Economy

Everything we know about Japanese carmakers is changing. A long established pattern of home currency weakness boosting their share prices has not worked this year. Investors need a new strategy. A weaker yen, the industry’s reporting currency, has historically meant higher profits for Japan’s big three carmakers — Toyota, Honda and Nissan. This formula still holds true for other local exporters such as gaming. Nintendo just reported a record fiscal first half net profit in the six months to September. In the past year, the currency has weakened from ¥113 to ¥146 against the US dollar. Each ¥1 fall should produce a more than ¥40bn operating profit for Toyota.Yet while operating earnings did improve for the trio — they largely disappointed markets. Toyota’s profit for the September quarter was significantly below market expectations. It also cut its production target for the fiscal year through March. Though Honda managed to raise its full-year outlook for operating profits, the forecast for the full year was still below expectations.Part of this poor showing has been because of strategic hedging by automakers, which have increased their proportions of overseas production. Instead of providing carmakers with record profits, this year’s yen collapse exacerbates the rising costs of imported raw materials and energy. Combined with chip supply disruptions, which are hitting Nissan particularly hard in recent months, these factors cloud the sector’s future.Nissan is meanwhile coping with changing dynamics within its partnership with France’s Renault. The two are renegotiating their equity ties, in which Renault owns 43 per cent of Nissan but Nissan has just a 15 per cent stake in Renault, adding uncertainty. Shares of Nissan and Toyota are down more than 12 per cent this year, more than double the declines of the broader benchmark index. Yet shares of the trio all trade at a premium to global rival Volkswagen. For Toyota, that premium is more than double.Supply-chain disruptions and output cuts should soon narrow that valuation gap. More

Foxconn, the world’s largest contract electronics manufacturer, has said the bulk of its spending on production facilities will continue to be in China, despite the major disruption at its plants caused by Beijing’s zero-Covid policy. Foxconn chair Liu Young-way told investors on an earnings call on Thursday that the recent upheaval at its 200,000-strong factory town in Zhengzhou, which led to some workers scaling fences and walking home, was a crisis created by the pandemic. The hit to production of iPhones forced a rare warning from Apple this week of lower iPhone 14 Pro and iPhone 14 Pro Max shipments than anticipated, and customers experiencing longer wait times to receive their products.The higher transmissibility of the virus and “the country’s dynamic zero- Covid policy”, were to blame, Liu said. “How to meet those requirements is a challenge for us. Not just Zhengzhou, but other plants and our competitors face the same challenge.” He said he hoped Beijing could change its policy as the virus became less deadly.The remarks were unusual coming from the Taiwanese company, which is China’s largest private-sector employer and exporter and normally steers clear of any comments that could be interpreted as political.Liu downplayed the risk that the Zhengzhou disruption could allow rivals to snatch Apple orders from Foxconn. Although he conceded that the company needed to adjust its pandemic management model, he said the largest portion of capital investment for next year would still flow to China, alongside investments in factories in Vietnam, India and Mexico.Liu said the need for reallocating capacity in response to the pandemic would not drive diversification of the company’s manufacturing footprint beyond China. “There are other drivers behind that, like geopolitics. Capacity reallocations for those reasons are more likely,” he said.

His comments came as the cost of managing production under Beijing’s draconian Covid-19 control measures, along with soaring inflation, ate into Foxconn’s profitability. The group’s gross margin, which Liu aims to gradually increase to 10 per cent, dropped to 6.16 per cent in the third quarter from 6.4 per cent in the three preceding months.Foxconn’s net profit for the September quarter was NT$38.8bn ($1.2bn), a 5 per cent increase compared with the same period last year but below analysts’ expectations of NT$41.3bn.The company said it expected revenue to be flat in the current quarter and next year. While its consumer electronics business was likely to be weaker in 2023 than this year, cloud products, personal computers and electronic components would continue to drive growth, it said.Liu said the company would do whatever it could to adjust capacity to fulfil demand from its customers for the upcoming Christmas and Lunar New Year season.The disruption was rare for Foxconn, as the company’s large network of factories across China enabled it in earlier phases of the pandemic to avoid disruptions that hit rivals such as Pegatron, another Taiwanese-owned iPhone maker. Production was “gradually returning to normal” in Zhengzhou, Liu said. More

Executives, analysts and bond traders are all wondering if corporate finance is about to unravel as interest rates rise.As the Federal Reserve raises interest rates in an effort to tame inflation, the corporate bond market, which lends money to many companies, has been hammered particularly hard.The steep rise in interest rates has caused bond values to tumble: From October 2021 to October 2022, an index that tracks investment-grade corporate bonds is down by roughly 20 percent. By some measures, overall bond market losses have been worse than at any time since 1926.Even the price of bonds issued by the highest-rated corporations have cratered this year.The ICE BofA US Corporate Index, which tracks the performance of U.S. dollar denominated investment grade rated U.S. corporate debt, has severely declined.

Source: Federal Reserve Bank of St. LouisBy The New York TimesThe yield on bonds issued by solid businesses is now about 6 percent, about twice as much as it was a year ago. That number indicates how high of an interest rate rock-solid corporations would have to pay to borrow more money right now; rates are even higher for smaller businesses or those that investors consider risky.Corporate bankruptcies and defaults remain low by historical standards, but a growing number of companies are struggling financially. Businesses in industries like retail, manufacturing and real estate are especially vulnerable because their sales are weak or falling. In many cases, their customers have also been hurt by higher interest rates because the higher borrowing costs have effectively raised the costs of big-tickets items like homes and cars.Until recently, for example, Carvana was a fast growing used car retailer with a soaring stock. The number of cars the company sold fell 8 percent in the third quarter, and its spending on interest payments tripled compared with the same period a year earlier. The interest rate on a big chunk of its debt issued this year that matures in 2030 is 10.25 percent. Its bonds are trading at less than 50 cents to the dollar, suggesting that investors would require Carvana to pay an interest rate of nearly 30 percent if it were to borrow more money for the same amount of time. The company’s stock is down more than 90 percent over the last year.“There’s certainly a lot of headwinds,” Ernest Garcia III, Carvana’s chief executive, said on a conference call with analysts last week. “Recently, we’ve seen car prices depreciate to the tune of give or take 10 percent so far this year, but we’ve also seen interest rates shoot up very rapidly and I think that overall has harmed affordability,” he added, even as he expressed optimism about the company’s ability to weather the financial storm.Carvana, Co. has paid more in interest payments in the last quarter compared to last year and sold fewer cars.Joe Raedle/Getty ImagesBefore rates jumped, companies borrowed a ton of money last year, with lower-rated firms selling more new bonds in 2021 than in any other year. But that flow has turned into a trickle as interest rates have risen and investors have grown more discerning about whom they lend money to. Banks are still making more commercial and industrial loans, but they are also becoming more discerning and are charging higher interest rates.Most investors, executives and economists expect a recession or anemic growth next year, which could make doing business, borrowing money and paying off loans even more difficult.What the Fed’s Rate Increases Mean for YouCard 1 of 4A toll on borrowers. More

Russia’s invasion of Ukraine is one reason that the fuel is scarce. Another is a series of yearslong, intertwined events that cover the globe.HOUSTON — Gasoline prices have dropped as much as a dollar a gallon since early summer, easing a financial strain on many people. But the price of diesel, the fuel that moves trucks, trains, barges, tractors and construction equipment, has remained stubbornly high, helping to prop up the prices of many goods and services.On Wednesday, a gallon of diesel fuel in the United States cost $5.357 on average, according to AAA. That was down from a record of $5.816 in June but well above the $3.642 it cost a year ago. (A gallon of regular gasoline now averages $3.805.)The surge in diesel costs has not garnered the attention from politicians and the public that the jump in gasoline prices did, because most of the cars in the United States run on gas. But diesel prices are a critical source of pain for the economy because they affect the cost of practically every product.“The economic impact is insidious because everything moves across the country powered by diesel,” said Tom Kloza, the global head of energy analysis at the Oil Price Information Service. “It’s an inflation accelerant, and the consumer ultimately has to pay for it.”Sherri Garner Brumbaugh, the president of Garner Trucking in Findlay, Ohio, said the weekly cost of fueling one of her heavy-duty trucks in September was $1,300, more than double the $600 she paid two years earlier. “A good portion gets passed onto my customers with a fuel surcharge,” she said.Both gasoline and diesel prices are tied to the price of oil, which is set on the global market. The price of each fuel immediately shot up after Russia invaded Ukraine in February. But their paths have diverged sharply. Over the last year, the cost of diesel has ballooned by over 40 percent, compared with 11 percent for gasoline.Diesel prices are high because the fuel is scarce worldwide, including in the United States, which in recent years became a net exporter of oil and petroleum products. Oil analysts said there were simply not enough refineries to meet the demand for diesel, especially after Russia’s energy exports fell when the United States, Britain and some other countries stopped buying them.Diesel inventories are always a bit low in the spring and fall, during agricultural planting and harvesting seasons, but this fall supplies are at their lowest level since 1982, when the government began reporting data on the fuel.The tightest market is in the Northeast, where oil refineries have closed in recent years and where the diesel crunch is complicated by winter demand for heating oil. The two fuels are virtually the same but are taxed differently. An especially cold winter could make the situation worse by increasing the demand for heating oil.In Massachusetts, for example, diesel is selling for more than $5.90 a gallon (about $2.33 more than it did a year earlier). In Texas, it costs $4.73 a gallon.Trucks, trains, barges, tractors and construction equipment all use diesel, and its price affects the cost of practically every product.Jim Watson/Agence France-Presse — Getty ImagesWhile Russia’s war in Ukraine sent diesel prices soaring, the current situation is partly the result of an interconnected, slow-building series of events that extends across the globe. Some analysts trace the roots of the U.S. diesel shortage to a fire at Philadelphia Energy Solutions in 2019, which forced the refinery to shut down, taking out one of the Northeast’s important diesel producers.But refineries have been closing elsewhere. Over the last several years, 5 percent of U.S. refinery capacity, and 6 percent of European refinery capacity, has been shut down. A few refineries closed or scaled back because of the collapse in energy demand in the early months of the coronavirus pandemic. Some older refineries were shut down because they were inefficient and their profits weren’t large enough for Wall Street investors. Other refineries were closed so that their owners could convert them to produce biofuels, which are made from plants, waste and other organic material.“Because we shut those refineries down, we don’t have enough capacity,” said Sarah Emerson, the president of ESAI Energy, a consulting firm.As much of the global economy recovered in 2021 and 2022, demand for diesel climbed quickly. But then, after Russia invaded Ukraine, the Biden administration banned Russian oil and petroleum imports, which amounted to 700,000 barrels of diesel and other fuels a day, much of it intended for the Northeast.Diesel prices have also soared so much higher than the cost of gasoline in part because of a decision by the International Maritime Organization several years ago to require most oceangoing ships to replace their high-sulfur bunker fuel with less polluting fuels starting in 2020. That has slowly increased demand for diesel over the last two years.“A substantial amount of diesel is needed in the new bunker blends, and that is a hidden demand for diesel molecules,” said Richard Joswick, the head of global oil analysis for S&P Global Platts. He estimated that the global shipping fleet was now consuming half a million barrels of diesel a day, or roughly 2 percent of the world’s supplies.At the same time, while American refiners are now making tidy profits, 30 percent of their production is being exported. Latin America has become a particularly profitable market, as American diesel replaces fuel from Venezuela, where the state-controlled oil sector has been hobbled by corruption, mismanagement and U.S. sanctions. Some American diesel also goes to Europe.The impact of exports on domestic prices has led some analysts to speculate that the Biden administration could eventually restrict exports to boost supplies at home. But energy experts said that might not have the desired effect because diesel had become a globally traded commodity. Denying Latin America fuel could also backfire because many countries in the region sell crude oil to the United States.“We have a symbiotic relationship with Latin America on diesel and crude,” said Ms. Emerson of ESAI Energy. “We can disrupt that, but it doesn’t immediately fix the problem.”The global diesel shortage was also exacerbated by labor strikes at French refineries this fall. And utilities in Europe have been stockpiling diesel in case they cannot find enough natural gas to fuel their power plants.Russian diesel has continued to flow to Europe since the war began, but stricter sanctions that the European Union plans to impose on Russia in February could potentially cause havoc to the diesel business of traders, banks, insurance companies and shippers.Still, some energy experts said prices could soon begin to ease.Help may be on the way from an unlikely source: China. In recent months, China has been loosening export controls on diesel. Its exports rose from 200,000 barrels a day in August to 430,000 barrels a day in September, and the country has the capacity to sell even more, according to estimates by ESAI Energy.Nearly a third of Chinese diesel exports went to the Netherlands in recent months, taking some pressure off the European market. And oil refineries being built in Kuwait and China could come online as early as next year, further increasing supply.Demand for diesel and its price could also fall if much of the world slides into a recession next year, as some economists and policymakers are expecting.“A deep recession would certainly cut into diesel demand,” said Mr. Joswick of S&P Global Platts. “We don’t forecast a recession, but that is certainly a possibility.” More

Hiring the best, the brightest and the highest number of employees was a badge of honor at tech companies. Not anymore as layoffs surge.When Stripe, a payments start-up valued at $74 billion, laid off more than 1,000 employees this month, its co-founders blamed themselves. “We overhired for the world we’re in,” they wrote. “We were much too optimistic.”After Elon Musk, Twitter’s new owner, slashed the company’s staffing in half last week, Jack Dorsey, a founder and former chief executive of the social media service, claimed responsibility. “I grew the company size too quickly,” he wrote on Twitter.And on Wednesday, when Meta, the parent company of Facebook and Instagram, shed 11,000 people, or about 13 percent of its work force, Mark Zuckerberg, the chief executive, blamed overzealous expansion. “I made the decision to significantly increase our investments,” he wrote in a letter to employees. “Unfortunately, this did not play out the way I expected.”The chorus of conceding by tech executives that they hired too many people is ricocheting across Silicon Valley as the industry rushes to make cuts, blaming a worsening economy.But at least part of the surge in layoffs was self-inflicted. When the companies enjoyed soaring profits and a belief that the pandemic-fueled boom times would keep going, they aggressively expanded by hoarding the most fought-over and expensive resource in the software business: talent.Silicon Valley tech companies have long seen hiring as more than just filling openings. The industry’s fierce talent wars showed that companies like Google and Meta were gaining the best and brightest. Ballooning staffs and a long reign atop lists of the most-desired jobs for college graduates were emblems of growth, deep pockets and prestige. And to employees, the work became something larger — it was an identity.The Austin, Texas, campus of Google, a veteran of the tech industry’s hiring wars.Brandon Thibodeaux for The New York TimesThis mentality became ingrained at the largest tech companies, which offer numerous perks on lavish corporate campuses that rival universities. It was echoed by smaller start-ups, which dangle a chance at life-changing wealth in the form of stock options.Now these practices are giving the tech industry indigestion.“When times are flush, you get excesses, and excesses lead to overhiring and optimism,” said Josh Wolfe, an investor at Lux Capital. “For the past 10 years, the abundance of cash led to an abundance of hiring.”More than 100,000 tech workers have lost their jobs this year, according to Layoffs.fyi, a site that tracks layoffs. The cuts range from well-known publicly traded companies like Meta, Salesforce, Booking.com and Lyft to highly valued private start-ups such as the Gopuff delivery service and the Chime and Brex financial platforms.More on Big TechMeta Layoffs: The parent of Facebook said it was laying off more than 11,000 people, or about 13 percent of its work force, in what amounted to the company’s most significant job cuts.Seeking Alternatives: Since Elon Musk bought Twitter, some of its users have sought out other social media platforms. Here is a closer look at Mastodon, one of the most popular alternatives.An Empire in Danger: U.S. lawmakers’ objections to an obscure Chinese semiconductor company and tough Covid-19 restrictions are hurting Apple’s ability to make new iPhones in China.Big Tech’s Slowdown: Amid inflation and rising interest rates, Silicon Valley’s most powerful companies are signaling that tough days may be ahead. Some have already announced hiring freezes and job cuts.Many of the job losses have taken place in tech’s most experimental areas. Astra, a rocket company, cut 16 percent of its staff this week after tripling its head count last year. In the cryptocurrency industry, which has suffered a meltdown this year, high-value companies including Crypto.com, Blockchain.com, OpenSea and Dapper Labs have cut hundreds of workers in recent months.Tech leaders were too slow to react to signs of an economic slowdown that emerged this spring, after many of the companies had already been on hiring sprees for several years, tech analysts said.Meta, whose valuation soared past $1 trillion, doubled its staff to 87,314 people over the past three years. Robinhood, the stock trading app, expanded its work force nearly sixfold in 2020 and 2021.“They’ve charged ahead with these plans that are no longer based on reality,” said Caitlyn Metteer, director of recruiting at Lever, a provider of recruiting software.For many, it’s a moment of shock. “Are we in a bubble” panics in the tech industry over the last decade have always been short-lived, followed by a rapid return to even frothier good times. Even those who predicted that pandemic behaviors enabled by the likes of Zoom, Peloton, Netflix and Shopify would ebb now say they underestimated the extent.Many believe this downturn will last longer because of the macroeconomic factors that created it. For the past decade, low interest rates pushed investors into riskier assets that offered higher returns. Those investors valued fast growth over profits and rewarded companies that took big risks.Jack Dorsey wrote on Twitter, which he helped start, that he had expanded the company too quickly.Marco Bello/Agence France-Presse — Getty ImagesIn recent years, tech companies responded to the flood of cash from investors and a rapidly growing business by pouring money into expansion via sales and marketing, hiring, acquisitions and experimental projects. The excess capital encouraged companies to staff up, adding fuel to the war for talent.“The pressure is to just spend the money quick enough so you can grow fast enough to justify the kinds of investments V.C.s want to make,” said Eric Rachlin, an entrepreneur who co-founded Body Labs, an artificial intelligence software company that Amazon bought.Expanding head count was also a way for managers to advance their careers. “Getting more people on the team is easier than telling everyone to just work super hard,” Mr. Rachlin said.That led the tech industry to gain a reputation for corporate bloat. Rumors often circulated of highly compensated workers who clocked just a few hours of work a day or juggled multiple remote jobs at once, alongside elaborate office perks like free laundry, massages and renowned cafeteria chefs. This spring, Meta scaled back its perks, including laundry service.In the past, tech workers could quickly change jobs or land on their feet if they were cut because of the plethora of open positions, but “I don’t think we know yet if everyone in this wave of layoffs will be able to do that,” Mr. Rachlin said.Some people see a chance to help those entering a difficult job market for the first time. Stephen Courson recently left a career in sales and strategy at Gartner, the research and consulting firm, and Salesforce to create financial content. He initially planned to focus on time management, but after many of his friends went through painful layoffs he began working on a course that helps people prepare for job interviews. It’s a skill that many of today’s job hunters never had to hone in flush times.“This isn’t going to get better quickly,” he said.Amid the drumbeat of layoff announcements, investors see an opportunity. They are quick to point out that well-known successes of the last decade — companies like Airbnb, Uber, Dropbox — were created in the aftermath of the Great Recession.This week, Day One Ventures, a venture capital firm, announced Funded Not Fired, a program that aims to invest $100,000 into 20 new start-ups where at least one founder was laid off from a tech company. Within 24 hours, hundreds of people had applied, said Masha Bucher, founder of the firm.“Some of the people are saying, ‘This is a sign I’ve been waiting for,’” she said. “It really gives people hope.”In the meantime, there may be more layoff announcements — delivered through the now standard form of a letter from the chief executive posted to a company blog.These letters have taken on a familiar format. The bosses explain the grim economic outlook, citing inflation, “energy shocks,” interest rates, “one of the most challenging real estate markets in 40 years” or “probable recession.” They take the blame for growing too fast. They offer up support to those affected — severance, visa help, health care, career guidance. They express sadness and thank everyone.And they reaffirm the company’s mission. More

China has wrapped up a flagship import trade fair that sought to boost foreign access to its market, even as the government’s strict anti-coronavirus measures continue to constrain international trade with the country.The China International Import Expo in Shanghai, one of the world’s largest trade events and a personal project of President Xi Jinping since it launched in 2018, hosted more than half of the biggest multinational companies, according to organisers.The event, which was held partly virtually last year, comes at a pivotal moment. China’s economy faces intensifying pressure from the government’s zero-Covid policies, weakening trade data and mounting scrutiny of its reopening prospects.While foreigners were largely absent from the vast 59-acre conference centre close to Shanghai’s Hongqiao airport, almost 500,000 people visited gleaming stalls where companies exhibited their latest products and technologies.Chinese authorities continue to require a week of hotel quarantine for overseas arrivals, and unlike with previous events such as the Beijing Winter Olympics, a “closed loop” system was not set up to facilitate foreign attendance at the trade fair. The expo also applied its own Covid-19 protocols, including an entry requirement of a negative PCR test within the past 24 hours.At a booth for Danish group Arla Foods Ingredients, Shanghai-based Asia head Alexander Leufgen said some customers from within China and abroad had struggled to get into the event because of the pandemic measures. The company was hosting a separate event for them downtown, he added.“It’s a strict regime,” said Andreas Thorud, China director at the Norwegian Seafood Council. He added that Norwegian seafood exports to China were nonetheless up 4 per cent year on year by volume and 46 per cent in terms of value, marking a record.

The trade fair was held under strict Covid-19 regulations, with attendees required to submit a negative PCR test within the past 24 hours © Alex Plavevski/EPA-EFE/Shutterstock

“When it comes to Norwegian seafood in the Chinese market, the numbers can speak for themselves,” he said.Such growth highlights the immense appeal of China’s market to foreign exporters despite the restrictions and trade disruptions caused by the pandemic. In 2020, China briefly halted European salmon imports after an outbreak was linked to Beijing’s Xinfadi wholesale market. Covid cases close to ports have sporadically obstructed trade.Leufgen said his company had recorded double-digit revenue growth in China this year and the country remained an attractive market. “One side effect of Covid-19 has been that health awareness for people [in China] has increased,” he said.

Official trade data this week showed Chinese imports, which boomed early in the pandemic, dropped for the first time last month since 2020, while exports also contracted, despite forecasts of a 4.5 per cent increase. The economy grew 3.9 per cent in the third quarter, well below a government target of 5.5 per cent for the year.Several foreign business representatives were only able to participate in the fair remotely, through a video conference attended almost entirely by domestic media. Dave Nicholas, a director at New Zealand dairy company Hoeslandt, said China was “the great opportunity for all New Zealand companies operating in the dairy industry”, adding he looked forward to travelling to China again after last visiting in 2019.Domenico Monge, head of Italy’s biggest pet food brand Monge, echoed that China was a “wonderful opportunity” but pointed to challenges in the market, including domestic competition.At an opening address on Friday via video link, Xi said China remained committed to the “fundamental national policy of opening up to the world”, adding that it would “work with all countries and all parties to share the opportunities in its vast market”.

But he provided no insight about any further relaxation of Covid controls. Speculation about a possible reopening has driven market gyrations in recent weeks.At the Norwegian Seafood Council stall, Thorud said it was significant that the trade event went ahead in spite of the restrictions. “Right now, we see CIIE goes as planned,” he said. “China is not open yet, but when that happens, you need to be ready.”Additional reporting by Wang Xueqiao in Shanghai More

The wealth of China’s 100 richest people shrank by more than a third in 2022, as Beijing’s zero-Covid policy, faltering economic growth and a push for “common prosperity” dented valuations of top companies and ate into private wealth.The fortunes of the country’s wealthiest tycoons fell 39 per cent to $907.1bn from $1.48tn last year, according to Forbes. It was the biggest decline since the publication started compiling its China’s 100 Richest list more than 20 years ago.The wealth of only two people on the list grew, Forbes said, while 79 billionaires became poorer. There were three newcomers to the list.Forbes blamed the decline on Beijing’s tech crackdown, a strict adherence to zero-Covid policies that has throttled growth and damped consumer demand, and concerns about President Xi Jinping’s consolidation of power. The slide in value of the renminbi also chipped away at fortunes.“The past year has been one of China’s most difficult in recent decades,” said Russell Flannery, Forbes’ editor-at-large.Zhong Shanshan, the chair of bottled water company Nongfu Spring, remained in the top spot with $62.3bn, down 5 per cent from the year before. Robin Zeng, chair of CATL, the world’s largest electric vehicle battery maker, remained in third place after his fortune fell by 43 per cent to $28.9bn.

The net worth of Pony Ma dropped by more than half after the share price of internet giant Tencent, where he is chief executive, plumbed four-year lows this year. Alibaba founder Jack Ma saw his personal fortune almost halve after his company dropped roughly 60 per cent in value.Shein founder Chris Xu was a notable newcomer, with a fortune estimated at $10bn, while Hui Ka Yan, chair of struggling property group Evergrande and once one of the country’s richest people, dropped off the list.China’s economy has faltered after repeated Covid-19 lockdowns, with policymakers battling to boost consumer spending. The official goal of 5.5 per cent annual growth was already well out of reach, analysts said, while the World Bank predicted the country would grow more slowly than the rest of Asia for the first time in more than three decades.Gross domestic product expanded just 3.9 per cent year on year in the third quarter.The rapid decline in wealth also follows a push for “common prosperity”, a political agenda that seeks to reduce inequality through wealth distribution and welfare policies. Xi, who has secured an unprecedented third five-year term in power, has insisted that common prosperity will be one of the country’s most important objectives over the next 15 years.

“[Xi’s] common prosperity programme has attacked the two sectors with the largest concentration of wealth — property and technology,” said Andrew Kemp Collier, managing director at Orient Capital Research, adding that the technology sector was “almost cut in half” by a spate of new regulations. “It is clear that Xi Jinping favours the state system because of the control it offers the central government to engineer changes in the economy.”China’s biggest companies, including Alibaba and Tencent, have had to shift their strategies or pledge funds to social responsibility programmes in line with the policy, while their valuations have plummeted as investors worry that Xi wants to prioritise political goals over capital growth.The total net worth of individuals on the Hurun China Rich List, a separate gauge of the country’s richest people released on Tuesday, shrank by 18 per cent.The number of people on the list, who have wealth of at least Rmb5bn ($690mn), shrank 11 per cent to 1,305. More

US consumer prices are expected to rise again in figures released on Thursday, bolstering the Federal Reserve’s plan to carry out further interest rate hikes.The consumer price index is expected to have risen by another 0.6 per cent in October, according to a consensus estimate compiled by Bloomberg, up from 0.4 per cent in the previous period. Despite the monthly acceleration, the annual pace is forecast to have slowed to 7.9 per cent, down from 8.2 per cent.Once items such as food and energy are stripped out, “core” CPI is set to have risen 0.5 per cent, just shy of the 0.6 per cent pace recorded in September. Compared to the same time last year, it would be up 6.5 per cent.The data, set to be published by the Bureau of Labor Statistics at 8:30am Eastern Time, comes on the heels of unexpectedly tight midterm elections that left the battle for control of Congress still hanging in the balance.High inflation has dogged Joe Biden’s administration for the bulk of his presidential term, igniting fears of a pronounced economic downturn at some point next year as the Fed steps up its efforts to get price pressures under control.Jay Powell, Fed chair, signalled last week that the central bank would likely need to lift interest rates to a higher level this tightening cycle than initially expected as it grapples with an economy that has proven resilient in the face of rapidly rising interest rates.Most economists now expect the so-called terminal rate to eclipse 5 per cent next year, well above the 4.6 per cent level projected by most Fed officials as recently as September. To get there, officials have begun to lay the groundwork for smaller rate rises, having increased rates by 0.75 percentage points at each of its four previous meetings.

At the press conference that followed the November gathering, at which the Fed lifted its benchmark policy rate to a target range of between 3.75 per cent and 4 per cent, Powell said the central bank could scale back the pace of increases at the December meeting or the one after that.While officials have previously said they needed to see a slowdown in the inflation data before they could alter course, they are now more directly taking into account how much rates have already risen this year and the fact that it takes time for those adjustments to affect the economy. As a result, less emphasis is placed on each subsequent CPI report.“We do need to see inflation coming down decisively and good evidence of that would be a series of down monthly readings,” Powell said last week. “But I’ve never thought of that as the appropriate test for slowing the pace of increases or for identifying the appropriately restrictive level that we’re aiming for.”He has repeatedly warned that the higher rates need to rise and the longer they stay at a level that is constraining economic activity, the greater the odds of the economy tipping into a recession. Most economists now expect a contraction next year, with the unemployment rate rising substantially above its current 3.7 per cent level. More