China’s National Bureau of Statistics will release its estimate for first-quarter gross domestic product growth on Friday, with banner figures expected one year after the Covid-19 pandemic brought the world’s second-largest economy to a halt.The country recorded a historic year-on-year contraction of almost 7 per cent in the first quarter of 2020, setting the stage for a dramatic rebound this year. Exports in March were the most recent example of this “low base” effect, soaring more than 30 per cent compared with the same month last year, when China was under lockdown to contain coronavirus.Here are five things to look out for in Friday’s release.How big will the first-quarter bounce be?Larry Hu, chief China economist at Macquarie, said first-quarter economic output was “on track to [expand] 18 per cent” year on year.But this “first into the pandemic, first out” momentum will slow over the rest of 2021. China’s economy grew 6.5 per cent in the fourth quarter and 2.3 per cent for the entire year — making it the only major economy to expand in 2020.Premier Li Keqiang announced a full-year growth target of “at least 6 per cent” at the annual session of the National People’s Congress, China’s rubber-stamp parliament, held last month in Beijing. Why not aim higher?Chinese financial officials, led by Liu He, vice-premier and the country’s most powerful financial official, are eager to rein in some of the stimulus measures that cushioned the economy but also reversed their success in stabilising China’s overall debt levels.Liu’s team is determined to restore financial discipline. It has refused to embrace the “helicopter money” and other demand-side stimulus measures unleashed by major western economies such as the US.The seriousness of their intent was highlighted in February, when the People’s Bank of China quietly instructed domestic and foreign lenders to keep first-quarter new loan growth flat compared with the same period last year.Will they succeed?Issuing diktats to China’s state-controlled banking system is often ineffective, even for powerful officials such as Liu.President Xi Jinping has declared that “homes are for living in, not speculating on”, and China’s top banking regulator has singled out the property sector as the economy’s biggest “grey rhino” risk to stability.But the country’s property boom has not abated. Real estate-related investment and loan growth were up 38 per cent and 14 per cent year-on-year in the January-February period, respectively.Steel production also increased 6 per cent last year to a record 1.1bn tonnes. Government efforts to rein in the sector, which has exacerbated air pollution levels across northern China this spring, led to higher prices, which spurred more production.Will consumption and services rebound?China’s impressive economic recovery last year was driven by surging industrial production, while retail sales remained relatively weak. The service sector also bore the brunt of the pandemic.This is the opposite of what Beijing would like to see, as it tries to rebalance the economy away from credit-fuelled industrial activity towards consumption. But this is proving to be very difficult. China recorded consumer price deflation in November of minus 0.5 per cent for the first time in more than 10 years.What other constraints does Beijing face as it tries to rein in the recovery?Xi’s administration does not want to apply the brakes too hard ahead of the centennial of the Chinese Communist party’s founding, which will be celebrated on July 1.“The party will do ‘whatever it takes’ to prevent a downturn in the economy or a bad slump in the stock market from spoiling the run-up to [the] celebrations,” said Diana Choyleva at Enodo Economics. “After that, a renewed emphasis on reducing China’s debt burden will lead to tighter policy and liquidity conditions.” More
A group of 175 former world leaders and Nobel laureates is urging the US to take “urgent action” to suspend intellectual property rights for Covid-19 vaccines to help boost global inoculation rates.A measure to allow countries to temporarily override patent rights for Covid-related medical products was proposed at the World Trade Organization by India and South Africa in October, and has since been backed by nearly 60 countries.Doing so would allow developing countries to make their own copies of the vaccines that have been developed by pharmaceutical companies without fear of being sued for intellectual property infringements. “A WTO waiver is a vital and necessary step to bringing an end to this pandemic. It must be combined with ensuring vaccine knowhow and technology is shared openly,” the signatories, comprising more than 100 Nobel prizewinners and over 70 former world leaders, wrote in a letter to US president Joe Biden, seen by the Financial Times. They added a waiver in tandem with other measures would “expand global manufacturing capacity, unhindered by industry monopolies that are driving the dire supply shortages blocking vaccine access”.
While wealthier countries have access to doses of Covid-19 vaccines and are increasing vaccination programmes for their populations, developing economies have had more limited access to doses. Former leaders who signed the letter included Gordon Brown, former UK prime minister; François Hollande, former French president; Mikhail Gorbachev, former president of the USSR; and Yves Leterme, former Belgian prime minister.Hollande branded the inequality in access to vaccines “an unbearable political and moral situation”, that was “economic nonsense”.The individuals who signed the letter, including Nobel laureates in economics as well as from across the arts and sciences, warned that inequitable vaccine access would impact the global economy and prevent it from recovering. “The world saw unprecedented development of safe and effective vaccines, in major part thanks to US public investment,” the group wrote. “We all welcome that vaccination rollout in the US and many wealthier countries is bringing hope to their citizens.”“Yet for the majority of the world that same hope is yet to be seen. New waves of suffering are now rising across the globe. Our global economy cannot rebuild if it remains vulnerable to this virus.”The group warned that fully enforcing IP was “self-defeating for the US” as it hindered global vaccination efforts. “Given artificial global supply shortages, the US economy already risks losing $1.3tn in gross domestic product this year.” US business groups, including pharmaceutical industry representatives, have urged Biden to resist supporting a waiver to IP rules at the WTO, arguing that the proposal led by India and South Africa was too “vague” and “broad”.The US has previously opposed a waiver for Covid-19 products, along with the UK, EU and Switzerland.The US trade representative’s office said late last month that it was “exploring every avenue” and “evaluating the efficacy” of the proposal to waive so-called Trade-Related Aspects of Intellectual Property Rights. Katherine Tai, US trade representative, told a WTO meeting on vaccine equity on Wednesday that both the government and the private sector would need to do their part to “live up to” the “spirit” of the Trips agreement, which was born out of the HIV crisis. “We hope to hear more today about how the market once again has failed in meeting the health needs of developing countries,” Tai said. “As part of that we have to consider what modifications and reforms to our trade rules might be necessary to reflect what we have learned.”Countries already have the ability to make their own generic versions of branded drugs and vaccines by issuing so-called compulsory licenses under the WTO Trips agreement, but so far none has for Covid-19 products.
Joseph Stiglitz, a Nobel laureate in economics, told the FT that the compulsory license rule already in place indicated that the principles of pausing patents in emergencies had been accepted by the international community.However, developing countries have often been reluctant to take advantage of the compulsory license option for fear of diplomatic blowback, he said. “Historically, the US has always threatened countries that have used it,” Stiglitz said. “So we’ve agreed to it, but we undermine it.” He said governments had made funding available for research into vaccines, and that pharmaceutical companies had “already made their profit”. “And we know that next time something like this happens, the government will come forward and help pay for the development of the vaccines because the economic trade-off between the loss of trillions versus a few billions of dollars for research is a no brainer.”
Video: Covid-19 and the business of vaccines More
Eurozone countries should increase government spending by an extra 3 per cent of gross domestic product over the next year to mitigate the economic impact of the coronavirus pandemic, the IMF said on Wednesday.The 19-country bloc is forecast to recover more slowly than its main trading partners, the IMF has warned, held back by vaccination rollout delays, extended coronavirus lockdowns and a smaller fiscal stimulus than the US is implementing.Advanced European economies are expected to cut their extra fiscal support from 7.5 per cent of GDP in 2020 to about 6.5 per cent this year, the IMF said.A further increase in public spending would boost the bloc’s growth by 2 per cent and reduce the permanent loss of jobs, investment and output due to the crisis, according to the fund.“The faster the recovery, the less scarring people and businesses will suffer from unemployment, lost human capital and lower investment and research and development,” the IMF said in its latest European regional economic outlook.In particular, European governments should spend more on “additional transfers targeted at households in need, hiring subsidies to reintegrate the unemployed faster, temporary investment tax credits to bring forward investment and equity support schemes for viable firms in need of capital”, the fund recommended.
The IMF recently trimmed its growth forecast for the eurozone this year to 4.5 per cent and estimates that it faces a long-term output loss relative to the pre-Covid-19 trend of about 1.5 per cent of GDP by 2025.“As monetary policy — close to the effective lower bound in several economies — becomes less effective in boosting output, fiscal policy needs to play an increasingly larger role,” the IMF said. “Fiscal measures to stimulate investment and to facilitate job creation and reallocation would speed up the recovery.”Christine Lagarde, president of the European Central Bank and former head of the IMF, compared the eurozone economy to a patient coming out of intensive care but still leaning on two crutches. “You don’t want to remove either crutch, the fiscal or the monetary, until the patient can actually walk fine, and to do that means support well into the recovery,” she said on Wednesday.The $1.9tn fiscal programme launched by the US government is expected to provide a 0.3 percentage-point boost to eurozone GDP and a 0.15 percentage-point lift to inflation by 2023, Lagarde added.
Several European countries are ramping up their spending plans. The German government last month approved a €60bn supplementary budget and the Dutch cabinet is discussing extra expenditure.Mario Draghi, Italy’s prime minister and Lagarde’s predecessor at the ECB, is preparing a new package of stimulus measures worth up to €40bn — about 2.5 per cent of GDP — which could push Italy’s budget deficit this year above 10 per cent of GDP. That would be the first time the country’s deficit has hit double digits since the early 1990s.Since taking office two months ago Draghi has argued that his country and others in Europe must provide significant support to their economies to reduce the impact of pandemic lockdowns. Draghi is expected to present his plan to Italy’s two parliamentary chambers for approval in the final week of April.EU governments are this month due to submit plans to Brussels for how they plan to spend their share of the bloc’s €750bn NextGenerationEU recovery fund. However, the money is not due to start being distributed before June, while several governments are yet to approve the plan and it faces a legal challenge in Germany.Luis de Guindos, vice-president of the ECB, told MEPs on Wednesday: “If we want a timely recovery in Europe, we have to avoid any cliff effects from the premature scaling back of these [stimulus] policies. It is therefore of the utmost importance that the NextGenerationEU plan becomes operational without delay.” More
(Reuters) – After it shut down for two months last year, Jan-Ie Low and her family reduced the hours at their Las Vegas restaurant and converted much of their dining room into a food delivery hub. Outdoor dining was not an option in the desert heat. Conventions, which bring in diners, were canceled because of the coronavirus. “If you don’t adapt, you’re going to be left behind,” said Low, whose family has owned the SATAY Thai Bistro & Bar for more than 15 years. Despite the changes made, sales dropped by about 50% in 2020 from the year before.COVID-19 is hitting business owned by Asian Americans on multiple fronts. Pandemic related closures and restrictions on indoor gatherings were particularly hard on the restaurants, stores, nail salons and other service industries in which many Asian-owned firms are concentrated. Language barriers and a dearth of banking relationships made it difficult for some business owners to access government aid, even as they coped with an added layer of fear amid a surge in hate crimes linked to racist rhetoric that blames Asians for the coronavirus.According to a report https://www.fedsmallbusiness.org/medialibrary/FedSmallBusiness/files/2021/45-entrepreneuers-aarp-report released last month by the New York Federal Reserve and AARP that focused on older entrepreneurs who make up 80% of all small business owners, small firms owned by Asian Americans fared worse than those owned by Black Americans and Hispanic Americans – despite going into the pandemic in a stronger economic position.(Graphic: Concentrated in hard hit sectors – https://graphics.reuters.com/HEALTH-CORONAVIRUS/USA-ASIAN-BUSINESS/qzjpqzegovx/chart.png)SIGNIFICANT FINANCIAL TOLL Some 9% of firms owned by Asian Americans were financially “distressed” in 2019 – far lower than the 19% of Black owned firms and 16% of Hispanic owned businesses given that rating based on their profitability, credit score, and business funding, according to New York Fed research. Among white-owned firms, the figure was 6%. But businesses owned by Asian Americans took a steeper hit early on in the crisis. By the end of March, sales for Asian-American businesses were down by more than 60% from a year earlier, greater than the roughly 50% drop faced by other small businesses, according to research https://www.jpmorganchase.com/institute/research/small-business/small-business-financial-outcomes-during-the-onset-of-covid-19#finding-4 from the JPMorgan Chase (NYSE:JPM) Institute.Some 90% of small Asian-American firms in the New York Fed study lost revenue last year, greater than the 85% for Blacks, 81% for Hispanics and 77% for whites. Michael Park, owner of Bobby Schorr Cleaners in Philadelphia, said the dry cleaning business his family has owned for 34 years sometimes made only about $100 a day in sales early on in the pandemic, less than a tenth of normal. Business picked up a bit over the summer as people became more comfortable venturing out, but sales are still about 25% of pre-pandemic levels, he said. Park used grants and small business loans to cover basic expenses. “We’re just trying to stay afloat,” he said.TROUBLE ACCESSING AIDJamie Lee, who works for a community development organization that supports housing, development and small businesses in Seattle’s Chinatown district, said many of the owners she works with know enough English to serve customers, but are uncomfortable filling out complex financial forms necessary to tap into grants and government aid, such as the Paycheck Protection Program.Minority-owned businesses were largely excluded from the first round of PPP loans issued last spring, according to research published in January by Robert Fairlie from the University of California at Santa Cruz and Frank Fossen of the University of Nevada. More support for minority-owned businesses came after the program was adjusted to include more participation from smaller and community-based lenders, the researchers found. Low, the managing partner of the Nevada Thai restaurant, said applying for a PPP loan felt like hunting for toilet paper in the early months of the crisis. She eventually found a small lender – not the large bank her family-run restaurant typically works with – willing to process her application. In Washington, Teizi Mersai, the business operations manager for Lam’s Seafood Market, a Vietnamese-American-owned grocery store in an area known as Little Saigon in Seattle, said he and other mom and pop shop owners are thankful for the support they received from neighborhood groups that helped them apply for aid and tap into other resources.“The community really does come together,” he said.Mersai also joined a delivery service so that customers could order groceries online. It took about six months to get fully set up because he and his staff had to research platforms and then photograph thousands of the Asian items they offer, including drinks, noodles and snacks that were not captured in stock images provided by a third-party website.The move online and a loosening of restrictions should help sales, Mersai said.A few weeks ago, something happened that put the staff on edge. A store clerk, who was Asian American, was hit while he was on his way home from work. The employee was not seriously harmed by the blow to his face and it is unclear whether the attack was a hate crime. But colleagues are taking precautions.“We basically tell everyone to make sure you travel in pairs as much as you can,” Mersai said. More
In its regional outlook for the euro zone, the IMF said the extra fiscal boost could then be followed by stronger consolidation once excess capacity has been reduced. “Such additional support to the tune of 3 percent of GDP over 2021−22 could lift output by about 2 percent by the end of 2022 and more than halve the medium-term scarring due to robust supply-side effects,” the IMF said in the report.”This would have greater benefits for households with low incomes and fewer side effects than additional monetary stimulus. It would also bring inflation closer to target in many countries and help rebuild monetary policy space,” it said.Euro zone countries provided more than 3 trillion euros in national fiscal stimulus and liquidity schemes last year to keep their economies going and some, like Italy, are announcing new support measures as the third wave of the pandemic triggers new lockdowns across the bloc. More
The Ever Given was declared suitable for onward passage from the Great Bitter Lake to Port Said, where she would be assessed again before departing for Rotterdam, Bernhard Schulte Shipmanagement (BSM) said in a statement.The ship has been in the lake, which sits between two sections of the canal, since being dislodged on March 29. The 400-metre (430 yard) vessel was stuck in the canal for six days, blocking traffic. The Suez Canal Authority (SCA) said on Wednesday that negotiations aimed at reaching an agreement “may take some time”. It has made a $916 million compensation claim against the ship’s Japanese owner Shoei Kisen, UK Club, one of its insurers, said.The SCA has also obtained a court order to detain the ship as discussions over compensation continue. “The SCA’s decision to arrest the vessel is extremely disappointing. From the outset, BSM and the crew on board have cooperated fully with all authorities,” BSM chief executive Ian Beveridge said in the statement.”BSM’s primary goal is a swift resolution to this matter that will allow the vessel and crew to depart the Suez Canal.”Taiwan’s Evergreen Line, which is the Ever Given’s charterer, said separately on Wednesday it was investigating the scope of the Egyptian court order “and studying the possibility of the vessel and the cargo on board being treated separately”.Panama’s Luster Maritime and Japan’s Higaki Sangyo Kaisha, the vessel’s registered owners, have started legal proceedings in London’s High Court to open a limitation fund that lawyers say will serve as a cash pool of around $115 million to satisfy valid English claims.Japan’s Shoei Kisen is the beneficial, or ultimate, owner of the vessel. Two Suez Canal Authority sources told Reuters that the owner had offered $100 million in response to the Canal’s claim. Shoei Kisen declined to comment. More
(Reuters) -Wells Fargo & Co reported first-quarter profit ahead of Wall Street estimates on Wednesday as the bank reduced its reserves by $1.6 billion and costs tied to its years-old sales practices scandal stabilized.The San Francisco-based lender did not report material restructuring and remediation charges in the quarter as Chief Executive Officer Charlie Scharf undertakes what he has said will be a “multi-year journey” to overhaul the bank.The fourth-largest U.S. lender said profit rose to $4.74 billion, or $1.05 per share, in the three months ended March, from $653 million, or 1 penny per share, a year earlier.Analysts on average had expected a profit of 70 cents per share, according to the IBES estimate from Refinitiv.The loan loss reserve release added 28 cents to the earnings per share.The slight year-earlier profit was caused by an exceptionally large provision for potential loan losses, as U.S. banks braced for unpaid bills due to the COVID-19 pandemic shuttering the economy and pushing millions out of work.Since then, an ultra-loose monetary policy, trillions in stimulus support and an accelerated vaccination program have largely put the world’s largest economy on a more solid footing.Earlier in the day, JPMorgan Chase & Co (NYSE:JPM) said it released more than $5 billion in reserves in the first quarter, helping the largest U.S. bank’s earnings jump almost 400%. Wells Fargo (NYSE:WFC) reported overhead, or efficiency ratio, which measures cost per dollar of revenue, of 77%, from 74% a year earlier.Pre-tax, pre-provision profit fell 13% to $4.07 billion.Changes in pre-provision profit are more important this quarter than usual because they are not impacted by different judgments banks make about future loan losses, analysts have said.Wells Fargo has been operating under penalties from regulators since 2016 when details of a sales scandal emerged and led to the departure of two chief executives and billions of dollars in litigation and remediation charges and a Federal Reserve imposed asset cap of $1.95 trillion. The asset limit has kept Wells Fargo from freely increasing loans and deposits to boost interest revenue and better cover costs. Other banks’ balance sheets have swelled.Last year Scharf said he was looking for $10 billion of costs to cut over several years from Wells Fargo’s roughly $54 billion annual expense base because its overhead ratio was worse than at peers.”Charge-offs are at historic lows and we are making changes to improve our operations and efficiency, but low interest rates and tepid loan demand continued to be a headwind for us in the quarter,” Scharf said on Wednesday. More
The huge container ship that blocked the Suez Canal for almost a week last month is being held by Egyptian authorities as they seek compensation of more than $900m from its owners. An Egyptian court this week ordered that the Ever Given should be seized as talks continued between the Suez Canal Authority that operates the waterway and the vessel’s Japanese owner and its insurers over who pays for losses resulting from the blockage. The SCA made a claim for $916m on April 7, according to the UK P&I Club, an insurer that covers the owner, Japan-based Shoei Kisen Kaisha, against third-party liabilities. Osama Rabie, SCA head, told Egyptian television on Monday that an investigation into the cause of the incident would finish on Thursday, but that the talks over compensation continued.The ship’s owner was trying to reduce the bill by 90 per cent, Rabie said, adding: “They don’t want to pay anything.”The compensation covered the rescue as well as delay costs and damage to equipment and the canal, he explained. The canal “suffered enormous damages and we made no mistakes,” he said.Shipping industry analysts pointed out that the SCA puts two pilots on board vessels to help them navigate the waterway.UK P&I said on Tuesday that a “carefully considered and generous” counter-offer had been made to the canal authority, adding that it was “disappointed by the SCA’s subsequent decision to arrest the vessel”.Shoei Kisen Kaisha confirmed on Wednesday that the Ever Given had been impounded but declined to comment further, saying it would respond in accordance with local law.Evergreen Marine, the Taiwanese operator of the 220,000-tonne vessel, said on Wednesday that the SCA’s claims were “largely unsupported and lack any detailed justification”.“Evergreen is urging all concerned parties to facilitate a settlement agreement,” it said, adding it was also “investigating the scope” of the court order.The Ever Given is impounded in the wider Great Bitter Lake section of the canal where traffic can pass. UK P&I is part of a an international group of 13 mutuals which share the first $100m of large claims. The group also has $3bn of reinsurance cover.Fitch, the rating agency, has forecast the episode would be a “large loss event” for the reinsurance industry.UK P&I said the SCA claim included $300m for “loss of reputation,” which the insurer disputed, as well as a $300m “salvage bonus”. It continued: “The claim presented by the SCA also does not include the professional salvor’s claim for their salvage services which owners and their hull underwriters expect to receive separately.”Refinitiv, a data provider, has estimated that lost transit fees totalled less than $100m. Salvage costs will typically be paid by the hull and machinery insurer, according to insurance experts. Shoei Kisen told the Financial Times last month that this cover was provided by Tokyo-based MS&AD Insurance Group. MS&AD declined to comment at the time.Shoei Kisen sent out a letter to cargo owners last month to declare so-called general average, according to one cargo owner with goods on board. General average is an ancient maritime law that requires all parties involved in a voyage to share losses proportionally resulting from actions taken to save the vessel. The amount cargo owners or their insurers would pay depends on the value of their cargo onboard, not the number of containers, and insurers typically have to pay a guarantee to release the cargo that ensures they will adhere to the final bill determined by an insurance adjuster.The cargo owner said a quick resolution was not expected. “I’ve told my customers to plan for a life without that cargo in the medium-term.” More