Economy

China has said it will launch an official private pension scheme that aims to push more of the country’s vast household savings into the financial market, as the government grapples with an ageing population.Employees in China will be able to contribute up to Rmb12,000 a year ($1,860) to private schemes, which the government said would be adjusted in line with “economic development” and would benefit from preferential tax treatment.The plan, which will be trialled in certain cities for a year before being more widely implemented, is a significant moment in the government’s longstanding efforts to develop its pension system, which relies heavily on state plans and those organised by employers.“The measures are targeted at Chinese citizen middle-class employees who are already contributors to the basic pooled pension insurance scheme, who will be newly tax-incentivised to contribute annually into an individual pension account,” said Lauren Johnston, visiting senior lecturer, with the School of Economics and Public Policy at the University of Adelaide.“Their funds in turn will help to seed a growing Chinese wealth management and finance industry.”The development comes as the share of China’s population aged 65 and over has been forecast to increase more rapidly than in other OECD countries, more than doubling from 10.6 per cent in 2017 to 26.3 per cent in 2050. The share of the Chinese population aged 80 and above will rise even more quickly, according to OECD estimates, increasing more than four times from 1.8 per cent in 2017 to 8.1 per cent in 2050.China’s approach will aim to move pension savings more directly into the country’s financial markets, as part of a wider opening up that has attracted some of the world’s biggest investors to expand their presence in the country.Global investment giants, including BlackRock and Goldman Sachs Asset Management have over the past year launched partnerships with mainland Chinese banks as part of a bid to seize part of an asset management market with savings of almost $19tn as of 2020.

BlackRock’s majority-owned joint venture with China Construction Bank which was approved last year, said last week on its WeChat account that it would launch its first pilot pension wealth management product in the cities of Chengdu and Guangzhou. Larry Fink, BlackRock chief executive, last year said the New York-based group was “committed to investing in China to offer domestic assets for domestic investors”.China is implementing a range of schemes that look to expand and liberalise its financial markets, including a wealth connect scheme with Hong Kong that could provide onshore investors with greater access to international financial markets. Capital controls mean Chinese household savings are largely constrained to onshore markets, where property and bank deposits are dominant.A Towers Willis Watson report estimated that in 2020 China had $285bn in assets in pension schemes, equivalent to just 2 per cent of its total gross domestic product, though it only counted so-called “enterprise annuity” products, or voluntary pensions arranged by employers. In the UK and the US, total pension assets make up 135 per cent and 157 per cent of GDP respectively.The development comes as countries around the world are being urged to reform their pension systems, as rapidly ageing populations strain nation’s budgets. In the 10 years to 2020, China’s population grew at the slowest rate in decades.Earlier this year, the OECD sounded a fresh warning about the need for countries to take urgent action to ensure the sustainability of “pay-as-you-go” systems, where workers support the payment of pensions through their taxes. More

The pharmacy chain’s board said the proposal was not credible as it had no evidence of financing and required multiple months of exclusivity, among other reasons.The New York Post reported late on Wednesday that the private equity firm had made its offer in April, valuing Rite Aid (NYSE:RAD) at more than $800 million.Rite Aid had a market capitalization of $392.7 million as of Wednesday’s close.The company will “as always, be responsive to credible proposals that will enhance stockholder value”, it said. More

COPENHAGEN (Reuters) -Carlsberg, the Western brewer most exposed to the Russian market, expects its decision to sell its business there to result in a writedown of about 9.5 billion Danish crowns ($1.39 billion), it said on Thursday.The company, which has eight breweries and 8,400 employees in Russia, said late last month that it would sell its business in the country, joining an exodus of Western companies since Russia’s invasion of Ukraine.The writedown did not take into account any external offers for the business and was subject to a “very high degree of volatility and uncertainty”, Carlsberg (OTC:CABGY) said, adding that the sale could take up to 12 months. Dutch rival Heineken (OTC:HEINY) has also said it will exit Russia and last month said it expected to book related charges of about 400 million euros ($437 million).Carlsberg had non-current assets in Russia worth 19.2 billion Danish crowns by the end of 2021, its annual report said.”The writedown isn’t quite as grim as one might have feared,” Sydbank analyst Per Fogh told Reuters. “This is what they consider to be fair value of the asset now, but the question still remains what a potential buyer would pay for it.”Carlsberg last year generated 10% of its revenue and 6% of its operating profit in Russia, where it took full control of the Baltika group of breweries in 2008. Since then, however, it has faced sluggish sales in a sanctions-hit economy while facing Russian regulations aimed at curbing alcohol abuse.Carlsberg lowered its operating profit growth forecast for this year to between minus 5% and plus 2%, compared with previous guidance of 0% and 7%.Shares in Carlsberg, which have shed nearly a quarter of their value since the start of the year, fell slightly on the news but were up 1% by 1026 GMT. The brewer said it also expected 300 million crowns of Ukraine impairment charges along with goodwill writedowns of 700 million crowns for the Central and Eastern Europe region, which includes Ukraine. ($1 = 6.8196 Danish crowns) More

TOKYO (Reuters) -Japan’s ruling coalition on Thursday agreed a supplementary budget to support lower-income households and small firms, signalling more spending for the heavily indebted nation as it battles inflationary pressures for the first time in decades.In a first phase, Prime Minister Fumio Kishida’s Liberal Democratic Party-led (LDP) government aims to set out on Tuesday relief measures worth 1.5 trillion yen ($11.7 billion).They will include one-off 50,000 yen cash payouts to low-income households with children and expanding subsidies to fuel wholesalers, a preliminary document seen by Reuters showed.The governing coalition, which faces upper house elections pencilled in for July 10 as the economy flags and voters struggle to cope with soaring energy costs, also aims to ensure stable supplies of oil and basic foods, according to the draft.News of the extra budget – whose total value Keiichi Ishii, secretary general of the LDP’s smaller ally, the Komeito party, estimated at 2.7 trillion yen ($21 billion) – was unexpected.Part of it will be used for emergency measures and the rest set aside to offset the impact of surging costs of fuel and other products. More than 1 trillion yen will be earmarked for maintaining the current fuel subsidy scheme from June to September, the draft showed.The package is expected to be submitted to parliament for approval in May. The current legislative session is scheduled to end in June. Komeito’s Ishii said his party endorsed the timetable.Toru Suehiro, senior economist at Daiwa Securities, said the LDP had probably been pressured by Komeito to draw up a supplementary budget rather than taking funds from the country’s contingency reserve.Suehiro said Thursday’s news also reflected a preference for using fiscal tools to alleviate households’ burdens rather than tweaking monetary policy or intervening in the currency market to prop up a yen that is trading at close to 20-year-lows against the dollar.Covering the extra stimulus might involve additional bond issues, which would further enlarge the industrial world’s heaviest public debt burden, which stands at more than twice annual economic output.Japan entered a long period of close-to-zero inflation in the early 1990s that determined the way policymakers managed its economy for decades.Driven by the war in Ukraine and already surging fuel costs, inflation pressures are now building. While core CPI remained low at just 0.6% year on year in February, energy costs rose 20.5% in that month while wholesale inflation reached 9.5% in March.($1 = 127.9600 yen) More

In the absence of progress towards an overarching UK-U.S. trade agreement British negotiators are seeking to secure state level agreements, including a deal with Texas by October this year “There’s been considerable progress on this and we are in discussions with around 20 U.S. states,” Mordaunt said. “We are going to do a state level agreement with Texas we hope by October of this year, and we will start signing these agreements with U.S. states next month. The first eight that we have in the pipeline will be equivalent to 20% of the United States economy,” Mordaunt said in parliament. More

The ECB said last week that it would stop buying bonds in the third quarter of the year and raise interest rates some time after that, ending years of monetary largesse in the face of surprisingly high inflation.De Guindos was joining a growing number of ECB policymakers, including the Bundesbank’s President Joachim Nagel, in calling for an early end to the Asset Purchase Programme.”My opinion is that the programme should end in July and for the first rate hike we will have to see our projections, the different scenarios and, only then, decide,” de Guindos told Bloomberg.”From today’s perspective, (raising rates in) July is possible, and September or later is also possible,” he added.Speaking to global policymakers in Washington on Thursday, ECB President Christine Lagarde also said future steps “will depend on the incoming data and (the ECB’s) evolving assessment of the outlook”.”In the current conditions of high uncertainty, we will maintain optionality, gradualism and flexibility in the conduct of monetary policy,” she told the International Monetary and Financial Committee.But Belgian central bank governor Pierre Wunsch, a policy hawk, was more outspoken, saying in a Bloomberg interview that raising the ECB’s policy rate, currently at minus 0.5%, to zero or slightly above by year-end would be a “no brainer”. The ECB will update its macro-economic projections in June and again in September.These estimates will be crucial because the ECB has said it would only raise rates when it is confident that inflation would stay at its 2% target over its forecast horizon.Inflation in the euro zone hit a record 7.5% last month and de Guindos hinted at it staying above the ECB’s current projections for the rest of the year. “Inflation will start to decline in the second half of the year,” he said. “But even so, it will be above 4% in the final quarter.”The ECB said in March it saw inflation at 5.6% in the second quarter, 5.2% in the third quarter and 4.0% in the final three months.Further out, it saw inflation at 2.1% in 2023 and 1.9% in 2024. More

Investing.com — The euro surges as officials put a July rate hike back on the agenda. Jerome Powell and Christine Lagarde both speak on the sidelines of the IMF meeting later. Tesla (NASDAQ:TSLA) beats earnings expectations, but raises a few eyebrows in the process. United Airlines (NASDAQ:UAL) forecasts good times ahead, but Equifax (NYSE:EFX) is downbeat about the outlook for the mortgage credit market. Russia declares ‘victory’ over a city where Ukrainian forces are still fighting, a day after it defaulted on a dollar bond payment due to the lack of cooperation from its U.S. bankers. AT&T (NYSE:T) results, jobless claims and the Philly Fed business survey are due. Here’s what you need to know in financial markets on Thursday, 21st April.1. Tesla’s earnings blow past expectations, raise eyebrowsTesla reported another stronger-than-expected quarter in the three months through March, with a net profit of $3.32 billion. That included a $679 million contribution from regulatory emissions credits, but an operating profit of $3.6 billion indicated solid underlying momentum in its core business.CEO Elon Musk said the group should be able to produce over 1.5 million cars this year, despite challenges from a three-week shutdown at Shanghai that only ended earlier this week.Some cast doubt on the group’s accounting, suggesting that Tesla either wasn’t recognizing steep input price inflation or faced a big jump in costs in coming quarters. The company reported a 15% increase in operating expenditure, but an 80% rise in revenue. The disparity may lie partially in the company using up raw material inventories that were bought before prices for inputs such as battery metals went through the roof earlier this year.Tesla stock rose over 7% in premarket trading, more than reversing Wednesday’s declines.2. ECB officials put July rate hike in playThe euro rose to its highest in over a week after Vice President Luis de Guindos joined a chorus of European Central Bank officials acknowledging the possibility of a rate increase in July. That would be the bank’s first in 12 years, and represents a significant shift after President Christine Lagarde soft-pedaled the outlook for tightening policy at her press conference last week.Lagarde and Federal Reserve Chairman Jerome Powell both speak on the sidelines of the International Monetary Fund’s spring meeting later, an event that has gathered the world’s central bankers at a time when inflation is running amok globally.By 6:15 AM ET (1015 GMT), the euro was at $1.0915, up 0.6% on the day and just off its intraday high.3. Stocks set to open higher; United soars, Equifax slumpsU.S. stock markets are set to open higher later, with Tesla’s well-received earnings helping to calm the fears stoked by Netflix’s results on Tuesday. By 6:20 AM ET, Dow Jones futures were up 208 points, or 0.6%, while S&P 500 futures were up 0.8% and Nasdaq 100 futures were up 1.1%. The Nasdaq had underperformed sharply on Wednesday, due to the heavy weighting of Netflix (NASDAQ:NFLX), which suffered its biggest one-day drop in 18 years. Netflix stock fell another 1.2% in premarket trading.Stocks likely to be in focus later include United Airlines, which reported upbeat guidance after the bell on Wednesday despite showing another big quarterly loss, and Equifax, which fell nearly 10% in after-hours trading after forecasting a sharp slowdown in mortgage credit inquiries over the rest of the year.AT&T dominates the early reporters, along with Danaher (NYSE:DHR), NextEra Energy (NYSE:NEE), Philip Morris (NYSE:PM), American Airlines (NASDAQ:AAL) and Union Pacific (NYSE:UNP), while Swiss giant Nestle (OTC:NSRGY) already reported a thumping 7.6% rise in first-quarter sales, over 5% of which was due to price increases.4. Jobless claims, Philly Fed survey dueThe number of people making initial claims for jobless benefits is expected to stay close to 60-year lows at 8:30 AM ET, a reflection of the continuing tightness of the U.S. labor market. Analysts expect initial claims to tick back down to 180,000 after last week’s increase to 185,000. Continuing claims are expected to grind lower to 1.455 million, a drop of 20,000.The numbers will be released at the same time as the Philadelphia Federal Reserve’s monthly manufacturing survey, which is expected to show a slight cooling of activity from February.Of more interest than either may be the auction of inflation-protected 5-year Treasury notes at 1 PM ET. The last auction sold at an average yield of -1.508%. That’s unlikely to be repeated given the sharp rise in real bond yields in recent weeks.5. Russia declares ‘victory’ in MariupolRussian President Vladimir Putin declared victory in the country’s battle for the Ukrainian city of Mariupol, even though elements of the defending forces continue to fight on. Putin told Defense Minister Sergey Shoigu in a choreographed video clip that Russian forces should rather conserve lives than storm the remaining Ukrainian positions in the Azovstal steel mill.Putin’s comments come a week after the loss of the Black Sea Fleet’s flagship Moskva. Moscow’s failure to account for a crew that it says was fully evacuated prior to the sinking has revived long-standing suspicions of the state’s disregard for its servicemen.Russia was declared in potential default on Wednesday by an international committee overseeing credit derivatives. However, the failure to pay occurred because the western banks acting as payment agents refused to handle Russia’s dollars, rather than because Russia had chosen not to pay. Separately, Bloomberg reported that Russia’s oil output fell to its lowest this year last week amid increasing practical problems in getting its product to willing buyers. More

Just last month, Boris Johnson had bragged that the UK has “the fastest growing economy in the G7”. The post-pandemic bounce came earlier to Britain than most. But that ebullient performance seems to have left the party-going premier with a nasty hangover: the IMF now forecasts that, in 2023, the UK will have the slowest growth rate of the seven.Output growth this year will come in at 3.7 per cent. Next year, though, it forecasts a drop to 1.2 per cent. This is around half of the IMF’s forecast for the growth rate of the average advanced economy. The IMF’s view is that “consumption is projected to be weaker than expected as inflation erodes real disposable income”. Inflation is high everywhere — a consequence of the ending of pandemic restrictions, plus the war in Ukraine. But, according to the IMF, price rises will be a major problem for longer in the UK than elsewhere. And high interest rates, raised in response to those surging prices, are “expected to cool investment”. It is not wise to read too deeply into the particulars of the current position: the emergence from a global pandemic and the start of a war on its continent are unique circumstances. But it is hard to ignore one more permanent truth: the UK has a serious long-term problem with economic growth. The country has not solved its so-called “productivity puzzle”.Since the financial crisis, the country’s economy has failed to get up a head of steam. The mean annual growth rate from 1948 to 2008 was 2.7 per cent. Since then, it has been a little under 1 per cent. Weak growth is critical to understanding the country’s politics. The UK’s long period of fiscal austerity after 2010 was a response to the UK having a smaller tax base than it was planning on. The misery was compounded and prolonged by the economy’s inability to grow strongly.Opposition politicians have, for a decade, sought to capitalise on annoyance about anaemic wage growth. It was not until 2019 that the country’s average wages had returned to the levels of 2008. Young people, in particular, face miserable pay and high housing costs. Again, this is a story about what happens when output stalls.The country’s leaders, however, have not focused on restoring growth. On the contrary, Johnson was elevated to prime minister because of his support for Brexit, a decision that has further hampered output. The Centre for European Reform, a think-tank, estimates that UK trade in goods is down by around 15 per cent due to Brexit.One concern underpinning the IMF’s forecasts is that the UK’s planned corporate tax rises may constrain the UK’s growth in 2023: corporation tax is set to rise from 19 per cent to 25 per cent. At the same time, the British government will be withdrawing the so-called “super-deduction” — a generous pandemic relief for capital spending.The Treasury is already consulting on a replacement measure to encourage businesses to keep on investing: one cause of weak UK growth is a lack of business investment. It is important that, whatever comes next, there is adequate support for business investment — a long-term weakness of the UK, even before the crash.A robust pro-investment tax measure should be a relatively easy win for the Treasury — it has the tools and there is no lobby standing in its way. But that makes it rare: many of the UK’s other growth problems, whether its distance from the European single market or the country’s restrictive planning laws, will take serious political capital to fix. So long as the UK’s politicians are indifferent to its growth problems, they will not be fixed. More