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    China’s economy zooms back to its pre-covid growth rate

    IN THE EARLY months of the covid-19 outbreak, researchers at the Federal Reserve and Massachusetts Institute of Technology published a paper entitled “Pandemics Depress the Economy, Public Health Interventions Do Not”. Examining America’s response to the influenza pandemic that broke out in 1918, they concluded that cities that acted early and forcefully had the best economic outcomes. Those that did not could not escape the pandemic’s shadow: people still curbed their consumption and businesses capped their investment. Cities that imposed strict controls, by contrast, limited the damage to public health and were able to bounce back sooner.
    Economists will pore over data from the covid-19 shock for years to come. But China’s GDP figures for 2020, published on January 18th, suggest that the researchers’ findings from the influenza of 1918 were spot on. After its early fumbles in managing the novel coronavirus outbreak, China imposed stricter lockdowns than just about any other country. The new data confirm that it was one of a handful of countries to register any economic growth at all last year.

    China’s GDP expanded at an annual rate of 2.3% in 2020 as a whole. Anyone predicting such a pace before the pandemic would have sounded outlandishly gloomy; it is, by some distance, China’s weakest growth rate since 1976, the final year of the Cultural Revolution. In the covid-blighted world, though, things look different. More impressive yet is China’s momentum. In the fourth quarter of 2020 growth accelerated to 6.5%, year on year, faster than its pre-covid rate. With vaccines being rolled out and the base of comparison very low at the start of the year, growth could soar to nearly 20% in the first quarter of 2021.
    Nevertheless, the strength of the headline rebound has masked both big imbalances and the difficulties faced by many in China. The industrial sector was the first part of the economy to recover, and has remained its brightest spot. Factory output increased by 2.8% in 2020 compared with 2019. At the other end of the spectrum was the fall of 3.9% in retail sales—a proxy for consumption and a reflection of the way people feel about their prospects (see chart).

    The divergence between production and consumption partly stems from the way that China sequenced its economic restart. The government believed, correctly, that it would be easier to contain viral risks in factories, which function as semi-closed ecosystems, often with workers living in nearby dormitories. As early as February, when other countries were just grasping the sheer scale of the health crisis, China carefully reopened its factory gates. It was nearly half a year later before it fully reopened schools.
    Chinese factories also benefited from developments in the global economy, distorted and depressed it was by the pandemic. Between March and the end of 2020 China exported 224bn masks, enough for 35 per person around the world. And its companies were big exporters of the screens and sofas in high demand as people spent far more time at home. As a result China’s merchandise trade surplus hit $535bn last year, up by 27% from 2019 and just shy of a record.
    But sluggish consumption at home points to the gloomier side of China’s recovery. In rich countries many governments dramatically increased fiscal support for people who lost jobs during the pandemic. China instead focused its stimulus spending on new infrastructure projects and on cheap loans to companies, hoping that they, in turn, would hire workers and thus support wages. By the end of the year the government could boast that the unemployment rate in cities had returned to 5.2%, the same as at the end of 2019. Wages, though, took a hit. In cities disposable income per person increased by just 1.2% last year, half as fast as GDP growth. Many migrant workers suffered pay cuts.
    Inequality also seems to have worsened. As in many other countries, 2020 was lucrative for the wealthy. Asset prices soared, thanks in part to the central bank’s loosening of monetary policy. The CSI 300 index, a gauge of China’s biggest stocks, rallied by nearly 30%, while property prices in the country’s main cities rose at their fastest pace since 2017. In recent weeks, buoyed by the strength of the economy and wary about the red-hot markets, the government has gradually started tapering its stimulus. China’s overall debt-to-GDP ratio shot up by about 25 percentage points last year, climbing to nearly 290%. This year, with credit growth slowing, the debt ratio should stabilise.

    Ultimately, though, the good and bad of China’s economic policies in 2020 were far less important than its decision to spare no effort to eliminate covid-19. A small outbreak currently under way in Hebei, a northern province, has once again demonstrated its approach: rapid testing on a mass scale; detailed contact tracing through smartphone apps; limits on travel between regions; and strict quarantines wherever infections are detected. Other countries understandably shy away from such tactics, enabled as they are by China’s authoritarian politics. But they are an extreme version of what should now be recognised as best practice when a pandemic strikes. The crucial first step, from which all else follows, is to try to stop its spread. That was true in 1918—and was again in 2020. More

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    Jamie Dimon says JPMorgan Chase should absolutely be 'scared s—less' about fintech threat

    Jamie Dimon, CEO of JP Morgan Chase
    David A. Grogan | CNBC

    JPMorgan Chase CEO Jamie Dimon has watched while a new breed of fintech players, led by PayPal, Square and tech giants around the world have exponentially grown users and market value.
    His message to the management team of his $3.4 trillion banking goliath: Be frightened.

    “Absolutely, we should be scared s—less about that,” Dimon said Friday in a conference call with analysts. “We have plenty of resources, a lot of very smart people. We’ve just got to get quicker, better, faster. … As you look at what we’ve done, you’d say we’ve done a good job, but the other people have done a good job, too.”
    Dimon’s blunt assessment was in response to questions from analysts including Mike Mayo of Wells Fargo who pointed out that with rich, tech-like valuations, fintech players have “trounced” the traditional banks in recent years.
    Dimon said he sent his deputies a list of global competitors, and that PayPal, Square, Stripe, Ant Financial as well as U.S. tech giants including Amazon, Apple and Google were names the bank needs to keep an eye on. The rivals are also clients of JPMorgan’s commercial and investment banking in many cases, he added.
    Competition will be particularly tight in the world of payments, he said: “I expect to see very, very tough, brutal competition in the next 10 years,” Dimon said. “I expect to win, so help me God.”

    Dimon added that in some cases, the new players were “examples of unfair competition” that the bank would do something about eventually. He included players that take advantage of richer debit-card revenue for small banks and firms Dimon accused of not taking precautions against money laundering.

    He specifically called out Plaid, the payments start-up whose acquisition by Visa recently collapsed, saying “people who improperly use data that’s been given to them, like Plaid.”
    Plaid CEO Zach Perret declined to directly respond to the accusation during an interview with CNBC’s David Faber, adding that Plaid is spending time with the bank on a partnership.
    When contacted for further comment, a Plaid spokeswoman said the company is “focused on ensuring people have access to their own financial information so they can securely share it with permission in order to use the fintech apps they choose.”
    She added that “data privacy and security are core to everything we do, including the data exchange agreements we have with JPMorgan Chase among many other banks.”
    — CNBC’s Dawn Giel contributed to the report. More

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    Fed's Rosengren voices support for Biden stimulus proposal

    President-elect Joe Biden’s proposed stimulus plan is the right medicine for an economy likely to see substandard growth in the first half of 2021, Boston Federal Reserve President Eric Rosengren said Friday.
    As the first central bank official called to publicly speak on the Biden plan, he said he was comfortable with the aggressive fiscal action despite a nearly $2 trillion price tag that will take an already debt-laden federal government deeper into the red.

    “It’s a big package, but I think it’s appropriate,” he told CNBC’s Steve Liesman during an interview on “The Exchange.” “The economy is in a lull right now.”
    The Biden plan looks to spend $1.9 trillion on a variety of measures tied directly to the impact that the Covid-19 pandemic has had on the economy, like direct cash payments and extended unemployment benefits, as well as on items that are tangential, like raising the federal minimum wage and cash to schools.
    Fed officials for months have been calling on Congress to provide more fiscal aid.
    “While it’s a very big package, I do think until we get to the point where people have been vaccinated, where businesses have been bridged, and where many of the unemployed workers have come back to work, we need an expansionary fiscal policy,” Rosengren said. “And to the extent that it targets those parts of the economy most affected by the pandemic, that is the appropriate action for fiscal policy at this time.”
    Though it’s uncertain how much spending Congress will approve, the money will go to an economy that Rosengren thinks will struggle through the first half of the year then rebound sharply.

    Still, he said fiscal and monetary policy really isn’t the problem at this point, but rather that “we have the wrong pandemic policy.”
    “Too many people are infected and we’re being too slow to get shots in the arm,” he said.
    Fed policy now is set to be accommodative, and that’s unlikely to change anytime soon. Chairman Jerome Powell on Thursday reiterated his belief that interest rate increases or changes to the central bank’s asset purchase program are coming anytime soon as the Fed seeks to meet its goals on employment and inflation.
    Though Rosengren has warned in the past about financial stability issues that could arise from easy Fed policy, he also said that’s not his main concern now as he said the purchases of Treasurys and mortgage-backed securities have helped the recovery.
    “My financial stability concerns are really about what happens when the economy is much stronger than it is today,” he said. More

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    Stocks making the biggest moves midday: Poshmark, JPMorgan, Wells Fargo, Zoom, Spotify & more

    Check out the companies making headlines in midday trading. 
    Zoom Video — Shares of the video conferencing giant popped nearly 2% after an analyst at Bernstein named the stock a top pick for 2021. The analyst said his call was based on the growth in Zoom’s Phone business.

    Exxon — The oil giant slid more than 3% after The Wall Street Journal reported that the SEC launched an investigation into Exxon. According to the report, the probe focuses on how the company valued a key asset in the oil rich Permian Basin.
    Wells Fargo — Shares of the banking giant slipped more than 7% after Wells Fargo reported weaker-than-expected revenue for the fourth quarter. Revenue came in at $17.93 billion, which was short of the $18.127 billion expected by analysts polled by Refinitiv. “Although our financial performance improved … our results continued to be impacted by the unprecedented operating environment and the required work to put our substantial legacy issues behind us,” CEO Charlie Scharf said in a statement.
    Snap – The social media company jumped more than 2% after MoffettNathanson upgraded the company to buy from neutral. The firm said Snap has the potential to accelerate its revenue and profits, which is still underappreciated by the rest of Wall Street.
    Poshmark — Shares of the online clothing reseller dropped more than 13%, reversing course after a red hot debut on Thursday. The stock is still trading more than 100% higher than its IPO price of $42 per share.
    Spotify — The music streaming company’s stock shed more than 4% after Citi downgraded the stock to sell from neutral. The investment firm said in a note that it believes Spotify’s push into podcasts is overvalued by the market.

    Petco – Shares of the pet supply retailer pulled back about 5% after its IPO surge in the previous session. The stock soared 63% in its market debut on Thursday as investors remained bullish on the pandemic-fueled pet boom.
    Plug Power – Shares of the hydrogen fuel cell company slipped more than 8% as investors took profits after the stock’s big week. Despite Friday’s decline, shares are still up more than 80% year to date.
    JPMorgan — The stock dipped 2% despite the bank beating analysts’ estimates for fourth-quarter profit and revenue. JPMorgan reported earnings of $3.79 per share, higher than the expected $2.62 per share profit, according to estimates from Refinitiv. The bank reported revenue of $30.16 billion, topping estimates of $28.7 billion.
    Citigroup — The bank slipped 4% after Citi reported mixed earnings for the fourth quarter. The bank earned $2.08 per share, topping estimates of $1.34 per share, according to Refinitiv. Revenue came in at $16.50 billion, lower than the forecast for $16.71 billion.
    Accolade — Shares of the healthtech firm jumped more than 12% after Accolade said it was buying telemedicine start-up 2nd.MD for about $460 million. The acquisition will bolster Accolade’s ability to provide users with second opinions for medical concerns.
    – CNBC’s Yun Li, Maggie Fitzgerald, Fred Imbert and Jesse Pound contributed reporting.
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    Man makes last-ditch effort to recover $280 million in bitcoin he accidentally threw out

    The reflection of bitcoins in a computer hard drive.
    Thomas Trutschel | Photothek via Getty Images

    LONDON — A British man who accidentally threw out a hard drive with a trove of bitcoin on it is once again urging local city officials to let him search for it in a landfill site.
    James Howells, a 35-year-old IT engineer from Newport, Wales, said he discarded the device while clearing out his home in 2013. He claims he had two identical laptop hard drives, and that he mistakenly put the one containing the cryptographic “private key” needed to access and spend his bitcoins in the trash.

    After all these years, Howells is still confident he’d be able to recover the bitcoin. Though the external part of the hard drive may be damaged and rusted, he believes the glass platter inside may still be intact.
    “There is a good chance the platter inside the drive is still intact,” he told CNBC. “Data recovery experts could then rebuild the drive or read the data directly from the platter.”
    Howells says he had 7,500 bitcoins which, at today’s prices, would be worth more than $280 million. He says the only way to regain access to it would be through the hard drive he threw in the trash eight years ago.

    But he needs permission from his local council to search a garbage dump he believes contains the lost hardware. The landfill is not open to the public and trespassing would be considered a criminal offense.
    Howells has offered to donate 25% of the haul — worth around $70.8 million — to a “Covid Relief Fund” for his home city if he manages to dig up the hard drive. He has also promised to fund the excavation project with the backing of an unnamed hedge fund.

    But the Newport City Council has so far rejected his requests to look through the landfill, citing environmental and funding concerns. And it doesn’t seem like local officials are about to budge anytime soon.
    “As far as I am aware they have already rejected the offer,” Howells said. “Without even having heard our plan of action or without being given a chance to present our mitigations to their concerns regarding the environment, it’s just a straight up ‘no’ every time.”
    A spokesperson for the council told CNBC it had been “contacted a number of times since 2013 about the possibility of retrieving a piece of IT hardware said to contain bitcoins,” the first being “several months” after Howells first realized the drive had gone missing.

    “The council has told Mr Howells on a number of occasions that excavation is not possible under our licencing permit and excavation itself would have a huge environmental impact on the surrounding area,” the council spokesperson said.
    “The cost of digging up the landfill, storing and treating the waste could run into millions of pounds — without any guarantee of either finding it or it still being in working order.”
    It’s not hard to imagine why Howells would want to salvage the equipment. Bitcoin prices have skyrocketed in the past few months, hitting an all-time high near $42,000 last week before pulling back sharply.
    The New York Times reported Tuesday that a programmer in San Francisco has been locked out of 7,002 bitcoins — worth about $267.8 million today — because he forgot the password needed to unlock a small hard drive containing the private key to a digital wallet.
    Bitcoin’s network is decentralized, meaning it isn’t controlled by a single individual but a network of computers. Each transaction originates from a wallet which has a “private key.” This is a digital signature and provides mathematical proof that the transaction has come from the owner of the wallet. More

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    Biden’s $400 unemployment boost would replace 86% of lost wages for many workers

    Alex Wong | Getty Images News | Getty Images

    A $400 boost to weekly unemployment benefits being pushed by President-elect Joe Biden would replace about 86% of lost wages for the average worker, according to a CNBC analysis of Labor Department data.
    Biden called for jobless benefits to be raised in a Thursday night speech outlining a $1.9 trillion Covid relief package, the American Rescue Plan. The $400 enhancement would be available through September 2021.

    More from Personal Finance:Biden wants to increase stimulus checks to $2,000Biden calls for $30 billion more in rental assistanceBiden calls to raise the federal minimum wage to $15 per hour
    He also wants to extend benefits through September for the long-term unemployed, in addition to sending more stimulus checks, rental assistance and other relief.

    $400 weekly boost

    Workers got $323 a week in state benefits, on average, in the third quarter last year, according to most recent U.S. Labor Department data. That aid replaced about 38% of their average pre-layoff wage, which was $843 a week.
    A $400 increase in benefits would bump that replacement rate to 86%.
    The supplement would go further in some states, especially those that tend to pay more meager benefits.

    In Louisiana, for example, the average worker got $183 a week in benefits in November, according to the U.S. Labor Department. For them, a $400 boost would represent a 219% increase in weekly benefits.
    Massachusetts, on the other hand, gave $491 a week to the average person, the largest payout among states in November. A $400 enhancement for that worker would yield an 81% increase in benefits.
    More than 18 million Americans were collecting unemployment benefits at the end of 2020, according to the Labor Department.
    States are currently in the process of issuing a $300-a-week enhancement to benefits provided by the recently passed $900 billion Covid relief law. It’s slated to end in mid-March. More

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    Wells Fargo shares slide after fourth-quarter revenue falls short of expectations

    A man walks past a Wells Fargo Bank branch on a rainy morning in Washington.
    Gary Cameron | Reuters

    Wells Fargo on Friday released mixed results for the fourth quarter, sending the bank’s stock lower.
    Here’s how the numbers compared with Wall Street expectations:
    Earnings: 64 cents per share vs. Refinitiv estimate of 60 cents per share
    Revenue: $17.93 billion vs. $18.127 billion forecast
    Net interest income: $9.275 billion vs. $9.34 billion FactSet estimate

    Shares of Wells Fargo dipped 4.7% before the opening bell.
    The bank’s earnings include a $781 million restructuring charge, a $757 million reserve release due to the sale of its student-loan portfolio and a $321 million hit due to the “impact of customer remediation accruals.”
    “Although our financial performance improved and we earned $3.0 billion in the fourth quarter, our results continued to be impacted by the unprecedented operating environment and the required work to put our substantial legacy issues behind us,” CEO Charlie Scharf said in a statement. “With a more consistent broad-based recovery and as we continue to press forward with our agenda, we expect you will see that this franchise is capable of much more.”
    The bank’s consumer banking and lending division saw revenue decline by 5% on a year-over-year basis to $8.61 billion from $9.08 billion. Revenue from its commercial banking business came in at $2.388 billion, down 18% from $2.9 billion in the year-earlier period.
    Corporate and investment banking revenue dropped 7% year over year to $3.11 billion from $3.329 billion. That includes a 25% slide in equity markets trading revenue. Fixed-income trading revenue was roughly flat from a year earlier.

    “We have prioritized and are moving forward on our risk and control buildout,” Scharf said. “We have clarified our strategic priorities and are exiting certain non-strategic businesses; and we have identified and are implementing a series of actions to improve our financial performance.”
    Shares of Wells Fargo shares rallied more than 28% in the fourth quarter as the rollout of Covid vaccines and the prospects for more fiscal stimulus raised hope for a strong economic recovery.
    Despite the sharp gain, Wells shares still lagged those of JPMorgan Chase, which rose nearly 32% in the same time period. JPMorgan’s quarterly numbers, released earlier Friday, beat estimates on the top and bottom lines. Citigroup’s earnings were mixed.
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