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    Analysis-China’s looming fiscal package set to stabilise rather than boost growth

    BEIJING (Reuters) – China’s planned fiscal package targets damaged property and local government balance sheets that weigh on the economy and fuel deflationary pressures, thus acting as a stabiliser rather than the instant growth booster markets craved.Larger-than-expected monetary stimulus last month fuelled unfettered investor speculation about a complementing, blockbuster fiscal programme to immediately revive sagging economic activity.On Tuesday, Reuters reported that China is considering approving next week new debt issuance of more than 10 trillion yuan ($1.4 trillion) in coming years.Some 6 trillion yuan will go chiefly towards lowering the off-books debt of municipalities, while 4 trillion will fund buybacks of idle land from cash-strapped developers and help reduce a giant inventory of unsold flats.The measures in the works represent a more calibrated approach to stimulus, which is a departure from previous all-out strategies to revive growth.In 2008, for example, China threw lavish resources directly at the infrastructure and property sectors to counter the effects of the global financial crisis.”The primary goal of this stimulus is clearly more about shoring up balance sheets rather than boosting near-term GDP growth,” said Christopher Beddor, deputy China research director at Gavekal Dragonomics.”It should ease the strains, but not necessarily generate instantly higher spending.”This prudent approach is partly informed by the fact that China is now suffering from the excesses of previous stimulus. But it also leaves open questions about the impact the measures will have on short- and long-term growth.That lingering uncertainty is reflected in financial markets, with Chinese stocks down about 0.5% on Wednesday, pulling other Asian markets lower.”The package can be a painkiller, rather than a booster for the economy,” said Gary Ng, senior economist at Natixis. “The economic impact may not be as big as it looks on the surface.”CLOGGED PIPESStill, a programme worth more than 8% of the world’s second-largest economy’s gross domestic product (GDP) cannot be dismissed.”It’s not just about quantity. It’s about providing a sense of stability,” said Zong Liang, chief researcher at state-owned Bank of China.Local governments, facing high debt and falling revenues, have been cutting civil servants’ pay and other expenses. Property developers starved for cash have struggled to resume work on incomplete projects, hitting jobs and incomes.China hopes to unclog the pipes that transmit money to businesses and consumers by shifting liabilities onto the central government’s healthier balance sheet, which only carries a debt load of 24% of GDP.”Policymakers seem to sense that there’s a major liquidity squeeze right now unfolding among local governments, in large part due to the property downturn, leading many local authorities to stop paying their staff and corporate suppliers,” Gavekal’s Beddor said.Tackling that squeeze releases resources into the real economy, but the impact may only show up in the second half of 2025, he added.Another lingering question is whether the package merely postpones the debt crunch.The International Monetary Fund calculates explicit local government debt at 31% of GDP at the end of 2023, that of their finance vehicles at a further 48% of GDP, and other government-related debt at another 13%.Add the central government’s debt and the total reaches 116 trillion yuan, the Fund estimates.In the property sector, Goldman Sachs estimates the unsold real estate inventory, if fully built, would amount to 93 trillion yuan.Overcoming these past excesses hinges on whether the package can kick off a virtuous growth circle that allows China to curb, rather than simply transfer these liabilities.Many analysts say a decades-old household consumption deficit holds back such prospects.Low wages, high youth unemployment and a feeble social safety net leave China’s household spending below 40% of GDP, or about 20 percentage points behind the global average.While Beijing is also expected to unveil consumer subsidies for appliances and other goods, the amount will be a tiny fraction of the gap.”It seems support for consumption remains modest,” said Louis Kuijs, chief Asia economist at S&P Global. “That means it remains unlikely that we will see a substantial improvement of the economic growth outlook or that deflation risks have been vanquished.” More

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    Deficits, Donald Trump and the dollar

    Standard DigitalStandard & FT Weekend Printwasnow $29 per 3 monthsThe new FT Digital Edition: today’s FT, cover to cover on any device. This subscription does not include access to ft.com or the FT App.What’s included Global news & analysisExpert opinionFT App on Android & iOSFT Edit appFirstFT: the day’s biggest stories20+ curated newslettersFollow topics & set alerts with myFTFT Videos & Podcasts20 monthly gift articles to shareLex: FT’s flagship investment column15+ Premium newsletters by leading expertsFT Digital Edition: our digitised print editionWeekday Print EditionFT WeekendFT Digital EditionGlobal news & analysisExpert opinionSpecial featuresExclusive FT analysisFT Digital EditionGlobal news & analysisExpert opinionSpecial featuresExclusive FT analysisGlobal news & analysisExpert opinionFT App on Android & iOSFT Edit appFirstFT: the day’s biggest stories20+ curated newslettersFollow topics & set alerts with myFTFT Videos & Podcasts10 monthly gift articles to shareGlobal news & analysisExpert opinionFT App on Android & iOSFT Edit appFirstFT: the day’s biggest stories20+ curated newslettersFollow topics & set alerts with myFTFT Videos & Podcasts20 monthly gift articles to shareLex: FT’s flagship investment column15+ Premium newsletters by leading expertsFT Digital Edition: our digitised print editionEverything in PrintWeekday Print EditionFT WeekendFT Digital EditionGlobal news & analysisExpert opinionSpecial featuresExclusive FT analysisPlusEverything in Premium DigitalEverything in Standard DigitalGlobal news & analysisExpert opinionSpecial featuresFirstFT newsletterVideos & PodcastsFT App on Android & iOSFT Edit app10 gift articles per monthExclusive FT analysisPremium newslettersFT Digital Edition10 additional gift articles per monthMake and share highlightsFT WorkspaceMarkets data widgetSubscription ManagerWorkflow integrationsOccasional readers go freeVolume discountFT Weekend Print deliveryPlusEverything in Standard DigitalFT Weekend Print deliveryPlusEverything in Premium Digital More

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    Five frightening financial charts for Hallowe’en

    $75 per monthComplete digital access to quality FT journalism with expert analysis from industry leaders. Pay a year upfront and save 20%.What’s included Global news & analysisExpert opinionFT App on Android & iOSFT Edit appFirstFT: the day’s biggest stories20+ curated newslettersFollow topics & set alerts with myFTFT Videos & Podcasts20 monthly gift articles to shareLex: FT’s flagship investment column15+ Premium newsletters by leading expertsFT Digital Edition: our digitised print edition More

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    Benjamin Button’s clues for the US economy

    $1 for 4 weeksThen $75 per month. Complete digital access to quality FT journalism. Cancel anytime during your trial.What’s included Global news & analysisExpert opinionFT App on Android & iOSFT Edit appFirstFT: the day’s biggest stories20+ curated newslettersFollow topics & set alerts with myFTFT Videos & Podcasts20 monthly gift articles to shareLex: FT’s flagship investment column15+ Premium newsletters by leading expertsFT Digital Edition: our digitised print edition More

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    UK’s rising fiscal burden narrows tax gap with Europe

    $75 per monthComplete digital access to quality FT journalism with expert analysis from industry leaders. Pay a year upfront and save 20%.What’s included Global news & analysisExpert opinionFT App on Android & iOSFT Edit appFirstFT: the day’s biggest stories20+ curated newslettersFollow topics & set alerts with myFTFT Videos & Podcasts20 monthly gift articles to shareLex: FT’s flagship investment column15+ Premium newsletters by leading expertsFT Digital Edition: our digitised print edition More

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    Giant African rats join crackdown against illegal wildlife trade

    $1 for 4 weeksThen $75 per month. Complete digital access to quality FT journalism. Cancel anytime during your trial.What’s included Global news & analysisExpert opinionFT App on Android & iOSFT Edit appFirstFT: the day’s biggest stories20+ curated newslettersFollow topics & set alerts with myFTFT Videos & Podcasts20 monthly gift articles to shareLex: FT’s flagship investment column15+ Premium newsletters by leading expertsFT Digital Edition: our digitised print edition More

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    EU presses ahead with tariffs on Chinese electric vehicles

    Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.The EU is pushing ahead with tariffs of up to 45 per cent on Chinese electric vehicles, sharply escalating the trade war between the 27-member bloc and Beijing over allegations of unfair industrial subsidies.The tariffs, which come into force on Wednesday and will be imposed for five years, come after the EU rejected China’s claims that it was introducing protectionist measures without evidence that Chinese vehicles were receiving undue state support. The new duties also come on top of an existing 10 per cent tariff on Chinese car imports in the bloc.The two sides said they would continue talks, including over the introduction of “minimum prices” for Chinese-made vehicles sold in Europe. That level would have to be high enough to compensate for the “injurious subsidisation” that Chinese manufacturers received and which allowed them to undercut European rivals, an EU official said.China’s commerce ministry said in a statement on Wednesday that Beijing would “continue to take all necessary measures to resolutely safeguard the legitimate rights and interests of Chinese companies”. It added that it hoped Brussels could work with Beijing in a “constructive manner” to resolve the dispute through dialogue.The EU’s decision to impose additional duties on Chinese-made EVs followed the conclusion of a months-long investigation launched by commission president Ursula von der Leyen last year into China’s allegedly unfair support for its EV industry.Beijing has repeatedly criticised Brussels over the investigation and tariff rises, arguing the European actions violate international trade rules and threaten global progress on fighting climate change.The EV tariffs have caused deep divisions in the bloc, with strong opposition from member states including Germany and Hungary. Diplomats have warned that EU countries that export to China are bracing for further retaliation from Beijing.A spokesman for German Chancellor Olaf Scholz said on Wednesday that Berlin was pushing for a negotiated solution because of the risk of retaliation.“Such trade conflicts are not something we should strive for and in this respect the clear expectation towards Brussels, but also towards Beijing, is that good results will be achieved in the ongoing talks so that a trade conflict can be averted,” he said.The introduction of the duties also comes at a vulnerable time for the EU car industry, which has struggled to compete with the aggressive expansion of low-priced Chinese EVs in the bloc. Except for Renault, all the major European car manufacturers have issued profit warnings this year.Volkswagen, Europe’s biggest car manufacturer, is planning to shut at least three German plants and shed tens of thousands of jobs as part of a cost-cutting drive.Along with high energy costs and challenging regulation linked to the EU’s green transition, the industry is contending with a significant increase in the number of cheaper Chinese models reaching the market. The commission has insisted it is introducing tariffs to ensure a level playing field in Europe rather than to restrict trade with China.The tariffs were first announced in June, with four companies — China’s BYD, Geely and SAIC and Tesla of the US — allocated individual duties that ranged from 7.8 per cent for Tesla to 35.3 per cent for SAIC, according to the level of subsidies they received from Beijing.All other manufacturers that co-operate with Brussels by providing requested information will be hit with a tariff of 20.7 per cent. Those that do not face a 35.3 per cent levy.“We can safely say that we basically disagreed on each and every fact, each and every legal argument that we have established in the investigation,” an EU official said.China has already said it will impose anti-dumping measures on EU brandy imports and has launched probes into EU imports of pork and dairy products since the EV tariffs were announced. Beijing also raised a complaint at the World Trade Organization after the tariffs were provisionally announced, calling the investigation “protectionist in nature” and claiming an “absence of any concrete evidence regarding alleged subsidisation in China”.The EU has said the WTO complaint is now void since the tariffs were marginally reduced after the investigation ended.The China Chamber of Commerce to the EU “expressed profound disappointment” over the commission’s decision to proceed with the tariffs, telling the Financial Times it was “disheartened by the lack of substantive progress in negotiations”.But an EU official confirmed prices were unlikely to rise immediately for consumers. “There is a big chance that if a consumer bought a car now, it would be bought from stock [already] on the EU market,” the official said.Additional reporting by Gloria Li in Hong Kong and Laura Pitel in BerlinVideo: Content creators take the fight to AI | FT Tech More

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    US dollar rally pauses before jobs data, Aussie droops on RBA outlook

    TOKYO (Reuters) – The dollar hovered close to a three-month peak on Wednesday in a big week for macroeconomic data that could reveal the path for U.S. monetary policy.The Australian dollar edged closer to a three-month trough after some stickiness in inflation suggested a Reserve Bank of Australia interest rate cut is unlikely this year.Mixed U.S. indicators overnight, showing a loosening U.S. jobs market but a confident consumer, provided little clarity on the outlook for Federal Reserve easing, allowing the greenback to drift lower with Treasury yields on Tuesday following a strong seven-year note auction. Recently though, economic readings have pointed to a resilient economy, particularly for employment, spurring a paring back of bets on the pace of rate reductions. The ADP employment report is due later in the day, ahead of the potentially crucial monthly payrolls report on Friday.”The U.S. dollar continues to garner strong support as markets adjust their rate path expectations,” said James Kniveton, senior corporate FX dealer at Convera.”The American economy is currently firing on all cylinders.”Meanwhile in Australia, “the increased inflation number in services is likely to mean rate reductions this year are a very distant prospect,” Kniveton said.The Reserve Bank of Australia’s preferred inflation gauge, the trimmed mean measure, slowed to 3.5% from 4.0% in the third quarter, but service-sector inflation remained elevated. On a quarterly basis, the gauge increased by 0.8%, topping forecasts for a 0.7% rise.The Aussie was little changed at $0.6562 as of 0101 GMT, not far from Tuesday’s low of $0.6545, a level that had last been seen on Aug. 8.The U.S. dollar index, which measures the currency against six major rivals including the yen and euro, was little changed at 104.24, after reaching the highest since July 30 at 104.63 on Tuesday before finishing the day almost flat.The 10-year Treasury yield slid to 4.2461% on Wednesday, after reaching the highest since July 5 at 4.3390% in the prior session.Both the dollar and U.S. bond yields have also been buoyed in recent days by rising speculation in markets and on some betting sites on a victory on Nov. 5 for Republican presidential candidate Donald Trump, whose tariff and immigration policies are seen as inflationary. That also helped leading cryptocurrency bitcoin surge to near its all-time high from March at $73,803.25. The token last changed hands at about $72,082, after pushing as high as $73,609.88 in the previous session.Opinion polls still indicate the race is too close to call.The dollar-yen pair, which tends to track U.S. yields closely, slipped 0.06% to 153.27, after retreating from a three-month peak of 153.87 on Tuesday.The yen has also been weighed down by political uncertainty since a disastrous weekend election for Japan’s ruling coalition saw it lose its majority in parliament, ushering in a period of horse trading that is likely to result in expanded fiscal spending and could potentially delay rate hikes.The euro edged up 0.06% to $1.0824 ahead of the release of readings on gross domestic product across Europe later in the day, that could shed light on whether the European Central Bank will opt to cut rates by 25 or 50 basis points at its next meeting in December.Sterling traded flat at $1.3016 ahead of the Labour government’s first budget on Wednesday.Finance minister Rachel Reeves, along with Prime Minister Keir Starmer, has reiterated the need for tough fiscal measures to help close a hole in British public finances. They are seeking to retain the confidence of investors, two years after then-Prime Minister Liz Truss’ tax-cutting plans sparked a crisis in the bond market.Key for sterling will be estimates from the UK’s Office for Budget Responsibility, which makes the forecasts that underpin the government’s spending and tax plans. More