Economy

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.This article is an on-site version of Martin Sandbu’s Free Lunch newsletter. Sign up here to get the newsletter sent straight to your inbox every ThursdayIt is commonly accepted that China has come to the rescue of the world economy twice in the past 15 years. In 2008-09, its stimulus complemented that of other big economies to arrest the collapse in activity from the global financial crisis. A few years later, it offset fiscal retrenchment across the west and a new financial crisis in the eurozone. Germany, in particular, outperformed the rest of western Europe on the back of strong Chinese demand. Now, a decade on, the Chinese economy seems to have run out of steam. Below I share my take on a recent debate about why — but I would love to hear your thoughts too. Write to us at [email protected]. “Who killed the Chinese economy” is the title of a recent colloquium in Foreign Affairs — in article form, followed up with a webinar hosted with the Peterson Institute for International Economics.That headline is a little hyperbolic: the Chinese economy isn’t dead yet. While it has become popular to go bearish on China, some remain relatively optimistic. Short term, the IMF has raised its 2023 growth forecast to 5.4 per cent. Longer term, the FT’s own Martin Wolf has warned against calling “peak China” just yet.But to run with the metaphor, I want to share the one thing I have recently read that makes me think China’s economy is, if not murdered, then in lethal danger. Two years ago I wrote about the world-historic size of real estate’s economic footprint there. It was clear then that a fall in real estate activity would have huge effects. In a paper in May, Sheng Zhongming shows just how huge. The paper calculates the effect on China’s public finances of permanently lower activity levels in real estate (defined as sustaining the current sales level of Rmb13tn/year [$1.8tn]). The result is that public sector revenues will be Rmb3.6tn lower than before the real estate crash, and available government financing lower by the same amount. This is enormous. It corresponds to 3 to 4 per cent of gross domestic product each. Most of this will hit local government budgets, which in 2021 made up about two-thirds of overall fiscal revenue of Rmb30tn. In other words, we could be looking at a permanent revenue loss of 15 per cent, and as much again in curtailed financing, for that government level. There is no way such a big change would not be extremely disruptive.So we should be worried, very worried. More importantly, so should Chinese policymakers, as the ones able to actually do something about it. But what? Here is where the Foreign Affairs/Peterson Institute colloquium comes in handy. Designed as a response to Peterson Institute president Adam Posen’s analysis of China’s “economic long Covid” (which I mentioned in the summer), it sets up a debate between Posen and China experts Zongyuan Zoe Liu and Michael Pettis about how best to understand China’s economic problems.Read the whole exchange and watch the webinar (which unfortunately seems to be missing the start) for a good sense of the perspectives. But to simplify, they divide into the political and the structural. Everyone agrees that private domestic demand, especially consumer demand, needs to make up a greater share of the Chinese economy. That’s because export-driven growth will no longer be accommodated by the rest of the world (Pettis explained why in a recent FT column) and because state-led investment is no longer finding productive outlets. But the obstacles to this rebalancing depend on one’s view of the causes. Posen sees arbitrary government interference, especially during and after the pandemic (which is why he calls it economic long Covid), as the chief cause of declining Chinese growth. Liu and especially Pettis both offer more “structuralist” analyses that place the root causes in an economic and institutional structure that outgrew its usefulness one or two decades ago and failed to renew itself. In the webinar, Posen usefully sets out a view of how the two perspectives have different policy implications, which the other experts did not contest. He said that if the structuralist interpretation was correct, then, if “you restructure the debt . . . stimulus will work [and] fiscal stimulus should be effective even if monetary stimulus is not. Whereas in my point of view, because the households are beaten down, it’s not going to work that way.” Put in different words, if it’s the debt burden that keeps people from spending, removing it and giving them money will make them spend; if it’s their lack of confidence in their (and their investments’) safety from the government, then any extra money that gets into private hands will only be squirrelled away (and out of the country).I lean towards the structuralists, inasmuch as I think the debt overhang is a big constraint on growth. It was left unsaid — but I think because they all take it for granted — that debt restructuring is a necessary condition for restoring healthy growth. The question is what other policies are also needed. And here I struggle to share Posen’s fatalism about policies to stimulate domestic demand growth.There are still many poor people in China: according to the world inequality database, the bottom 50 per cent of earners make only about €5,000 a year on average. If the government pursued significant transfers to the poorest, they should have a high propensity to spend out of any additional income. Of course, even poor people may save rather than consume (because of the lack of a social safety net) or invest (because of government arbitrariness). Even so, it beggars belief to think that no large groups of income- or liquidity-constrained households exist in China. Not just income but wealth is extremely unequally distributed in China. So if income redistribution given current wealth inequalities fails to boost domestic spending (because poor people want to save up), then it can be complemented by wealth redistribution. At an individual level, a previously poor person with a sudden cushion of wealth may feel more comfortable spending a sudden increase in income, or invest it in long-term projects. One straightforward type of wealth redistribution is to rejig the troubled real estate industry by using government subsidies to build better housing for poor people to own.This suggests another solution to the supposed conundrum of getting domestic spending up: the government can spend on poor people’s behalf. This is no contradiction to the need to restructure public debt. Direct fiscal spending could be funded through taxes. If it really is true that private actors have a low propensity to spend out of new income, then taxing and spending by the government should expand demand by much more than it represses private spending. This, too, would be a strategy of redistribution through significantly raising spending on public services for the poor.The same, of course, holds true for direct public investment (or at least directly state-funded investment). While most observers think China’s investment rate is far too high, surely the core of the problem is one of misallocation of capital, that is to say investment on unproductive things. But again, there are a lot of poor people in China: is there really nothing that can be invested in to significantly increase their economic wellbeing? If these strategies are unachievable, the question must be why. And the answer must be that the Chinese government is unable or unwilling to shift more of its national resources to directly benefit its poorest citizens. Why that should be could have institutional reasons — the Chinese state may be set up to silence the interest and voices of the poor and entrench those of the rich. Or they could be political — China’s leaders just don’t care about the poor. Either would, therefore, have to change. The upshot, then, is that a recovery of China’s economic mojo relies on building a welfare state: a Chinese economy with European characteristics.Other readablesNumbers newsUS inflation keeps falling — at 3.2 per cent in October, year on year consumer price inflation was below expectations. This is not just about “base effects” (flattering comparisons with price changes a year ago). The chart below shows three- and six-month averages of month on month inflation (expressed in annual rates): it is heading steadily downwards.Uncapped? Almost all of Russia’s oil exports are now circumventing the west’s price cap.Brussels has downgraded its growth forecasts for the EU — but independent economists still find it too optimistic.Recommended newsletters for youChris Giles on Central Banks — Your essential guide to money, interest rates, inflation and what central banks are thinking. Sign up hereUnhedged — Robert Armstrong dissects the most important market trends and discusses how Wall Street’s best minds respond to them. Sign up here More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.So where did the currency wars go? The renminbi and yen are at their weakest against the dollar since 2008 and 1990, respectively. The Chinese current account surplus, properly measured, is probably at or approaching a record high. The White House is obsessed with boosting US manufacturing and what it regards as unfair competition from China. Yet Joe Biden and Xi Jinping met on Wednesday and exchange rates were barely, if at all, on the agenda. While this is a lull, it is highly unlikely to be a permanent peace. The factors that created battles over currency misalignments have not gone away. China in particular is threatening to return to the sort of mercantilist behaviour that started protracted tensions 20 years ago. The US, despite strong objections to China’s trade-distorting protectionism and domestic subsidies, hasn’t fussed much over the renminbi’s value or China’s trade position. Last week, the US Treasury’s twice-yearly currency report, which in the past has formally labelled China a manipulator, was released with barely a ripple of discussion.There are several reasons for this. With the US economy recovering remarkably well from the pandemic, a stronger dollar helps keep down inflation, which seems to be a higher priority for voters than growth and jobs, and makes it easier for the Federal Reserve to cut rates.Biden’s own interventionist industrial policy is focused on products like electric vehicles for the American market rather than exports. And the tariffs against imports from China his administration has largely retained from the Trump presidency protect US companies against an undervalued renminbi.It’s remarkable how little has changed with the dollar in the past few years, both cyclically and structurally. The US currency’s trade-weighted rise of about 10 per cent over the past two years has essentially reflected traditional factors of better growth prospects and higher interest rates. It weakened around this time last year and again somewhat over the past month as yield differentials narrowed. There are also few signs the dollar’s international role is seriously being eroded. True, the People’s Bank of China has started lending in renminbi to more countries using swap lines — including Argentina, a country with well over a century’s experience in finding new creditors to soak for cash. There is also some limited trade denominated in local currencies to avoid Ukraine-related US trade and financial sanctions. But China itself, despite some suggestions to the contrary, has kept its own reserves in dollars, and the US currency remains overwhelmingly dominant in global payments systems. There is no real sense of a global crisis from exchange rates that would cause the US authorities to act. Yes, a strong dollar hurts lower-income countries in general, and some lower-income African and Asian nations with dollar-denominated sovereign debt loads are in trouble. But bigger emerging markets such as Brazil and India have largely shifted into borrowing in local currencies.Nor is there evidence that currencies are currently being systematically manipulated to gain a competitive advantage. Over the past few months the PBoC seems to have acted to stabilise the renminbi rather than depreciate it, and tighter monetary policy in Japan suggests the Japanese authorities are not targeting a weaker yen.The crunch might come if the US economy does slow and, perhaps under a Trump presidency, the tap on its large domestic green subsidy programme is turned off. Weaker domestic demand means the US will need to look more to exports to keep the recovery in American manufacturing going.If Beijing has similar aspirations, there will be a direct clash. Economic growth in China has disappointed this year. The government’s desperation to keep its economy growing may lead it to return wholeheartedly to the export-promoting model that characterised China’s charge to middle-income status after 1990.As Brad Setser of the Council on Foreign Relations points out, China has a choice between returning its economy to full employment via fiscal stimulus, which boosts domestic consumption, or via monetary stimulus, which will weaken the exchange rate and offset internal weakness with a rising trade surplus.Moreover, China’s massive investments in production, notably in EVs and semiconductors, are producing gluts that have to be offloaded abroad. The EU is already bracing itself for a surge of EV imports from China and contemplating antisubsidy duties to slow it.A mercantilist battle for export markets make renewed currency wars much more likely. And there are no established policy protocols to bring peace, despite years of wrangling in the 2000s and 2010s over correcting misalignments and current account imbalances.Global imbalances reflect domestic misalignments. China’s growth troubles can easily spill over into the tradable sectors of economies elsewhere. A slowing of growth, a widening of deficits and surpluses and the currency wars could easily start up [email protected] More

The old carriage works in Swindon once churned out rolling stock for Isambard Kingdom Brunel’s Great Western Railway, dubbed “God’s Wonderful Railway” after it opened in 1843.Nearly 180 years later, the vast sheds house pods for innovators and start-ups straining to pull the town out of a two decades-long investment slump and into the new cutting-edge industrial arc that stretches from Oxford to Cambridge.But a shortage of land, planning blockages, regulatory uncertainty, post-Brexit trade barriers and a decade of local government budget cuts have combined to make it harder to get foreign companies to invest in the town.It is a story that is not unique to Swindon, home to 220,000 people and which sits in the middle of a triangle of the university centres of Oxford, Bristol and Reading, about 80 miles west of London.The fastest-growing town in Europe in the 1970s and 80s, Swindon is today a reminder of the perils of allowing the national conditions for investment to deteriorate over time — a situation to be addressed in a report by Tory peer Lord Richard Harrington to be published on the eve of next week’s Autumn Statement.Great Western Railway’s engine works in Swindon in 1934 More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.From 2009 until the end of last year, net asset purchases by major central banks — the US Federal Reserve, European Central Bank, Bank of England, and Bank of Japan — totalled about $20tn. That figure must come down. The big question is how far, and how fast.Following the financial crisis, central banks hoovered up bonds as part of quantitative easing programmes to stimulate demand-sapped economies. Then the pandemic hit, leading to a further bond-buying binge to calm markets. Central banks (with the exception of the BoJ) have been slimming their balance sheets this year via quantitative tightening: letting expiring bonds roll off their balance sheets, and in the case of the BoE, through sales. When central banks buy bonds from banks, the latter receive a credit known as central bank reserves — the safest and most liquid financial assets. QT reverses the process, reducing liquidity in the system. Still, the Fed’s total asset holdings amount are equivalent to about 30 per cent of the US economy — just under $8tn — and the ECB’s, more than half the eurozone’s gross domestic product. Maintaining too large a balance sheet leads to heightened financial instability — excess reserves distort the private market for liquidity provision, create dependence on the central bank, and, as Andrew Hauser, an executive director at the BoE, outlined in a recent speech, it can incentivise inappropriate risk-taking.It can also raise operational and reputation risks for central banks. When interest rates rise, central banks suffer losses on their bond portfolios and pay out more interest on bank reserves created by QE. “Many central banks are now facing big financial holes, which are politically uncomfortable” said Ricardo Reis, a professor at the London School of Economics. In July, the BoE forecast it would make a net loss of more than £150bn over the next decade as it unwinds QE. Although the cost is covered by treasuries, it is hardly good for the public image of the central banks. The aim of QE should be to calm markets or provide stimulus when rates are already low. If it is not unwound, central banks risk being seen as financing government deficits.A more trimmed balance sheet also allows central banks to regain “valuable policy space in an environment in which the current large volume of excess liquidity is not needed”, as Isabel Schnabel, a member of the ECB’s executive board, noted in a speech in March. Rates may also need to be pushed higher than would be the case with smaller balance sheets, raising the chance of deeper recessions — particularly if they just ratchet higher with each crisis. But the trillion-dollar problem facing central banks is how to shrink their footprint without sparking ructions. High government deficit forecasts, particularly in the US, point to an ample supply of government bond issuance down the line. Ongoing QT with bond sales only adds to that supply. This may push yields too high, and lead to something breaking in the economy — the Fed’s QT efforts in 2019 drove market convulsions. Calls to abandon QT are already mounting.How far central banks should go depends on what is the optimum size of their balance sheets, or the preferred minimum range of reserves as the BoE calls it. “It should be large enough to satiate the demand for reserves,” Reis argues. This means central banks should not slim down to pre-global financial crisis levels — economies have grown and banks’ liquidity needs have risen (as demonstrated by the demands on Silicon Valley Bank following rapid deposit outflows that led to its collapse). That has made calculating the precise level of the PMRR more difficult. In the US, the banking system’s lowest comfortable level of reserves has been estimated by analysts to be about $2.5tn, compared with more than $3tn currently. This suggests the end of QT is still distant, particularly when factoring in the Fed’s other liquidity facilities. But there are several complications: can central banks cut rates on one hand while carrying out QT with the other? And for the ECB, QT is complicated by the need to defend “peripheral” sovereign bond yields, stopping them from widening too far from those for other eurozone debt. Given it holds a disproportionate amount of these bonds, QT sales could put pressure on them.Central banks should, nonetheless, dip their toes, and aim to bring down their holdings to more appropriate levels over the long-run. It will not be an easy process — and the dieting will need to be calibrated, fitting in with monetary and financial policy risks. Perhaps, though, the difficulty of offloading assets will spur a rethink on how generous central banks ought to be with buying them in the [email protected] More

The dinner follows a significant afternoon of talks between President Xi and President Joe Biden during the Asia-Pacific Economic Cooperation leaders’ meetings, signaling a step towards mending the tense US-China bilateral relationship. Amid growing concerns over China’s stringent national security policies and the portrayal of foreign entities as espionage threats, the engagement with Xi is seen as vital by businesses invested in the vast Chinese consumer electronics market.The National Committee on U.S.–China Relations and the US-China Business Council are hosting the private dinner. Details of the event have been kept under wraps; however, Mike Gallagher, chair of the House Select Committee on the Chinese Communist Party, revealed at an anti-CCP rally that seats at Xi’s table commanded a price of $40,000 each.In addition to the American corporate titans, Xi’s “old friends” from Iowa, who hosted him during a visit 38 years ago, are also expected to join the dinner. The Chinese leader is set to address the attendees, further underscoring the importance of this diplomatic and economic outreach initiative.This article was generated with the support of AI and reviewed by an editor. For more information see our T&C. More

The bank’s decision to absorb a portion of the interest rate hikes rather than passing them on in full to customers is reflected in a 53% drop in net interest income, illustrating BOC’s commitment to aiding the business revival of its clientele. This customer-focused approach has not hindered the growth in other areas, as evidenced by a 10% increase in net fee and commission income, spurred by higher card-related transactions and demand for retail banking services.Amidst currency fluctuations, with the Sri Lankan Rupee (LKR) appreciating, BOC experienced exchange losses that affected trading and other operating income. However, this was mitigated by proactive credit risk management strategies that led to a net reversal of impairment provisions. This reversal was attributed to stringent credit monitoring, identification of high-risk borrowers, and positive impacts from business revival activities and currency appreciation.BOC’s Revival and Rehabilitation Unit played a pivotal role in managing non-performing loans effectively, supporting troubled businesses through challenging times. Despite inflationary pressures that led to a 13% increase in operating expenses, the bank maintained strong Tier I and Total Capital Adequacy Ratios, well above regulatory requirements.Customer confidence remained high, as demonstrated by an 11% growth in deposits totaling LKR3.7 trillion. The bank’s asset base expanded to LKR4.3 trillion, with loans and advances standing at LKR2.3 trillion and investments at LKR1.8 trillion.Further emphasizing its dedication to economic growth and development, BOC launched the “SME Energizer” loan scheme to reinforce its support for small and medium-sized enterprises (SMEs) as well as large infrastructure projects.The bank’s efforts have not gone unnoticed on the global stage; BOC has been ranked among the world’s top 1000 banks for the twelfth consecutive year and has been named Sri Lanka’s No.1 Banking Brand for the fifteenth consecutive year by Brand Finance Lanka. With a brand value exceeding LKR50 billion—the highest in the sector—BOC stands out as a beacon of stability and potential growth amidst economic recovery efforts in Sri Lanka.The bank’s unwavering commitment to its customers, SMEs, and infrastructure development continues to be a cornerstone of its operational philosophy, setting it apart as a key player supporting Sri Lanka’s path to economic recovery.This article was generated with the support of AI and reviewed by an editor. For more information see our T&C. More

President Biden pressed the Chinese leader Xi Jinping on Wednesday to crack down on the Chinese firms that are helping to produce fentanyl, a potent drug that has killed hundreds of thousands of Americans.A plan to curb China’s illicit exports of fentanyl and, particularly, the chemicals that can be combined to make the drug was hoped to be one of the more significant achievements for the United States out of Mr. Biden and Mr. Xi’s meeting, which took place as leaders from Pacific nations gathered for an international conference in San Francisco.A summary of the meeting published by China’s CCTV News said that Mr. Biden and Mr. Xi had agreed to establish an anti-drug working group.China is home to a thriving chemical industry that pumps out compounds that are made into pharmaceuticals, fragrances, textile dyes and fertilizers. Some of those same compounds can also be combined to create fentanyl, an opioid that can be 100 times as potent as morphine.U.S. officials argue that this vast chemical industry is playing a key role in the American fentanyl crisis by supplying the bulk of materials used in illegal drug labs, including in Mexico, which is now the largest exporter of fentanyl to the United States.The Chinese government denies that its country plays such a pivotal role and instead blames the United States for harboring a culture of drug use.“All-out marketing by pharmaceutical companies, over-prescription by doctors, ineffective government crackdowns and the negative implications of marijuana legalization are among the combination of factors behind an ever-growing market for narcotics,” China’s foreign ministry said in a statement last year.U.S. officials say they have stopped more fentanyl from coming into the United States in the past two years than in the previous five years combined. According to the Centers for Disease Control and Prevention, fentanyl and other synthetic opioids may have resulted in more than 77,000 overdose deaths in the United States between May 2022 and April 2023. The problem with fentanyl overdoses is particularly acute in San Francisco, where Mr. Biden and Mr. Xi are meeting.Ian Johnson, a senior fellow for China studies at the Council on Foreign Relations, said that getting China to agree to do something about fentanyl would resonate more with average Americans than the typical “deliverables” from international meetings.“For Biden, that would be nice to have to show to the heartland of the United States that relations with China are more than just some esoteric matter, but can actually bring something to ordinary people,” Mr. Johnson said in a briefing held by the council last week. Republicans have made fentanyl-related deaths a central piece of their campaign against Mr. Biden and Democrats in the 2024 elections.Red stained pollen grain sample at the U.S. Customs and Border Protection in Chicago, last year.Lyndon French for The New York TimesCollecting pollen samples at a Customs and Border Protection facility. The extent to which an agreement with China would curb the flow of fentanyl into the United States is unclear.Lyndon French for The New York TimesStill, given the difficulties with policing an illicit industry, the extent to which an agreement would curb the flow of fentanyl into the United States is unclear.Roselyn Hsueh, an associate professor of political science at Temple University, said that an agreement between Mr. Biden and Mr. Xi could lead the Chinese central government to provide more oversight and invest more resources into inspection and monitoring. But she said Beijing had run into difficulty in the past clamping down on fentanyl and precursor chemicals.Before 2019, China was the primary source of fentanyl coming into the United States, typically through the mail and other commercial couriers. As a part of trade talks with President Donald J. Trump, the Chinese government in 2019 agreed to prohibit the production, sale and export of all fentanyl-related drugs except through special licenses.But that resulted in Chinese companies rerouting to Mexico and India’s emergence as a new production site, Ms. Hsueh said. The main source of U.S. fentanyl became Mexican criminal organizations, which used Chinese-made components and Chinese money-laundering services.Today, online sales that mask the identities of sellers and buyers further complicate enforcement. The regulation and enforcement of fentanyl and precursor chemicals remain “fragmented and decentralized” among Chinese local governments, industry associations and firms with vested interests in the chemical trade, Ms. Hsueh said.U.S. officials have said that problem is compounded because many of the ingredients used to make fentanyl are legal chemicals that can be used for legitimate purposes in other industries. The United States has issued sanctions against dozens of people in China and Hong Kong for their role in fentanyl trafficking. In September, Mr. Biden added China to the U.S. list of the world’s major drug-producing countries, a move that the Chinese government denounced as “a malicious smear.”Last month, the U.S. customs department released an updated strategy to combat fentanyl and synthetic drugs, including through the enhanced use of data and counterintelligence operations to track drug manufacturing and distribution networks, and target suspicious locations and recipients that demonstrate patterns of illicit activity. “In my 30 years as a customs official, the trafficking of synthetic illicit drugs like fentanyl is one of the toughest, most daunting challenges I have ever seen,” said Troy Miller, the acting commissioner for Customs and Border Protection.U.S. officials say they have stopped more fentanyl from coming into the United States in the past two years than in the previous five years combined.Mamta Popat/Arizona Daily Star, via Associated PressU.S. officials believe China’s dominance as a chemical producer makes Beijing’s cooperation key for enforcement. Administration officials, including Commerce Secretary Gina M. Raimondo, have raised the issue with top Chinese officials during recent trips to China.When six lawmakers, including Senator Chuck Schumer, the majority leader, had a chance to talk to Mr. Xi during a visit to China last month, the main issue they brought up was not trade or military coordination or climate change, but the harm that fentanyl had caused in their home states.“Everyone told stories, personal stories about how, you know, friends of ours, family, have died from fentanyl, and how this was a really important issue, and I think that you could tell that made an impression on him, how deeply we felt about it,” said Mr. Schumer, a New York Democrat.Fentanyl precursors from China have become a bipartisan issue in Congress, and the six senators who spoke with Mr. Xi were three Democrats and three Republicans.“China needs to enforce laws that prevent the export of fentanyl precursors to international drug markets,” said Senator Bill Cassidy, Republican of Louisiana.Despite the scale of the problem, there is hope that greater coordination between the United States and China could improve the situation. Cooperation between the countries on preventing shipments of the precursor chemicals stalled several years ago after the United States placed sanctions on a Chinese government entity for its alleged involvement in human rights abuses in China’s westernmost region, Xinjiang.That entity was located at the same address in Beijing as the National Narcotics Laboratory of China, which plays a key role in China’s law enforcement effort on drug-related chemicals.Chinese officials deeply resent American sanctions on their institutions, and U.S. officials have taken the position that because of the risk of confusion among the two institutes at the same address, neither institute can work with the United States.China then broadened its position in August 2022 when it halted any counternarcotics coordination with the United States as one of a series of measures taken in response to a visit to Taiwan by Representative Nancy Pelosi, then the speaker of the House. Beijing claims Taiwan, a self-ruled island democracy, as part of its territory.Eileen Sullivan More

(Reuters) – General Motors (NYSE:GM)’ tentative labor deal with the United Auto Workers (UAW) union closed in on ratification as the votes were counted on Wednesday.Following the approval earlier in the day by more than 60% of union members at the Detroit automaker’s large Arlington, Texas, assembly plant, additional votes in favor have the deal close to clinching majority approval. The number of union locals, most of which are smaller, still to report vote totals is not large.After several large assembly plants voted against the deal earlier on Wednesday, some media had reported the deal was heading toward failure. But Arlington’s support, followed by strong voting in favor by smaller warehouse and parts facilities, has put the deal on the brink of approval.This would mark the first ratification of a deal, which runs through April 2028, with one of the Detroit Three automakers. Ford (NYSE:F) and Stellantis (NYSE:STLA) voting is still under way, and workers at both companies were favoring ratification by comfortable margins.The UAW’s GM vote tracking site currently shows approval of the contract leading by a 54% to 46% margin with almost 32,000 workers having cast votes out of about 46,000 UAW-represented GM workers. The Arlington plant, with about 5,000 UAW members, has the most of any GM plant. Voting officially ends on Thursday at 4 p.m. EST, although most votes will be cast on Wednesday. The UAW went on strike for more than six weeks against the Detroit Three, seeking better wages, working conditions and cost-of-living adjustments. All three companies agreed to tentative agreements about two weeks ago.Workers at other GM assembly plants voted against the deal, including 60% of workers at its Fort Wayne, Indiana, truck plant, 53% at its Wentzville, Missouri, plant, 58% of workers at GM’s Lansing Grand River plant and 61% of workers at the Lansing Delta Township plant. Seven of GM’s 11 assembly plants rejected the deal. In addition to Arlington, workers at plants in Detroit, Fairfax, Kansas; and Lake Orion, Michigan; approved the agreement.Only nine facilities are still listed without vote totals on the UAW vote tracker, including GM’s Lockport, New York, components plant with about 1,200 members. Those voting in favor of the agreement have a lead of almost 2,500 and many of the facilities still to come include workers who stand to receive large pay increases upon ratification. The UAW’s new agreement with GM grants a 25% increase in base wage through April 2028 and will cumulatively raise the top wage by 33%, compounded with estimated cost-of-living adjustments to over $42 an hour.Currently, about 66% of Ford workers who have voted are in favor of the UAW deal, and about 72% of Stellantis workers have so far voted in favor, according to UAW figures. Ford voting is scheduled to finish on Friday, while Stellantis is set to close next Tuesday.Automakers were previously slashing costs and navigating a bumpy road to manufacture EVs and catch up with market leader Tesla (NASDAQ:TSLA), but lower margins on those vehicles have deterred them from accelerating the move.GM in October also pulled its full-year profit forecast due to the strike and postponed a $4 billion electric truck plant in Michigan. (This story has been corrected to say the number of facilities still without vote totals to nine, not eight, in paragraph 10) More