Economy

The writer is chief economist for the Asia-Pacific at Natixis and senior research fellow at the Bruegel InstituteThe sudden and immediate reopening of the Chinese economy after three years of zero-Covid policies on December 8 last year was accompanied by a rapid positive turn in foreign investors’ sentiment, leading to a surge in portfolio flows, especially equities. This shift was based on the experience of other economies’ pent-up post-pandemic demand. Yet China seems to be following a different pattern. While China’s services demand has been resilient, the sales of consumer durables have been disappointing, largely dragged down by cars. Fixed-asset investment is an important contributor to growth, but it grew only 4.7 per cent in April 2023, which is lower than the 2022 average. This is not only true of shrinking real estate investment because manufacturing investment is also growing more slowly than last year, when China had a countrywide lockdown. China’s contracting purchasing managers’ index data for May also confirms the negative sentiment on manufacturing, which should not be surprising given that industrial profits have plummeted in 2023, with close to 20 per cent negative growth in April. Although the poor performance of the manufacturing sector and its divergence versus services is a global problem, China’s case is particularly important because it is the world’s largest exporter. Its global manufacturing export share is more than 20 per cent.One could be tempted to argue that the reason for the poor development in China’s manufacturing capacity is flagging external demand, especially from the US and Europe. However, the trade data offers a very different picture. China’s exports grew 8.5 per cent in April, even with a rapid deceleration of the US and European economies, while its imports plummeted by almost 8 per cent. The reopening of China’s economy was widely expected to unleash the excess savings that had accumulated in bank accounts during the pandemic. This has not transpired.

Against such a backdrop, what was considered an underwhelming growth target of 5 per cent for 2023 when announced at the Communist party’s main gathering in March, is now perceived as increasingly challenging. In fact, the People’s Bank of China has been pushing banks to lower their deposit rates in order to entice consumers to spend, though it has barely cut either its reserve requirement ratio or its official rate. No big announcement to support the economy has been made on the fiscal side either. The most likely reason for such caution is the rapidly increasing public debt, which has hit 97 per cent of gross domestic product — and still excludes state-owned enterprises’ debt because of data constraints.The widened US-China yield differentials and worsening growth prospects, coupled with a depreciating yuan, are putting investors off a market that was expected to be this year’s darling. In fact, net portfolio flows turned highly negative in April, especially for equities, according to the Institute of International Finance. This contrasts with the idea that the easing of regulatory constraints on property and large tech companies would push the stock market up after the harsh government crackdown on both sectors since 2020. Instead, the stock markets of China and Hong Kong are flunking, as a result of negative market sentiment. Down the road, the question is whether peaking rates in the US, while the American economy heads towards a recession, will be enough to reignite foreign investors’ interest in Chinese capital markets. The reality is that, beyond cyclical reasons, a whole new set of risks are emerging from America’s push for technological containment and the threat of western sanctions on China, either because of its support for Russia or what might unfold in Taiwan. In addition, China’s newly amended law against foreign espionage exemplifies its increasing wariness when it comes to foreign investors.China’s hesitant recovery, its push for lower interest rates and its poor corporate profits are all deterring foreign investors. The gloomy outlook in terms of portfolio inflows is surely another important reason for it to guard its large trade surplus, even while the US and European economies head towards recession. This also means China will continue to push exports while exerting restraint on imports to protect its foreign reserves from what are, by now, pretty unavoidable portfolio outflows. More

WASHINGTON (Reuters) – A bill to suspend the U.S. government’s $31.4 trillion debt ceiling and avert a disastrous default cleared a key procedural hurdle in the House of Representatives on Wednesday, setting the stage for an vote on the bipartisan debt deal itself.Republicans control the House by a narrow 222-213 majority. But the deal will need support from both Speaker Kevin McCarthy’s Republicans and President Joe Biden’s Democrats to pass, as members of both parties object to significant parts of the legislation.The procedural vote, which allows for the start of debate and then a vote on the bill itself, passed by a vote of 241-187, with 52 Democrats needed to overcome the opposition of 29 Republicans.McCarthy predicted that the next vote, expected around 8:30 p.m. (0030 GMT), would succeed, telling reporters: “It’s going to become law.”The legislation would suspend the U.S. debt ceiling through Jan. 1, 2025, meaning that there would not be a limit until that date, allowing Biden and lawmakers to set aside the politically risky issue until after the November 2024 presidential election.It would also cap some government spending over the next two years, speed up the permitting process for some energy projects, claw back unused COVID-19 funds, and expand work requirements for food aid programs to additional recipients.Biden expects to have the legislation on his desk by a June 5 deadline, when the federal government could run out of money to pay its bills, the White House said. A successful House vote would send the bill first to the Senate, where there could be a danger of delay unless Senate Majority Leader Chuck Schumer and Republican leader Mitch McConnell agree to fast-track the legislation.Republicans want Schumer to allow amendment votes in exchange for quick action. But Schumer appeared to rule out amendments on Wednesday, telling reporters: “We cannot send anything back to the House, plain and simple. We must avoid default.” The Treasury Department has warned that it will not be able to cover all the government’s obligations by Monday if Congress does not raise the limit.During Tuesday’s debate in the House Rules Committee, hardline Republican Representative Chip Roy complained that the greater budget savings many conservatives had hoped for had not been achieved.”How on Earth is this going to be beneficial?” Roy asked.Late on Tuesday, the non-partisan Congressional Budget Office said the legislation would result in $1.5 trillion in savings over a decade.Senate debate and voting could stretch into the weekend, especially if any one of the 100 senators tries to slow passage.SENATORS FIRM UP POSITIONSHardline Republican Senator Rand Paul, long known to delay Senate votes, has said he would not hold up passage if allowed to offer an amendment for a floor vote.Senator Bernie Sanders, a progressive independent who caucuses with the Democrats, said that he would vote against the bill due inclusion of an energy pipeline and extra work requirements. “I cannot, in good conscience, vote for the debt ceiling deal,” Sanders said on Twitter. White House Budget Director Shalanda Young, who was one of Biden’s lead negotiators, urged Congress to pass the bill.”I want to be clear: This agreement represents a compromise, which means no one gets everything that they want and hard choices had to be made,” Young told a news conference.In a win for Republicans, the bill would shift some funding away from the Internal Revenue Service, although the White House says that should not undercut tax enforcement.Biden can point to gains as well. The deal leaves Biden’s signature infrastructure and green-energy laws largely intact, and the spending cuts and work requirements are far less than Republicans had sought. Republicans have argued that steep spending cuts are necessary to curb the growth of the national debt, which at $31.4 trillion is roughly equal to the annual output of the economy.Interest payments on that debt are projected to eat up a growing share of the budget as an aging population pushes up health and retirement costs, according to government forecasts. The deal would not do anything to rein in those fast-growing programs. Most of the savings would come by capping spending on domestic programs like housing, education, scientific research and other forms of “discretionary” spending. Military spending would be allowed to increase over the next two years.The debt-ceiling standoff prompted ratings agencies to warn that they might downgrade U.S. debt, which underpins the global financial system.The last time the U.S. came this close to default was in 2011, a time of similar partisan divide in Washington, with a Democratic president and Senate majority and a Republican-majority House. (This story has been refiled to change ‘plan’ to ‘plain’ in paragraph 8) More

Good morning. Jamie Dimon has warned that tensions between the US and China have upended the international order, making it more complex for business than during the cold war. The JPMorgan chair was speaking at a banking conference in Shanghai, as fresh data showed the recovery of the world’s second-largest economy was slowing. Dimon also argued that “uncertainty” caused by Beijing could hit investor confidence.“Hopefully, we can work out all these differences, you know, with China and America and what it is doing to other allies, relationships and things like that,” he said in comments behind closed doors. Dimon’s first visit to mainland China in four years came as a contraction in Chinese manufacturing activity cast doubt over the country’s growth prospects, shaking regional equity markets against the backdrop of worsening relations with the US.Meanwhile, the US-China geopolitical rift continues to impact the financial industry in both nations. Just earlier this week, Goldman Sachs’s private equity business in Asia said she has stopped trying to raise money in the US.Related read: FT reporters detail how China’s economy has made a sluggish recovery six months after authorities began to roll back President Xi Jinping’s tough zero-Covid regime.Here’s what else I’m keeping tabs on today:Nato meeting: Foreign ministers will meet in Oslo to discuss the Ukraine war as recent evidence shows that Kyiv’s long-awaited counter-offensive is about to get under way.Manufacturing data: Purchasing managers’ index figures will be released for Japan, China, the EU and UK. Eurozone inflation: Falling inflation in France and Germany has boosted hopes that today’s eurozone inflation figures will show cooling prices. Brics meeting: Foreign ministers will gather in Cape Town for geopolitical discussions. Ministers will also review applications of at least 20 nations as they consider increasing the size of the group. (The Japan Times) Five more top stories1. US House Speaker Kevin McCarthy predicted a bill to avert a damaging default would “overwhelmingly” clear a vote in the lower chamber of Congress as he raced to secure backing for the bipartisan deal. The vote today will mark a crucial moment for McCarthy and whether the US will hit the debt ceiling. Go deeper: This helpful explainer details what is in the debt ceiling deal.2. Bank of Japan policy shift risks causing eurozone bond turmoil, the European Central Bank has warned. If the BoJ ends its ultra-loose monetary policy Eurozone bond markets are at risk of a sell-off caused by a sudden retreat of Japanese investors, the ECB said.3. A federal trial over Beijing’s alleged attempts to forcibly repatriate citizens began in Brooklyn on Wednesday. The case centres on a former New York police officer and two Chinese nationals accused of attempting to intimidate a Chinese dissident and his family in the US. Read the full story.4. A Chinese fighter jet performed an “unnecessarily aggressive manoeuvre” near a US military aircraft that was flying over the South China Sea last week, the Pentagon said. Video footage of the incident — the latest in a number of similar encounters — was released as US defence secretary Lloyd Austin was en route to visit Japan, Singapore and India. 5. A failed North Korean satellite launch triggered air raid sirens and an evacuation order in Seoul yesterday, but the order was retracted about 10 minutes later after South Korean authorities admitted it was a “false alarm”.Deep dive

Fearing a potential conflict in Asia, western companies are looking to move production out of Taiwan, but turning away from the self-ruled island will come at a high price for manufacturers. Explore how Taiwan became an indispensable economy for the production of everything from Chinese smartphones to US fighter jets in this visual story.We’re also reading . . . AI and the climate trap: The failures of global co-ordination on climate change offer lessons on artificial intelligence, writes Pilita Clark.Chinese private equity: State-backed investors have poured money into western companies even as the political mood has shifted.Into the bunker: A series of assaults has highlighted Russia’s vulnerability to blowback from its war on Ukraine.Chart of the day

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Just as Singapore Airlines was giving employees an eight-month salary bonus after record profits, Hong Kong was giving away more than 4,400 free tickets for regional rival Cathay Pacific. Their financial divergence reflects Singapore’s post-pandemic success as Hong Kong struggles to recover.Take a break from the news. . . and meet the woman dressing Gen Z. Sofia Prantera created streetwear label Aries as a move into denim with a more high-fashion offering. In this excellent profile of Prantera, fashion writer Kate Finnigan explains how Aries gained a cult following with young people. Additional contributions by Amy Bell and Tee Zhuo More

After three consecutive months of declines, job openings jumped in April, reaching 10.1 million, the Labor Department reported on Wednesday.The surge signals that job opportunities are withstanding the economic pressures that have led many to believe that the American economy may soon enter a recession.At the same time, the report — known as JOLTS, or the Job Openings and Labor Turnover Survey — showed that the labor market was far less feverish than it was a year earlier.The quits rate — viewed as an indicator of how confident workers are in leaving a job and finding employment elsewhere — was 3 percent, seasonally adjusted, in April 2022. Since then, it has retreated to 2.4 percent, just above its prepandemic peak. And the hiring rate was unchanged from March, which was the lowest since December 2020.Layoffs, however, decreased again, showing that employers are hesitant to let go of employees brought on board during this recovery.A bagel shop in Brooklyn advertised that it had positions to fill.Earl Wilson/The New York TimesThe data complicates the interest-rate outlook.The jump in openings may put pressure on the Federal Reserve to take interest rates even higher.The statistical relationship between high job vacancies, as calculated by the government, and low unemployment has been frequently cited by the Federal Reserve chair, Jerome H. Powell, as a key sign of the labor market’s being “unsustainably hot” and “clearly out of balance, with demand for workers substantially exceeding the supply of available workers.”But even as some economists remain unsatisfied with the progress on subduing prices, others worry that reliance on job openings as a core measure of labor market balance may lead the Fed to keep the cost of borrowing for businesses and households too high for too long, prompting a harsher downturn than necessary.“The quits rate is nearly back to prepandemic levels, the hires rate has already reverted to prepandemic pace,” Skanda Amarnath, the executive director of Employ America, a nonprofit that supports tight labor markets, wrote in a note. “JOLTS data should not drastically color this broader assessment of labor market tightness but will matter at the margins for the Fed’s own perception of labor market heat.”Some question how much weight to give the report.After peaking at a record of around 12 million in March 2022, job openings as measured by the government have fallen overall. For the past year, a mix of strong hiring for positions that were already listed and a decline in business sentiment has led to a pullback in newly created listings. But the April uptick is at least a pause in recent trends.Some economists think the JOLTS report should be taken with a grain of salt. Gregory Daco, the chief economist at EY-Parthenon, said the bump in listings could reflect summer hiring in the rebounding service sector, though he added, “I’d want to see June before assuming that summer hiring is stronger than last year.”The report is based on a survey of about 21,000 nonfarm business and government establishments. The economic research team at Goldman Sachs has made the case that since the response rate to the JOLTS report has fallen sharply since the start of the pandemic, “these findings argue for currently treating JOLTS less like the ‘true’ level of job openings.”The May jobs report will be the next gauge.The May employment report, to be released by the Labor Department on Friday, will fill out the labor market picture before Fed policymakers meet on June 13 and 14.Economists surveyed by Bloomberg expect the data to show the addition of 195,000 jobs on a seasonally adjusted basis, down from 253,000 in the initial report for April. Unemployment, which was 3.4 percent in April — matching the lowest level since 1969 — is expected to rise to 3.5 percent, and the month-over-month increase in wages is expected to ease. More

China’s economic rebound is faltering and Jamie Dimon, the JPMorgan chair, is not the only one concerned. Dimon, who spoke at a Shanghai banking conference on Wednesday, called youth unemployment rates in China “scary”. He added that economic uncertainty had been “somewhat caused” by the Chinese government.The latest signs of slowing are found in high-frequency economic data. But the structural challenges that the Chinese economy faces are much deeper and more long term. The decades of “reform and opening” that drove a trade and investment bonanza are giving way to a phase of security and control led by President Xi Jinping.Xi’s concept of “comprehensive national security” — which defines 16 broad arenas including the economy, society and culture as matters of national security — has replaced the pro-growth doctrine that used to animate Beijing’s administration. Some analysts suggest we are entering the era of “plateau China”: an extended period in which growth settles into the low single-digit range, down from 2023’s official target of “around 5 per cent”.There are good reasons to think it could indeed be China’s fate to become a low-productivity superpower. By dint of its sheer size it would still contribute to global economic expansion, but it would fall progressively short of the 35 per cent contribution to global growth that the IMF predicts for this year.Such a scenario would have profound global implications. Most obvious would be to reduce China’s role as locomotive of the Asia-Pacific region, which the IMF forecasts will contribute 67.4 per cent of global growth this year. A slower growing China, coupled with efforts to increase domestic ownership of its industries, could also deal a blow to western multinationals that have become dependent on sales there.With so much at stake, it is important to assess how deep-seated China’s economic frailties are. A big part of the drag emanates from a weak property market and the related distress of thousands of local government financing vehicles, which over the past decade have provided the main impetus behind China’s investment-driven growth.Reviving the property sector is not straightforward. In April, sales of property by area and investment in building new homes were down significantly from the same month a year earlier. This, in turn, hits the incomes of local governments, which depend to a significant extent on selling land to property developers. Some city government entities, such as in Kunming and Wuhan, have scrambled in recent weeks to repay maturing debts. Unless Beijing provides some form of debt support to local government financing vehicles, which according to the IMF have some Rmb66tn ($9.3tn) in debts, such episodes of distress are likely to persist.So it is incumbent on Beijing to start a comprehensive programme to restructure local government finances. This should not be a simple bailout but a transparent programme to recapitalise LGFV balance sheets partly by selling off local assets. Such a course may encounter local resistance. But without it, China may be consigned to a generation of sub-par growth.China also needs to reinvigorate its private sector, in particular the tech companies that have suffered a regulatory barrage in recent years, to help generate jobs for the 18- to 24-year-old urban cohort, some 20 per cent of whom are unemployed. Taking even just these measures should help Beijing put its economy on track for more sustainable growth. Failure to do so could smother China’s economic renaissance under the weight of growing state control. More

Today’s top storiesScandal-hit UK business lobby group the CBI will recruit a new president as part of a governance overhaul as it battles for survival ahead of a crunch members’ meeting next week. Western countries are increasing pressure on Turkey to admit Sweden to Nato, as Stockholm makes a final push to overcome Ankara’s opposition to its membership.Some good news for the London Stock Exchange, which has been struggling to attract new listings, as WE Soda, the world’s largest producer of natural soda ash, announced plans for a $7.5bn IPO.For up-to-the-minute news updates, visit our live blogGood evening.Uncertainty around China’s economy and its relations with the west cranked up a notch today as western business leaders warned of the hit to investor confidence and fresh data confirmed the country’s recovery was faltering.JPMorgan chief Jamie Dimon said at a conference in Shanghai that China’s crackdown on consultants and tech businesses would not only damage foreign direct investment in the country but also exacerbate the growing tensions between Washington and Beijing. Yesterday it was the turn of Tesla boss Elon Musk who (according to the Chinese foreign ministry) called for “stable and constructive” ties between the “conjoined twins” of the US and China as he met foreign minister Qin Gang. US-China tensions are also causing great anxiety in Taiwan as western businesses look to extract themselves under the fear of invasion from their larger neighbour, which, in the words of one industry executive, would leave the tech and electronics industry worldwide “basically screwed”. Another casualty of the growing tensions was highlighted yesterday by the head of Goldman Sachs’s private equity business in Asia, who said they had led her to stop raising money in the US.Meanwhile the steady drip of disappointing news on the Chinese economy continues. New data today showed factory activity shrank in May, denting global stocks and raising the prospect of a government stimulus package. It follows worse than expected reports on industrial production and profits, property sales and credit growth that have sapped confidence in near term economic prospects as well as denting commodity and currency markets. Dimon also highlighted “scary” youth unemployment of more than 20 per cent amid concerns about the country’s broader demographic challenge, which could rival similar crises in Japan and Italy.On the positive side, the US and China have made tentative efforts to stabilise the situation with trade ministers holding talks. And despite the recent tech tussles, Chinese companies are still keen on opening factories in the US. Washington needs to grasp any opportunity to steady the situation, argues Evan Medeiros, who served in the US National Security Council, and who characterises the process as one of “reconnection” rather than “detente”.One thing that definitely needs to be addressed, according to FT contributing editor Ruchir Sharma, is the series of inflated expectations from Wall Street about a “booming” Chinese economy. A growth model dependent on stimulus and debt was always going to be unsustainable, he argues, and now it has run out of steam.“Boomy” chatter has let to investors losing hundred of billions of dollars in China over the past few months, Sharma writes. And global growth in 2023 may be weaker than expected as hopes fade that an American downturn will be countered by a strong Chinese recovery, which may never come. “It is time to expose this charade before the fallout gets worse,” he concludes.Need to know: UK and Europe economyUK prime minister Rishi Sunak visits the US next week but a trade deal between the two countries is not on the agenda. Retail industry data showed UK shop price inflation reached its highest rate for at least 18 years in May, despite the pace of food price growth marginally easing. The UK’s most vulnerable parts of society are suffering the most.Welcome news on falling inflation in Germany, France and Spain has boosted hopes that the European Central Bank might stop increasing interest rates by July.Brussels said it would extend EU single market benefits to western Balkan countries waiting their turn to enter the bloc. The would-be members could benefit in areas such as ecommerce or cyber security as well as easier trade in goods and payments.Need to know: Global economyThe bipartisan deal to raise the US debt ceiling cleared its first big hurdle in Congress and is set for a make-or-break vote in the full House. US national editor Edward Luce says it’s game, set and almost match to Joe Biden. Read our explainer on the deal.US business leaders are starting to seek alternatives to Donald Trump and Ron DeSantis for the Republican presidential nomination without the former’s unpredictability and the latter’s culture-war fervour.India’s economy grew by a greater-than-expected 7.2 per cent in the year to March, confirming the country’s status as one of the world’s fastest growing.Need to know: businessNvidia became the first chipmaker with a $1tn valuation as investors flocked to benefit from AI developments. The company on Monday launched a new supercomputer and announced a string of new AI alliances.Rising interest rates have set back European bank mergers and acquisitions by at least two years, dealmakers warned, as accounting rules mean assets being revalued at significantly lower levels.Philip Morris chief Jacek Olczak said the tobacco company’s move away from cigarettes and towards less harmful vaping alternatives meant it should now qualify as an ethical stock. US retailers are warning of a surge in thefts, costing some of them hundreds of millions of dollars as they try to outwit organised criminals with extra security and surveillance.An FT Big Read does a deep dive into Centerview, the Wall Street boutique bank involved in a bitter lawsuit over the departure of a company founder. Read how a self-made Chinese billionaire has come to dominate a key component of electric car batteries, with plans to further his country’s lead in the market.The World of WorkThe FT rounds up the views of bosses about “the right to disconnect” and how they view legislation to protect workers’ time.White-collar jobs seem to expand to fill the available time, whatever the progress of technology, writes columnist Sarah O’Connor. Formal pre-pandemic workwear doesn’t feel quite right anymore, but what should we choose instead? FT fashion experts offer some tips for updating your look in the new Working It podcast. Do say: I loved The Diplomat! Don’t say: Hey, who’s the muscular guy with the sunglasses following you everywhere? Columnist Stephen Bush offers some tips on how to make small talk at a diplomatic function. Some good newsThe York groundsel, a flower that became extinct in 1991 thanks to excessive use of weedkiller, has been resurrected in the city of its name in Britain’s first ever “de-extinction event”. More

The legislation would prevent President Biden from issuing another last-minute extension on the payments beyond the end of the summer.Follow for live updates as the House prepares for a vote on the debt limit deal.For millions of Americans with federal student loan debt, the payment holiday is about to end.Legislation to raise the debt ceiling and cut spending includes a provision that would require borrowers to begin repaying their loans again by the end of the summer after a yearslong pause imposed during the coronavirus pandemic.President Biden had already warned that the pause would end around the same time, but the legislation, if it passes in the coming days, would prevent him from issuing another last-minute extension, as he has already done several times.The end of the pause will affect millions of Americans who have taken out federal student loans to pay for college. Across the United States, 45 million people owe $1.6 trillion for such loans — more than Americans owe for any kind of consumer debt other than mortgages.The economic impact of the pandemic has faded since President Donald J. Trump first paused student loan payments in March 2020. Many Americans lost their jobs at the outset of the public health crisis, undercutting their ability to repay their loans on time. The number of jobs in the United States now exceeds prepandemic levels.Promoting the debt ceiling legislation over the weekend, Speaker Kevin McCarthy said on “Fox News Sunday” that it would end the pause on student loan payments “within 60 days of this being signed.”In fact, the legislation would follow the same timeline that the Biden administration had previously outlined, ending the pause on payments on Aug. 30 at the latest.A spokesman for Mr. McCarthy did not respond to an email seeking comment.Even with the pause ending, some borrowers may still see some relief if the Supreme Court allows Mr. Biden to move forward with a plan to forgive up to $20,000 in debt for some people with outstanding balances.Mr. Biden’s plan would cancel $10,000 of federal student loan debt for those who make under $125,000 a year. People who received Pell grants for low-income families could qualify for an additional $10,000 in debt cancellation.But the plan was challenged in court as an illegal use of executive authority, and during oral arguments in February, several justices appeared skeptical of the program. A ruling from the court could come at any time but is expected next month.White House officials have said repeatedly that they are confident in the legality of the president’s plan. But the debate about the plan, and the broader issue of student loans, has been fierce in Congress.Republicans have vowed to block the president’s plan if the courts do not. But they have so far failed to make good on that promise, despite repeated attempts.Last month, House Republicans passed a bill to raise the debt ceiling that would have blocked the student debt cancellation plan and ended the temporary pause on payments. That bill was shelved after negotiations began with the White House on the debt ceiling and spending cuts.Last week, the House passed a resolution that would use the Congressional Review Act to overturn the president’s debt cancellation plan. But the Senate has not taken up the measure, and Mr. Biden has said he would veto it.Instead, the compromise debt ceiling legislation now under consideration by lawmakers only requires ending the pause on payments — a move that the president had already said he would make. It would not block the debt cancellation plan.In addition, White House officials said the legislation would not deny the Biden administration the ability to pause student loan payments during a future emergency, as Republicans had sought to do.A spokesman for the White House said the president was pleased that Republicans had failed to block his debt cancellation plan in the debt ceiling legislation.“House Republicans weren’t able to take away a single penny of relief for the 40 million eligible borrowers, most of whom make less than $75,000 a year,” the spokesman, Abdullah Hasan, said. “The administration announced back in November that the current student loan payment pause would end this summer — this agreement makes no changes to that plan.” More

Turmoil among US banks has depleted the government-backed fund that protects depositors, giving it the least firepower in almost a decade to cover losses from future lender failures.The federal Deposit Insurance Fund contained $116bn in assets at the end of the first quarter, down from $128bn at the end of 2022, according to data released on Wednesday. The ratio of assets to insured deposits in the US banking system fell to 1.1 per cent, the lowest since 2015 and less than the minimum of 1.35 per cent required by law. The deposit fund’s depleted finances follow a period of turmoil for US regional lenders. The failures of Silicon Valley Bank and Signature Bank in March cost the fund $20bn. The first-quarter figures do not reflect the subsequent failure of First Republic, which cost the fund another $13bn, and would make the fund’s finances look even worse.The number of banks on the Federal Deposit Insurance Corporation’s so-called problem list stood at 43 at the end of the first quarter, up from 39 at the end of the year, the agency said as it released the data. The FDIC discloses the number of banks on its problem list, but not the names.The FDIC reported the updated fund data as part of its quarterly banking profile. The agency also confirmed that total profits of US banks neared $80bn, an all-time high, in the quarter as the Financial Times reported earlier this month. Deposits at US banks dropped by nearly $500bn in the quarter. That was the largest decline in almost four decades, on an absolute basis, but represented just 2 per cent of the nearly $17tn in US deposits.“Despite the recent period of stress, the banking industry has proven to be quite resilient,” said the FDIC chair Martin Gruenberg in a statement. “However, these results, especially for earnings, include the effects of only a few weeks of the industry’s stress than began in early March, rather than the course of the entire quarter.”The data also showed a slight improvement in the bond portfolios of banks, which have been hit by rising interest rates. US banks would collectively face as much as $515bn in losses if they were forced to liquidate those portfolios as of the end of March, down from unrealised losses of $617bn at the end of 2022. However, unrealised losses were still higher than a year ago, when they amounted to about $300bn, or at the end of 2021 when they were close to zero. The FDIC said the improvement was the result of a drop in the interest rates of longer-term bonds mostly in the month of March. The insurance fund ratio first fell below the statutory requirement of 1.35 per cent in 2020. US law gives the fund eight years to return to the minimum ratio. The FDIC reiterated that it is still on track to meet the required level by the end of 2028.This article has been updated to correctly describe the scale of the decline in deposits at US banks in the first quarter. More