Economy

Chinese policymakers have pledged to step up support for the world’s second-biggest economy, hit by COVID-19 outbreaks that have prompted stringent restrictions, severely disrupting supply chains and hitting production and consumption. China would strive to bring its economic operations back onto a normal track with a package of targeted, forceful and effective measures, the cabinet said.”At present, the downward pressure on the economy continues to increase and it’s very difficult for many market entities,” the cabinet was quoted as saying after a regular meeting.Many private-sector economists expect the economy to shrink this quarter from a year earlier, compared with first quarter’s 4.8% growth.Among the agreed new steps, the government will provide tax credit rebates to more sectors, raising annual tax cuts by more than 140 billion yuan ($21.06 billion) to 2.64 trillion yuan, the cabinet was quoted as saying.China will also reduce some passenger car purchase taxes by 60 billion yuan, state media said. Authorities will postpone social security payments, including pension insurance premium payments, by small firms, individual businesses and some severely distressed sectors till the end of this year, the cabinet said.The deferred payments are expected to reach 320 billion yuan this year, it added.Banks will also postpone repayments of some loans, including auto and consumer loans, by small firms and individuals in difficulties, the cabinet was quoted as saying.The national financing guarantee fund will boost its reinsurance businesses by over 1 trillion yuan this year, it added.China will also launch a number of new projects in water conservancy, transport, and urban shantytown renovation, and will kick off some new energy projects, the cabinet said.The cabinet also pledged to increase domestic and international passenger flights in an orderly way.($1 = 6.6470 Chinese yuan renminbi) More

Fiscal policy in Europe’s largest economy should be flexible in an uncertain environment, the IMF added in a statement after a mission to Germany.The IMF said it projected that growth in the German economy would slow to about 2% in 2022, picking up in 2023 to slightly above 2% if energy prices and supply bottlenecks subside, and COVID-19 infections remain under control.”Growth would then decline toward potential after 2024,” the IMF said in its so-called Article IV report.”Output would remain below the pre-pandemic trend in the medium term, given headwinds from elevated energy prices to private investment, weaker external demand, and greater economic and geopolitical uncertainty following the war,” it added.Berlin’s immediate policy priorities must be to secure supplies of gas, cushion the spillovers from Russia’s invasion of Ukraine, and build up resilience, the IMF said.The uncertain outlook for fossil fuel supplies makes the government’s plan to fast track a green transition even more critical, it added.The greatest threat to the outlook is a persistent and complete shut-off of Russia’s gas exports to Germany and Europe more broadly, it said.The IMF said that if downside risks materialize, the government should “continue to flexibly provide targeted support, and consider activating the escape clause of the debt break rule for another year.”Germany’s so-called debt brake, which stipulates that the federal and state budgets must generally be balanced without revenues from borrowing, was temporarily suspended due to measures related to the COVID-19 pandemic.Finance Minister Christian Lindner is aiming to comply with the debt brake again in 2023. More

BEIJING/SHANGHAI (Reuters) – The Chinese capital extended its work-from-home requirement for many of its 22 million residents to stem a COVID-19 outbreak, while Shanghai deployed more testing and curbs to hold on to its hard-won “zero COVID” status after two months of lockdown.Beijing said 99 new cases were detected on Sunday, up from 61 the previous day – the largest daily tally so far during a month-old outbreak that has consistently seen dozens of new infections every day.”(Beijing) should fully implement the requirement of working from home in key areas, further lower the rate of working from the office to reduce the flow of people and quieten the community,” Xu Hejian, spokesman for the Beijing municipal government, told a news briefing.The capital must “hold every line of defence” against new cases, he said.Six of the city’s 16 districts have told all residents to work from home and avoid gatherings, and said those who have to go to work should have a negative PCR test taken within 48 hours. A further three encouraged certain groups to follow such measures, with each district responsible for implementing its own guidelines.Offices in areas following the working-from-home guidance must not exceed 30% capacity.Despite the ominous milestone in the capital, health officials said that infections in China, where COVID-19 was first detected in late 2019 in the central city of Wuhan, show a steady declining trend. Analysts at Gavekal Dragonomics estimated last week that fewer than 5% of Chinese cities were reporting infections, down from a quarter in late March, in an outbreak that has cast a pall over the world’s no. 2 economy.In Shanghai, fewer than 600 daily cases were reported for Sunday, with none outside quarantined areas, as has been the case for much of the past week.The commercial hub of 25 million reopened more than 250 bus routes and a small part of its sprawling subway system on Sunday. But many towns and districts announced more mass testing and asked residents not to leave their compounds. In the city’s Changning district, one neighbourhood committee worker walked around with a loudhailer playing on repeat: “Residents, during the epidemic, do not go out unless for essential reasons! “Wear a mask if you do go out, do not gather with others to smoke or to chat. And remember to wash your hands when you return home and take an antigen test.” Shanghai has allowed more people to leave their homes for brief periods over the past week, although it generally plans to keep most restrictions in place this month, before a lifting its two-month-old lockdown from June 1.’MASSIVELY HIT’Beijing had already curtailed public transport, asked some shopping malls and other stores and venues to close and sealed buildings where new cases were detected.In one large residential compound not under isolation orders, shelves have been set up for deliveries at the entrance, according to residents, fuelling fears that tougher controls were on the way.The curbs in Beijing, Shanghai and elsewhere in China are leaving behind significant economic damage and disruption to global supply chains and international trade.China’s blue-chip CSI300 index closed down 0.6% on Monday. The benchmark has shed 18% this year, according to Refinitiv data. The highly transmissible Omicron variant has proven hard to defeat even with strict measures that starkly contrast the resumption of normal life elsewhere in the world.”We’ve been massively hit,” said a convenience store owner surnamed Sun, whose shop in Beijing has only been allowed to operate during daytime rather than its usual 24/7 hours.”Even during the Wuhan outbreak we could stay open the whole time.”NEW CURBS While more people are being allowed outside in Shanghai, several residents said they had been told of infections in their vicinity that required new curbs on movement.One resident in Hongkou district, which has not reported any new community-level cases since May 7, said he was told last week not to leave his flat, having been allowed to move within his compound previously. Hongkou was among six districts which have announced some tightening of curbs in recent days to “consolidate” the results of their efforts so far.But such moves made some people fear the virus was making a comeback.The top comment on a post by state agency Xinhua on China’s Twitter-like Weibo (NASDAQ:WB) on Shanghai’s latest numbers read: “This can’t be accurate, zero COVID cases at community level? Our compound had one new case yesterday.”Asked to comment, the Shanghai government said that all cases found in recent days were in “sealed” high-risk areas or quarantine centres and that any community transmission cases would be announced on official channels. More

Investing.com — The Chinese government committed to a big fiscal stimulus package, aiming to revive a flagging economy badly hit in recent months by COVID-19 lockdowns.The cabinet was quoted by local newswires as saying that it will implement a list of 33 measures in six areas, including broader tax relief for business, an increased supply of credit to small and medium-sized enterprises, and cuts on taxes for auto purchases.The moves are the latest in a coordinated series of measures aimed at propping up the economy, coming after a modest easing of monetary policy on Friday, when the central bank cut its five-year prime rate – a benchmark for long-term mortgage loans – by 15 basis points.Beijing has prioritized containing the COVID-19 virus over the economy for the last two months, imposing drastic and lengthy lockdowns on cities such as Shanghai and Zhenjiang and the north-eastern province of Jilin. Fears are growing that the capital Beijing will be the next city to suffer the same fate, after it reported its biggest daily number of new infections yet at the weekend.The cabinet said it would allocate 60 billion yuan ($9 billion) for a phased reduction in taxes on some passenger cars. While initial reports didn’t specify which cars, analysts have assumed that will refer to electric vehicles.  In addition, it said it wanted an orderly increase in domestic air traffic, which has collapsed to its lowest level since early 2020 due to the various restrictions on mobility.Wire reports of the cabinet’s statement continued to hint at an unresolved tension between the desire to stimulate activity and the desire to control COVID.The wires said the cabinet urged “relevant departments” to refine the package measures item by item as soon as possible, and announce their implementation, but added that they should ensure that the policies introduced “are in line with local realities.”The offshore yuan strengthened to its highest level against the dollar in three weeks on the news. By 7:45 AM ET (1145 GMT), the dollar was at 6.6524 yuan, down 0.7% on the day. More

Hello and welcome to today’s Trade Secrets. I’m off for the next two weeks, with some attractive and talented FT colleagues standing in, and by the time I’m next writing the newsletter on June 13 we’ll already be into the big World Trade Organization ministerial meeting in Geneva. So today I’ll give a state of play in the run-up to the meeting and particularly the most high-profile item, the patent waiver for Covid-19 vaccines which will amend the WTO’s “Trips” agreement on IP protection. Charted waters looks at how Italy’s particular dependence on Russian oil is contributing to the country’s economic woes.As ever, if you have any thoughts to share, I’m all ears and eyes on [email protected] healingThe set-piece WTO ministerials are supposed to happen every two years and the last one was in 2017, the pandemic having put paid to any in the interim. So in theory there ought to be plenty of business that’s piled up, right? In practice they’ll be doing well to be measuring progress in terms of agreeing actual policies rather than creating work programmes.In fact, it will be quite an achievement to hold a ministerial at all without Russia’s presence being the main issue. Vladimir Putin’s invasion of Ukraine has concentrated minds among some governments about trade issues, but it hasn’t exactly led to harmony in multilateral organisations — not least because big chunks of the emerging market world don’t share the US/European revulsion for the Russian president and certainly don’t want to use the WTO to make political statements against Russia. In small discussions, as at the G20 finance ministers’ meeting in Washington last month, it’s easy enough for the likes of the EU, US and UK to walk out in protest when the Russians start to talk. It’s going to be a bit harder with a plenary session of 164 WTO members. (It will also underline that the large majority of countries aren’t participating in the boycotts.)The Russia situation also places a big premium on the Geneva-based ambassadors getting ready finished or near-finished texts of agreements before the meeting so that ministers can ceremonially sign them off rather than having to negotiate through the night.And so to the main issue at hand (barring a sudden breakthrough on reforming fishing subsidies). The change to WTO intellectual property protections that started off in 2020 being proposed by India and South Africa as a full waiver on all forms of IP on all drugs and treatments for Covid has now been watered down to a plan to make it easier, in theory, for certain developing countries to use existing powers to override patents for vaccines.Last week, after months of discussions in the Quad, the inner cabal of four WTO members (the EU, US, India and South Africa), the text setting out that proposal was punted to the full membership, though with none of the four except the EU wanting to be seen backing it. WTO director-general Ngozi Okonjo-Iweala appeared at the meeting of ambassadors last week to try to giddy them up to agree a text for the ministerial.But different governments tried to pull the agreement in different directions with a whole bunch of proposed amendments: the revised draft we saw floating around last week was a mass of track changes and phrases in square brackets. To give a flavour of this I’ve written the rest of the newsletter in the style of a yet-to-be-finalised negotiating text.Like it or not, the provisions to suspend IP aren’t going to get a lot more expansive than the draft. They just aren’t. There is too much opposition from the rich countries such as the EU, the UK and Switzerland with [voluble pharmaceutical industries] a strong commitment to intellectual property rights. Switzerland and the UK in particular also have concerns about the legitimacy of the small-group consultative process [are sulking at being left out of the Quad] and [have some concerns about the timetable] are not going to be rushed just to have something to show at the ministerial.The EU has largely got its way [feels the Quad text provides a good basis for a balanced consensus outcome] and suggests that a prompt coalescing around it will enhance the WTO’s credibility as a negotiating body [enable it to talk about something else, anything, please.]The US has run away from [yet to take a position on] the latest text and is currently consulting with domestic stakeholders to forge a balanced consensus view of the situation [trapped between its leftwing health campaigners and the pharma industry] to reach an agreement commensurate with its commitment to the organisation [not have everyone roll their eyes at the erratic Americans again].India, which often blocks everything at the WTO on principle [styles itself a champion of developing countries], has been surprisingly constructive in not killing the proposal as yet. South Africa, one of the countries whose pharma industry might actually benefit from laxer IP rules, has largely maintained developing nation solidarity [silently wished India were less difficult]. The Africa Group of countries wants the provisions to cover therapeutic drugs as well as vaccines and last for at least five years [an indefinite free-for-all].In conclusion, then, WTO members say the situation is fluid and have vowed to redouble their efforts to reach a prompt deal [no one knows anything but it doesn’t look great]. Three weeks to the ministerial. Time is tight.As well as this newsletter, I write a Trade Secrets column for FT.com every Wednesday. Click here to read the latest, and visit ft.com/trade-secrets to see all my columns and previous newsletters too.Charted watersItaly has not been having the 2022 it expected. As my colleague Amy Kazmin writes, the year began with the optimism of a strong rebound from the pandemic plus plans for buoyant growth and structural reforms, underpinned by prime minister Mario Draghi’s assured leadership and a €191bn chunk of the EU’s €750bn Covid recovery plan.But inflation is wrecking the economic plan, such that recession this year is now likely. The catalyst has been soaring energy prices due to Italy’s high reliance on Russian gas, as the following chart shows.

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Much is made of Germany’s high reliance on Russian gas supplies. But observers, including former director-general of the Italian treasury Lorenzo Codogno, note that Italy’s reliance might be even higher. Not a good position for a country to be in at the moment. (Jonathan Moules)Trade linksBusiness leaders at Davos say the three-decade period of globalisation is ending, which is the kind of received-opinion thing that business leaders at Davos tend to say. Egypt, the world’s largest wheat importer, says millions of people may die if the food crisis arising from disruption to Ukrainian and Russian production and exports is not resolved.The FT’s James Kynge says pessimism is engulfing the Chinese economy as foreign investment fades.The story we flagged last week about the US’s baby formula shortage has continued, with relief supplies literally being airlifted to the US from an air base in Germany. There are some excellent papers here, especially this one about the intersection of regulation, trade and corporate lobbying that’s brought us here.Staunch Brexiter and former cabinet secretary David Davis remains convinced of the comical notion that UK prime minister Boris Johnson doing a tour of the leaders of Europe rather than negotiating with the European Commission will help Britain gets its way on Northern Ireland despite nearly six years of solid evidence to the contrary. More

The average age of light vehicles in operation (VIO) in the United States rose to 12.2 years this year, increasing by nearly two months from the prior year, the report said. The pandemic led consumers to shift from using from public transport and shared transport to personal cars, and since customers could not upgrade their vehicles, demand for used cars have accelerated and boosted the average vehicle age further, the report said. Stress on global supply chains worsened in April as COVID-19 lockdown measures in China and the war in Ukraine lengthened delivery times, and air freight costs between the United States and Asia rose, the New York Federal Reserve reported in its latest update to a worldwide index of supply problems.The average age of light vehicles in operation in the U.S. is expected to rise through 2022 and 2023, as the pipeline for new vehicle production and sales continues to be weighed down by parts shortages, the report said. Supply chain constraints have led to a decrease in vehicle scrappage, which measures the number of vehicles leaving the vehicle population, and has been a catalyst for the rise in average age over time. The report also said demand for battery electric vehicles (BEVs) in the U.S. has been expanding rapidly over the past few years. The average age of electric vehicles in the U.S. is 3.8 years of age this year, down from 3.9 last year, and has been hovering between 3 and 4.1 years since 2016. More

PARIS (Reuters) – The new French government will draft a bill on how to protect consumers’ purchasing power before the start of parliamentary elections in June, government spokeswoman Olivia Gregoire said on Monday. The rising cost of living is one of the key issues in the election campaign that will determine whether newly re-elected President Emmanuel Macron can win a majority in parliament. More

KATHMANDU (Reuters) – Nepal’s state-owned oil company has hiked the retail prices for fuels, including petrol and cooking gas, by up to 12.5% because of rising global oil prices, an official said on Monday, stoking concerns consumer inflation will be further pushed up.State monopoly Nepal Oil Corporation (NOC) said in a statement that the price for one litre of petrol was raised 5.8% to 180 Nepali rupees ($1.45) from 170 rupees a week earlier. The price for a 15.4 kg cylinder of cooking gas was increased 12.5% to 1,800 Nepali rupees from 1,600 rupees earlier, it said.Nepali people are facing a surge in food and energy prices as annual retail inflation accelerated to a five-year high of 7.28% in the month through mid-April and could further rise this month after fuel prices were revised twice within two weeks.Spiralling inflation in the poor Himalayan nation of 29 million raises the risk of social unrest as imports of goods like fuel, coal and edible oil become costlier. “This comes very hard on us,” said Geeta Pokharel,38, a Kathmandu housewife. “Those who have can pay but what about those who can’t,” she asked.Unlike Sri Lanka, Nepal has sufficient foreign exchange reserves to cover about six months of imports, but it could slide into difficulties if global oil and food prices remain high for a prolonged period due to the war in Ukraine.Retail petrol prices have surged nearly 30%, and diesel and kerosene by 33% this year, while cooking gas prices have risen 14%, according to data on NOC website.The government has banned luxury goods imports and raised fuel prices several times this year to curb the capital flows amid dwindling forex reserves – down 18.2% to $9.61 billion as of mid-April from mid-July.Deependra Bahadur Kshetry, a former central bank governor, said if prices continued to rise, inflation could rise into double-digits by mid-July this year. “If the government wants to give some respite to the poor people it should open mobile fair price shops and supply essential goods to consumers at reasonable prices.” ($1 = 124.2100 Nepalese rupees) More