Economy

Below are the key details of the plan: THE MEASURES Authorities increased the amount of debt local governments are allowed to raise through special bonds by 6 trillion yuan ($836 billion) over the next three years. This raises their special bond quota to 35.52 trillion yuan, and their overall debt ceiling to 52.79 trillion. China’s local government debt under official quotas was at 40.74 trillion yuan at the end of 2023, finance ministry data show. The new funds will help repay debt accumulated through local government financing vehicles (LGFVs), which Beijing refers to as “hidden debt”, given that local administrations used them to circumvent the official debt limits. Additionally, local governments will be allowed to use 800 billion yuan per year for the next five years in debt issuance already approved by Beijing, also for paying back the loans, bonds and shadow credits of LGFVs. Beijing said local officials responsible for reckless borrowing would be investigated and held accountable and that China will speed up LGFV reforms to better control debt. THEIR IMPACT Local governments, facing high debt and falling revenues, have been cutting civil servants’ pay and delaying payments to contractors, choking money flows to the real economy and fanning deflationary pressures. Their strains, stemming from a severe property crisis since 2021 that decimated revenues from residential land auctions to developers – a key source of funds for cities and provinces – had put China’s 2024 growth target of roughly 5% at risk. Officials estimate swapping hidden for official debt will save 600 billion yuan in interest for local governments over five years. Having money available for principal repayment also eases cost-cutting pressures on these administrations. The finance ministry estimates “hidden debt” was at 14.3 trillion yuan at the end of 2023. Authorities plan to trim that to 2.3 trillion yuan by 2028, with officials saying about 2 trillion yuan in past debts accumulated for shanty town renovation programmes will also be repaid by 2029. The International Monetary Fund, however, estimates LGFV debt amounted to 60 trillion yuan at the end of 2023, or 47.6% of gross domestic product. WHAT ABOUT REAL STIMULUS? While the debt swap programme unclogs money pipes to the real economy, it marks a departure from the fiscal packages China unleashed during past episodes of economic slowdown or market turmoil, when vast sums were spent on urbanisation and infrastructure. In part, that’s because those past stimulus programmes are what caused debt to spike in the first place. Still, Finance Minister Lan Foan said on Friday more support is coming. Authorities plan measures to reduce a giant inventory of unsold homes and repurchase idle land from developers; to recapitalise big state banks; and to expand subsidy schemes to factories for upgrading equipment and to consumers for replacing old appliances and other goods. Lan gave no details on the size and timing of these measures. WHAT’S NEXT?Key meetings this year may provide more hints.The Communist Party’s top decision making body, the politburo, convenes again at the end of the month. Leaders are also holding the annual Central Economic Work Conference in December to discuss growth targets and policies for next year.Growth headwinds are about to intensify as Donald Trump returns to the White House in January. Trump threatened tariffs in excess of 60% on U.S. imports of Chinese goods, rattling China’s industrial complex. Analysts say Beijing may be saving fiscal ammunition for the next round of its trade war with Washington. ($1 = 7.1785 yuan) More

(Reuters) – A look at the day ahead in Asian markets. Investors in Asia have their first chance on Monday (NASDAQ:MNDY) to react to a batch of key economic indicators and news out of China, and should do so in a relatively bullish frame of mind after the record-setting rally on Wall Street on Friday.The S&P 500 rose above 6,000 points for the first time, continuing its powerful rally following Donald Trump’s victory in the U.S. presidential election on Tuesday and the Federal Reserve’s interest rate cut on Thursday.That sealed a weekly gain of almost 5%, the S&P 500’s best week since September 2023. This helped lift the MSCI World equity index to a new high on Friday, too.It is worth recapping how monumental last week was for world markets – the U.S. election and Fed rate cut super-charged risk appetite and the dollar, while investors also navigated a UK rate cut and the collapse of the German government.The news flow from China was potentially no less significant for investors, although the outlook is not quite as uniformly bullish for local or risk assets. China unveiled a 10 trillion yuan ($1.4 trillion) debt package to ease local government financing strains and stabilize flagging economic growth. But this will disappoint investors, who had built up hopes for something special to pre-empt another round of fractious Sino-U.S. tensions and trade barriers.And on Saturday, official figures showed that inflation in China remains weak, an indication that the economy’s revival and path to reflation will be slow and long. Producer prices in October slid 2.9% on the year – deeper than the 2.8% fall in September, below an expected 2.5% decline, and the biggest drop in 11 months. Annual consumer price inflation slowed to 0.3% from 0.4%, the slowest in four months.While investor sentiment globally looks strong, the optimism that exploded around China in the wake of Beijing’s wave of stimulus measures in September is fading. Mainland China saw net outflows for the fourth consecutive week, according to Goldman Sachs. SocGen analysts advise caution on China, noting that the risk of higher U.S. tariffs on China and other parts of Asia is very real, implying lower growth in Asia and a stronger dollar against Asian currencies. They now expect USD/CNY to peak at 7.40 in the second quarter of next year, arguing that China’s stimulus measures may not fully compensate for the increased tariff risk. The dollar is certainly on a tear. It clocked its sixth weekly gain in a row last week against a basket of major currencies, something not seen since August-September 2023.Here are key developments that could provide more direction to markets on Monday:- Japan trade and current account (September)- Japan money supply (October)- Japan corporate earnings More

This article is an on-site version of our The Week Ahead newsletter. Subscribers can sign up here to get the newsletter delivered every Sunday. Explore all of our newsletters hereHello and welcome to the working week.We kick off the next seven days with the start of the world’s most important climate negotiation event, the UN COP29 summit in Azerbaijan’s capital city Baku. Choosing an economy highly dependent on oil sales to host the two-week gathering of politicians, business executives and activists was a contentious decision when it was announced, made more so last week when video footage emerged showing the chief executive of Azerbaijan’s COP29 team, Elnur Soltanov, discussing “investment opportunities” in the state oil and gas company.To make matters worse, the summit that organisers had dubbed “the finance COP” is expected to be shunned by prominent financiers, including the bosses of Bank of America, BlackRock, Standard Chartered and Deutsche Bank, according to FT sources. FT Live will be part of the action, however, hosting debates on the summit’s key announcements and agreements. Register for free at ftcop.live.ft.com.Elsewhere, and while the US further digests the implications of a second Donald Trump presidency, the current man in the job, Joe Biden, is boarding a plane to South America. He begins a state visit to Peru and Brazil on Thursday where he will meet the two countries’ leaders and take part in the Asia-Pacific Economic Cooperation summit, this year being held in Lima. In the UK, chancellor Rachel Reeves and Bank of England governor Andrew Bailey will be explaining themselves to senior bankers and other bosses from the country’s financial services sector at the annual Mansion House dinner, so called because it is held at the official residence of the City of London’s Lord Mayor. This year’s after dinner speeches will be delivered at a key moment, with Reeves’ late October Budget still fresh in the memory and concerns raised about the subsequent challenges now faced by the bank in taming inflation.Some content could not load. Check your internet connection or browser settings.The run of economic data reports picks up this week. For the US, there will be various key indicators of the state of the economy Trump will inherit, with fresh updates on inflation — the headline figure is expected to rise slightly while core inflation trends lower — retail sales and industrial production numbers. The scale of China’s challenge in restoring growth is the backdrop to its publication of retail sales, industrial production and property data. Meanwhile, the UK number-crunchers make available the latest labour market figures and, along with Japan and the EU, have a first stab at third-quarter GDP.There will also be a smattering of earnings calls, including mobile and broadband provider Vodafone, fresh from getting the Competition and Markets Authority nod for its £16.5bn merger with Three UK, and fashion brand Burberry, itself a takeover target in the ailing market for luxury goods. One more thing . . . Thank you to my newsletter colleague Harvey for filling in last week, giving me a few days at home assisting/haranguing my youngest two children, on half-term break, to stay on track revising for pre-Christmas GCSE mock exams and completing the dreaded statement for university applications. Next we enter the season of getting ready for Christmas itself, and the FT’s HTSI has got in early for those with an eye on dates by picking the best luxury advent calendars.Key economic and company reportsHere is a more complete list of what to expect in terms of company reports and economic data this week.MondayUK: CIPD Labour Market OutlookResults: Continental 9M, Direct Line Q3 trading update, IAC Q3,TuesdayOpec November Oil Market ReportGermany: October consumer price index (CPI) and harmonised index of consumer prices (HICP) inflation rate dataIndia: October CPI inflation rate dataUK: November labour market statistics, including the unemployment rateUS: National Federation of Independent Business (NFIB) October Business Optimism IndexResults: AstraZeneca Q3, Bayer Q3, Home Depot Q3, Infineon Technologies Q4, Oxford Instruments HY, SoftBank Q2, Spotify Q3, Vodafone HY WednesdayFrance: ILO Q3 unemployment rateRussia: Q3 GDP first releaseUS: October CPI inflation rate dataResults: ABN Amro Bank Q3, Allianz Q3, Alstom HY, Bertelsmann Q3, Cisco Systems Q1, Experian HY, Fuller, Smith & Turner HY, RTL Q3, RWE Q3, Smiths Group Q1 trading update ahead of AGM, SSE HY, Tencent Q3ThursdayBank of England governor Andrew Bailey speaks alongside UK chancellor Rachel Reeves at the annual financial and professional services dinner at the City of London’s Mansion HouseFederal Reserve chair Jay Powell takes part in the Global Perspectives event in DallasReserve Bank of Australia governor Michele Bullock speaks on a panel debate about the state of the economy at the ASIC Annual Forum in SydneyIEA Oil Market ReportEU: Q3 GDP estimateUK: RICS Residential Market SurveyUS: October producer price index (PPI) inflation rate dataResults: 3i Group HY, Applied Materials Q4, Asahi Q3, Aviva Q3 trading update, B&M European Value Retail HY, Burberry HY, Deutsche Telekom Q3, Eon Q3, First Group HY, Foxconn Q3, Great Portland Estates HY, Keller Group trading statement, Kier Group trading update, Metro Bank Q3, Premier Foods HY, Qinetiq HY, Siemens FY, Swiss Re 9M, United Utilities HY, Walt Disney Company Q4, WHSmith FYFridayChina: October industrial production and retail sales figuresEU: Autumn Economic Forecast for GDP, inflation, employment and public finances in the Eurozone areaFrance: October CPI and HICP inflation rate dataIndia: Guru Nanak’s Birthday. Financial markets closedJapan: flash Q3 GDP estimateUK: flash Q3 GDP and productivity estimates.US: October retail sales and industrial production figures.Results: Alibaba Q3, Land Securities HY, Lenovo Q2World eventsFinally, here is a rundown of other events and milestones this week. MondayArmistice Day (commemorated in the US as the federal holiday Veterans Day), marking the date that first world war ended in 1918, in which countries now pause to honour all those who have given their lives in times of conflictAzerbaijan: COP29, bringing together governments from 197 countries, plus the EU, to check progress on meeting climate change targets, begins in Baku StadiumChina: Singles Day, an annual holiday created for unmarried people, used by retailers as an opportunity to push store salesUK: Kemi Badenoch, the Conservative party’s new leader, is due to give evidence relating to her time as business and trade secretary to the Post Office Horizon IT Inquiry, the investigation into the scandal of sub-postmasters being wrongly accused of theft when the software system they were using was at faultTuesdayChina: 15th Airshow China opens in Zhuhai. The biennial event runs until SundayUK: The Booker Prize, the most prestigious award for English language fiction writers, is announced at a ceremony in LondonWednesdaySomaliland: the breakaway region of Somalia holds a presidential election, whose outcome could affect the future of a port deal with Ethiopia that has raised tensions with MogadishuThursdaySri Lanka: parliamentary electionsUK: 76th birthday of King Charles. Military gun salutes will take place across the country to mark the eventUS: President Joe Biden begins a state visit to Peru and BrazilFridaySaturdaySundayRecommended newsletters for youInside Politics — What you need to know in UK politics. Sign up hereUS Election countdown — Money and politics in the race for the White House. Sign up here More

Last month the ECB cut interest rates for the third time this year and four sources close to the decision told Reuters a fourth cut was likely in December unless data turned around in the coming weeks.”As things look at the moment, it is possible (that there will be a cut in December). There is nothing at the moment that would argue against that but that does not mean it will automatically happen,” Holzmann, who heads the Austrian National Bank, said in an interview with the Kleine Zeitung newspaper.”We do not have the latest forecasts and data. We will receive those in December. We will decide on that basis, yes or no,” he said.Holzmann said last month a week after the latest rate cut that a cut of 25 basis points was possible in December while at the same time repeating that it would depend on the economic data available at the time. More

Kashkari, appearing on the CBS program “Face the Nation,” offered his views on the economic impact of U.S. President-elect Donald Trump’s campaign promise to deport immigrants who are in the United States unlawfully.”If you just assume people are working – either working in farms or working in factories – and those businesses now lose employees, that would probably cause some disruption,” Kashkari said.”The implications are not entirely clear to me,” Kashkari added. “Ultimately it is going to be between the business community and Congress and the executive branch to figure out how they would adjust.”Trump’s election last Tuesday to a second four-year term may pose new uncertainties for the U.S. central bank as it continues to consider interest rate cuts now that inflation is nearing the Fed’s 2% target. The Fed cut the benchmark rate a quarter of a percentage point last week to a range between 4.5% to 4.75%.Kashkari said that while the current expectation is for another quarter point cut at the Fed’s December meeting, “we need to see what the data actually look like” before deciding.”We want to have confidence that inflation is going to go all the way down to our 2% target,” from its current level around half a percentage point above that, Kashkari said.Along with an immigration crackdown, Trump has said he will impose broad tariffs on imported goods and seek tax cuts, which could increase federal deficits. How those policies impact inflation, Kashkari said, will depend on the details and on factors such as how other nations respond to U.S. tariffs.A tariff, a fee or tax charged as goods enter the country, may spark a one-time increase in prices but have no impact on long-run inflation, Kashkari said.But “the challenge becomes if there is a tit for tat,” Kashkari said. “If it is one country imposing tariffs, and then responses, and it is escalating … we will have to wait and see what gets implemented and then how other countries might respond. Right now we are just all guessing.” More

NEW YORK (Reuters) -Investors will focus in the coming week on whether inflation trends can help sustain the record-breaking stock rally that has received a boost from Donald Trump’s victory in the U.S. presidential race.The benchmark S&P 500 surged to an all-time high and hit the 6,000 level for the first time on Friday, as expectations of tax cuts and looser regulations under Trump helped lift the appetite for equities.A reassuring economic outlook from the Federal Reserve, which delivered a widely expected 25 basis point rate cut on Thursday, also helped boost sentiment. The central bank’s ability to keep cutting rates, however, will be tested by whether incoming data shows inflation continuing to moderate.The Nov. 13 consumer price index report needs to “confirm that notion that inflation continues to head in the right direction,” said Art Hogan, chief market strategist at B Riley Wealth.Investors believe Trump’s proposals, in particular higher tariffs, could push up consumer prices. Meanwhile, U.S. data has been stronger than expected, with a recent report showing the economy grew at a solid 2.8% pace in the third quarter.CPI for October is expected to come in at an annual pace of 2.6%, according to economists polled by Reuters. That would be a slight uptick from the 2.4% pace in September, which was the smallest gain since 2021, but well below the four-decade highs reached in 2022 that led the Fed to hike interest rates.More robust inflation could further alter projections for the Fed’s rate-cutting path, after expectations changed with Trump’s election victory. Fed funds futures show investors are now expecting rates to decline to about 3.7% by the end of 2025 from the current 4.5%-4.75% range, about 100 basis points above estimates in September.Expectations of financial easing have helped boost stocks this year, along with solid corporate profits and excitement over the business potential of artificial intelligence. Michael Reynolds, vice president of investment strategy at Glenmede, said the neutral level for the Fed funds rate was about 3%, “and we ultimately expect the Fed to stop short of neutral.” “We ultimately think that they do take that shallow path because inflation is still a risk,” Reynolds said. “We just got through a period of well-above average inflation. Historically, that’s come in waves.” Adding to that risk is Trump’s economic agenda that could juice inflation along with growth during his presidency. “We’re a long way from knowing specifics around either tax policy or trade policy, but those are both on the table and will undoubtedly weigh into the Fed’s calculus as they look ahead from here,” said Jim Baird, chief investment officer with Plante Moran Financial Advisors. Investors also are continuing to adjust to the new political landscape, after big moves this week in the stock market’s so-called “Trump trades.” The small-cap Russell 2000 was up 8% on the week, with smaller, domestically focused companies expected to benefit from Trump’s plans to increase tariffs on imports. The S&P 500 banks index was up about 7% with lenders poised to benefit from the Republican’s expected efforts to slash regulations. The initial market reactions will be tested as Trump fleshes out his policy aims and starts to name political appointments. “Markets have started to digest Trump’s victory,” analysts at UBS Global Wealth Management said in a Thursday note. “As more detailed policy proposals emerge from the Trump transition team, investors should brace for further swings ahead.” More

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WASHINGTON (Reuters) – Donald Trump’s former Treasury secretary, Steven Mnuchin, said he will not seek to join the president-elect’s new administration but is ready to offer advice to his successor, including on how to strengthen sanctions on Iran and Russia and contain the growth of U.S. debt.In an interview, Mnuchin told Reuters it was important for the Treasury to work towards strengthening U.S. trade policy. This includes holding Beijing to its U.S. goods purchase commitments in Trump’s January 2020 Phase One deal to rebalance U.S.-China trade, which he said “they’re not living up to.”Serving as Treasury chief during Trump’s first term “was the experience of a lifetime, and I’m happy to advise on the outside,” Mnuchin said on Friday. “I’m sure they’ll have a lot of great choices.”He declined to name any favorites.Reuters reported on Friday that two prominent hedge fund investors, Scott Bessent, founder of Key Square Group, and John Paulson had emerged as the top contenders for Treasury secretary, and that Bessent had met with Trump.Mnuchin founded Liberty Strategic Capital, a private equity firm, after leaving office with investments from Softbank (OTC:SFTBY) Group and Abu Dhabi’s Mubadala sovereign wealth fund.ECONOMIC TEAMMnuchin said it was important that all parts of Trump’s economic team – the Treasury, Commerce Department, U.S. Trade Representative’s office and White House National Economic Council – work closely together as a group, as they did during trade and tariff negotiations with China in 2018 and 2019.Mnuchin, a former Goldman Sachs executive, said financial markets experience was important for the Treasury secretary to have, but so is a strong management background. This is because Treasury spans vast areas of the economy from regulatory and tax policy to international sanctions, with the latter taking considerable time during his tenure, he said.The U.S. needs stronger enforcement of financial sanctions and more actions to cut off oil revenues from Iran and Russia, he said, noting that sanctions on Russia over its war in Ukraine have been “more of a headline” than effective.A G7-imposed price cap of $60 per barrel of Russian crude oil may be reducing Russia’s oil revenues, but “Russia is selling plenty of oil and gas,” he added.These actions need to be combined with an increase in U.S. oil and gas production and stronger output from other Middle East countries to make up for sanctions-reduced supplies from Russia and Iran to keep prices stable, Mnuchin said.MANAGING DEFICITSAsked whether Trump’s plans to extend expiring individual tax cuts next year and end taxes on tips, Social Security and overtime income would run up a worrisome amount of U.S. debt, Mnuchin said that growing deficits needed to be brought under control.He said he believes that Congress and the administration can strike a balance between extending the tax cuts and finding savings in both discretionary and non-discretionary spending. Some revenue will be made up through stronger economic growth and from Trump’s higher tariffs, he added.Mnuchin defended the Trump administration’s heavy COVID-19 relief spending which, along with a revenue collapse during the pandemic, led to a record $3.1 trillion deficit in fiscal 2020, but he said the Biden administration had overspent.The U.S. deficit in fiscal 2024 ended on Sept. 30 topped $1.8 trillion, the highest outside of the COVID era, as public debt interest costs exceeded $1 trillion for the first time. “I think the spending we did in COVID was necessary, or there would have been a worldwide depression, not a recession,” Mnuchin said. “But I think the ongoing spending of the Biden administration clearly created inflation and created big deficits, and that has to be addressed.” More