens of companies in China disclosed in stock exchange filings this year that they had received notices from local authorities to pay back taxes tied to operations as far back as 1994.
    They stated amounts ranging from 10 million yuan to 500 million yuan ($1.41 million to $70.49 million), covering unpaid consumption taxes, undeclared exported goods, late payment fees and other fees.
    Even in the relatively affluent eastern province of Zhejiang, NingBo BoHui Chemical Technology said regional tax authorities in March ordered it to repay 300 million yuan ($42.3 million) in revised consumption taxes, as result of a “recategorization” of the aromatics-derivatives extraction equipment it had produced since July 2023.
    Jiangsu, Shandong, Shanghai, and Zhejiang — some of China’s top provinces in tax and non-tax revenue generation — see non-tax revenue growth exceeding 15% year-on-year growth in the first half of 2024, S&P’s Huang said. “This reflects the government’s efforts to diversify its revenue streams, particularly as its other major sources of income face increasing challenges.”
    The development has caused an uproar online and damaged already fragile business confidence. Since June 2023, the CKGSB Business Conditions Index, a monthly survey of Chinese businesses, has hovered around the 50 level that indicates contraction or expansion. The index fell to 48.6 in August.
    Retail sales have only modestly picked up from their slowest levels since the Covid-19 pandemic.
    The pressure to recoup taxes from years ago “really shows how desperate they are to find new sources of revenue,” Camille Boullenois, an associate director at Rhodium Group, told CNBC. 
    China’s national taxation administration in June acknowledged some local governments had issued such notices but said they were routine measures “in line with law and regulations.”
    The administration denied allegations of “nationwide, industrywide, targeted tax inspections,” and said there is no plan to “retrospectively investigate” unpaid taxes. That’s according to CNBC’s translation of Chinese text on the administration’s website.
    “Revenue is the key issue that should be improved,” Laura Li, sector lead for S&P Global Ratings’ China infrastructure team, told CNBC earlier this year.
    “A lot of government spending is a lot of so-called needed spending,” such as education and civil servant salaries, she said. “They cannot cut down [on it] unlike the expenditure for land development.”

    Debate on how to spur growth

    A straightforward way to boost revenue is with growth. But as Chinese authorities prioritize efforts to reduce debt levels, it’s been tough to shift policy away from a years-long focus on investment, to growth driven by consumption, analyst reports show.
    “What is overlooked is the fact that investment is creating weak nominal GDP growth outcomes —pressuring the corporate sector to reduce its wage bill and leading to a sharp rise in debt ratios,” Morgan Stanley chief Asia economists Chetan Ahya and Robin Xing said in a September report, alongside a team.
    “The longer the pivot is delayed, the louder calls will become for easing to prevent a situation where control over inflation and property price expectations is lost,” they said.
    The economists pointed out how similar deleveraging efforts from 2012 to 2016 also resulted in a drag on growth, ultimately sending debt-to-GDP ratios higher.
    “The same dynamic is playing out in this cycle,” they said. Since 2021, the debt-to-GDP has climbed by almost 30 percentage points to 310% of GDP in the second quarter of 2024 — and is set to climb further to 312% by the end of this year, according to Morgan Stanley.
    They added that GDP is expected to rise by 4.5% from a year ago in the third quarter, “moving away” from the official target of around 5% growth.

    The ‘grey rhino’ for banks

    Major policy changes are tough, especially in China’s rigid state-dominated system.
    Underlying the investment-led focus is a complex interconnection of local government-affiliated business entities that have taken on significant levels of debt to fund public infrastructure projects — which often bear limited financial returns.
    Known as local government financing vehicles, the sector is a “bigger grey rhino than real estate,” at least for banks, Alicia Garcia-Herrero, chief economist for Asia-Pacific at Natixis, said during a webinar last week. “Grey rhino” is a metaphor for high-likelihood and high-impact risks that are being overlooked.
    Natixis’ research showed that Chinese banks are more exposed to local government financial vehicle loans than those of real estate developers and mortgages.
    “Nobody knows if there is an effective way that can solve this issue quickly,” S&P’s Li said of the LGFV problems.
    “What the government’s trying to do is to buy time to solve the most imminent liquidity challenges so that they can still maintain overall stability of the financial system,” she said. “But at the same time the central and local government[s], they don’t have sufficient resources to solve the problem at once.” More

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    How China’s communists fell in love with privatisation

    On a recent visit to his hometown of Laixi, in eastern China, Guo Ping received a shock: the local government had sold off a number of state-owned assets, including two reservoirs. The small city’s finances, as well as those in the neighbouring port of Qingdao, were under strain, forcing officials to come up with new sources of revenue. This meant hawking even large bits of regional infrastructure. The sales seemed to be part of what Mr Guo, who asked to use a pseudonym, views as a gradual economic deterioration. More

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    DirecTV, Disney reach deal to end blackout in time for college football

    Disney and DirecTV reached an agreement to end a blackout in time for college football on Saturday.
    Disney’s networks have been dark for DirecTV’s customers for roughly two weeks, leaving them without college football, the U.S. Open and “Monday Night Football.”
    The dispute underscores how valuable live sports is both for the media companies that own rights to air the games and the pay-TV providers who want to show them.

    A Clemson Tigers helmet on the field of last season’s College Football Playoff National Championship Game. Clemson is among the NCAA Division I major conference programs to recently have football players test positive for Covid-19, adding more uncertainty to the planned start of college football season.
    Alika Jenner | Getty Images

    DirecTV and Disney have reached a deal that brings Disney’s ESPN and other channels back to the pay-tv provider’s customers after a roughly two week blackout.
    The deal comes in time for college football this Saturday, which airs on ABC, ESPN, as well as the SEC Network and ACC Network, as well as the Emmy Awards which air on ABC. CNBC earlier reported a deal could be made as early as Saturday.

    Disney’s networks went dark on Sept. 1 after the two sides could not agree to terms on fees and bundle structures. The dispute left DirecTV’s more than 11 million customers without access to the U.S. Open, college football and this season’s opening “Monday Night Football” game.
    DirecTV executives began calling for the ability to offer skinnier, genre-specific bundles to customers in the weeks leading up to the dispute, and again when the Disney networks went dark. Disney had said that DirecTV’s offers did not reflect the value that its networks provide. 
    On Saturday, DirecTV and Disney said they reached a deal that called for “market based terms” on pricing.
    The deal also gives DirecTV the opportunity to offer multiple genre-specific options, such as sports, entertainment and kids and family, inclusive of Disney’s traditional TV networks, along with its streaming services, Disney+, Hulu and ESPN+.
    DirecTV will be able to offer Disney’s streaming services in its packages and a la carte, the company said in a release Saturday. DirecTV also won the rights to distribute Disney’s upcoming ESPN flagship direct-to-consumer streaming service — expected to launch in fall 2025 — at no additional cost to its subscribers.

    The inclusion of Disney’s streaming services and ESPN’s future flagship service echoes the carriage agreement reached between Charter Communications and Disney last year after a similar blackout. Charter and Disney had reached a deal in time for the first week of “Monday Night Football.”
    In a joint statement, DirecTV and Disney called this a “first-of-its-kind collaboration” as it gives “customers the ability to tailor their video experience through more flexible options.”
    The blackout had underscored how valuable live sports is both for the media companies that own rights to air the games and the pay-TV providers who want to show them.
    Since Sept. 1, both sides accused the other of holding up an agreement. DirecTV called Disney anti-consumer, and ESPN Chairman Jimmy Pitaro called the responses DirecTV made to Disney’s package offers “basically hypotheticals.”
    Through the blackout the companies, their customers and other business owners appear to have lost out.
    “We never want to black out. It’s not good for either side. It’s not good for the customer, of course. We did everything we could,” ESPN’s Pitaro said on CNBC last week.
    The amount of customers DirecTV lost during the dispute was not “immaterial,” said DirecTV Chief Marketing Officer Vince Torres at Goldman Sachs’ Communacopia & Technology Conference on Thursday.
    DirecTV offered its customers a $30 credit, financed by stopping payments to Disney as soon as the blackout began, Torres said.
    During the dispute, many small business owners were also unable to offer the full slate of sports that they usually do. Many bars and restaurants rely on DirecTV as a commercial distributor of the NFL’s “Sunday Ticket” package of out of market games — which was unaffected by the blackout — and therein use the pay TV provider for the rest of its TV content, including ESPN.
    Beyond sports, the blackout also occurred during the presidential debate on Tuesday, leaving customers in certain markets without access to Disney’s ABC broadcast network.
    Disney had sought to temporarily allow DirecTV to offer ABC to its customers for that night, but the pay TV provider refused. DirecTV called it a public relations play and said it did not believe it was necessary to open ABC since the debate was also being broadcast on several other news networks.
    Antitrust in media has been closely watched in recent weeks after Venu, the joint streaming venture between Warner Bros. Discovery, Fox Corp. and Disney, was temporarily blocked by a judge on antitrust concerns. Fubo TV initially brought the suit and DirecTV and EchoStar’s Dish have since supported it. 
    DirectTV last week said it filed a complaint with the Federal Communications Commission that said Disney did not negotiate in good faith. The FCC has rules that require broadcast owners to do so. The release on Saturday didn’t state the status of the complaint, but sources tell CNBC it “remains active.”
    The entire pay-tv bundle has been upended in recent years as customers have turned to streaming services and other forms of entertainment in place of the traditional structure. The shift has fragmented the media ecosystem, and live sports — especially Disney’s ESPN — is considered the linchpin holding the bundle together due to its high viewership.
    DirecTV is in the midst of an ad campaign to remind consumers that it is more than a satellite TV company — it has a streaming bundle, too. More

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    Pfizer says its experimental drug for deadly condition that causes appetite and weight loss in cancer patients shows positive trial results

    Pfizer said its experimental drug for a common, life-threatening condition that causes cancer patients to lose their appetite and weight showed positive results in a midstage trial.
    Patients with the condition, called cancer cachexia, who took Pfizer’s treatment saw improvements in body weight, muscle mass, quality of life and physical function.
    The results could pave the way for the drug, a monoclonal antibody called ponsegromab, to become the first treatment approved specifically for cancer cachexia. 

    Kena Betancur | Corbis News | Getty Images

    Pfizer’s experimental drug for a common, life-threatening condition that causes cancer patients to lose their appetite and weight showed positive results in a midstage trial, the drugmaker said Saturday. 
    Patients with the condition, called cancer cachexia, who took Pfizer’s treatment saw improvements in body weight, muscle mass, quality of life and physical function, according to the drugmaker. The results could pave the way for the drug, a monoclonal antibody called ponsegromab, to become the first treatment approved in the U.S. specifically for cancer cachexia. 

    The condition affects about 9 million people worldwide, and 80% of cancer patients suffering from it are expected to die within one year of diagnosis, according to the company.
    Patients with cancer cachexia don’t eat enough food to meet their body’s energy needs, causing significant fat and muscle loss and leaving them weak, fatigued and, in some cases, unable to perform daily activities. Cancer cachexia is currently defined as a loss of 5% or more body weight over the past six months in cancer patients, along with symptoms such as fatigue, according to the National Cancer Institute.
    The symptoms of the condition can make cancer treatments less effective and contribute to lower survival rates, Pfizer said. 
    “We would see ponsegromab fitting into the treatment of cancer patients, really addressing that unmet need in cachexia, and through that, improving their wellness, their ability to care for themselves, and we would also hope their ability to tolerate more treatment,” Charlotte Allerton, Pfizer’s head of discovery and early development, told CNBC in an interview. 
    Pfizer has not disclosed the estimated revenue opportunity of the drug, which could potentially be approved for different uses.

    The company presented the data Saturday at the European Society for Medical Oncology 2024 Congress, a cancer research conference held in Barcelona, Spain. The results were also published in The New England Journal of Medicine. 
    The phase two trial followed 187 people with non-small cell lung cancer, pancreatic cancer or colorectal cancer and high levels of a key driver of cachexia called growth differentiation factor 15, or GDF-15. It is a protein that binds to a certain receptor in the brain and has an impact on appetite, according to Allerton. 
    After 12 weeks, patients who took the highest dose of ponsegromab — 400 milligrams — saw a 5.6% increase in weight compared with those who received a placebo. Patients who took a 200-milligram or 100-milligram dose of the drug saw a roughly 3.5% and 2% increase in body weight, respectively, compared with the placebo group. 
    Allerton said a work group of experts defines a weight gain of greater than 5% as a “clinically meaningful difference in cancer patients with cachexia.” She added that the drug’s effect on other measures of wellness, such as increased appetite and physical activity, is “really what offers us the encouragement.” 
    Pfizer said it did not observe any significant side effects with the drug. Treatment-related side effects occurred in 8.9% of people taking a placebo and 7.7% of those who took Pfizer’s treatment, the company said. 
    The company said it is discussing late-stage development plans for the drug with regulators, and aims to start studies in 2025 that can be used to file for approval. Pfizer is also studying ponsegromab in a phase two trial in patients with heart failure, who can also suffer from cachexia.
    Pfizer’s drug works by reducing the levels of GDF-15. Pfizer believes this can improve appetite and enable patients to maintain and gain weight. 
    “For most of us, we have low levels of GDF-15 in our tissues when we’re healthy, but we really do see this up regulation of GDF-15 in more of these chronic conditions, and in this case, cancer,” Allerton said. More