Finance

China on Monday reported its consumer price index rose by 0.6% year on year in August, missing expectations as costs of transportation and home goods, and rents declined.
The consumer price index was forecast to have climbed 0.7% year on year in August, according to a Reuters poll.
The producer price index fell by 1.8% year on year in August, more than the estimated 1.4% decline as per the Reuters poll.

egetable prices in China have risen significantly this summer, with analysts pointing to high temperatures and frequent rainfall as the main reasons.
Vcg | Visual China Group | Getty Images

BEIJING — China on Monday reported its consumer price index rose by 0.6% year on year in August, missing expectations as transportation and home goods prices, as well as rents declined.
The CPI was estimated to have climbed 0.7% year on year in August, according to a Reuters poll.

Food prices climbed by 2.8% year on year in August, the first positive print since June 2023, according to Wind Information data. Pork prices surged by 16.1% in August, while vegetable prices climbed by 21.8%.
Pork, a food staple in China, has an outsized weighting in the country’s consumer price index. Wang Yifan, agricultural analyst at Nanhua Futures, said that breeding cycles indicate pork prices can rise further in September and October, but will face pressure during the rest of the year.
Core-CPI, which strips out food and energy prices, climbed by 0.3% in August from a year ago, a slower rise for a second-straight month.

The consumer price index rose by 0.4% in August from July, also missing Reuters estimates of a 0.5% growth.
Consumer prices in China have remained subdued amid lackluster domestic demand since the pandemic.

China’s former central bank head Yi Gang said at a conference on Friday that the country needed to focus on “fighting the deflationary pressure.” He forecast the consumer price index would be slightly above zero by the end of the year.
Retail sales rose by just 2.7% in July from a year earlier. Retail sales and industrial data for August are due out Saturday.
“The fiscal policy stance needs to become more proactive in order to prevent the deflationary expectations from becoming entrenched, in my view,” Zhiwei Zhang, president and chief economist at Pinpoint Asset Management, said in a note.

Producer prices fall more than expected

The producer price index fell by 1.8% year on year in August, more than the estimated 1.4% decline as per the Reuters poll.
Oil, coal and other fuel industries reported a 3% year-on-year drop in prices, reversing a 4.3% increase in July.
The downward pressure on the producer price index remains large due to insufficient domestic demand and the drag from real estate, said Bruce Pang, chief economist and head of research for Greater China at JLL.
Within the consumer price index, he noted that major categories outside of food, tobacco and alcohol posted declines in August from the prior month, indicating the need for greater efforts to boost domestic demand.
— CNBC’s Anniek Bao contributed to this report. More

Exchange-traded fund inflows have already topped monthly records in 2024, and managers think inflows could see an impact from the money market fund boom before year-end.
“With that $6 trillion plus parked in money market funds, I do think that is really the biggest wild card for the remainder of the year,” Nate Geraci, president of The ETF Store, told CNBC’s “ETF Edge” this week. “Whether it be flows into REIT ETFs or just the broader ETF market, that’s going to be a real potential catalyst here to watch.”

Total assets in money market funds set a new high of $6.24 trillion this past week, according to the Investment Company Institute. Assets have hit peak levels this year as investors wait for a Federal Reserve rate cut.
“If that yield comes down, the return on money market funds should come down as well,” said State Street Global Advisors’ Matt Bartolini in the same interview. “So as rates fall, we should expect to see some of that capital that has been on the sidelines in cash when cash was sort of cool again, start to go back into the marketplace.”
Bartolini, the firm’s head of SPDR Americas Research, sees that money moving into stocks, other higher-yielding areas of the fixed income marketplace and parts of the ETF market.
“I think one of the areas that I think is probably going to pick up a little bit more is around gold ETFs,” Bartolini added. “They’ve had about 2.2 billion of inflows the last three months, really strong close last year. So I think the future is still bright for the overall industry.”
Meanwhile, Geraci expects large, megacap ETFs to benefit. He also thinks the transition could be promising for ETF inflow levels as they approach 2021 records of $909 billion.

“Assuming stocks don’t experience a massive pullback, I think investors will continue to allocate here, and ETF inflows can break that record,” he said.
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Big banks are jumping headfirst into the AI race. Over the past year, Wall Street’s largest names — including Goldman Sachs , Bank of America , Morgan Stanley , Wells Fargo to JPMorgan Chase — ramped up their generative artificial intelligence efforts with the aim of boosting profits. Some are striking deals and partnerships to get there quickly. All are hiring specialized talent and creating new technologies to transform their once-stodgy businesses. The game is still in its early innings, but the stakes are high. In his annual shareholder letter, JPMorgan CEO Jamie Dimon compared artificial intelligence to the “printing press, the steam engine, electricity, computing, and the internet.” The banks that can get it right should increase productivity and lower operational costs — both of which would improve their bottom lines. In fact, AI adoption has the potential to lift banking profits by as much as $170 billion, or 9%, to more than $1.8 trillion by fiscal year 2028, according to research from Citi analysts . Early-stage generative AI use cases are often for “augmenting your staff to be faster, stronger and better,” said Alexandra Mousavizadeh, co-CEO and co-founder of AI benchmarking and intelligence platform Evident Insights. “Over the course of the next 12 to 18 to 24 months, I think we’re going to see [generative AI] move along the maturity journey, going from internal use cases being put into production [to more] testing external-facing use cases.” Companies are only just starting to grasp the promise of this tech. After all, it was only following the viral launch of ChatGPT in late 2022 that the world outside of Silicon Valley woke up to the promise of generative AI. OpenAI’s ChatGPT, backed by Microsoft and enabled by Nvidia chips, sparked an investor stampede into anything AI. The AI trade also pushed corporate boardrooms in three ways: find use cases for the tech, strike partnerships to enable it, and hire specialized employees to build and support it. MS YTD mountain Morgan Stanley YTD AI use cases for key businesses Morgan Stanley was among the first on Wall Street to publicly embrace the technology, unveiling two AI assistants for financial advisors powered by OpenAI. Launched in September 2023, the AI @ Morgan Stanley Assistant gives advisors and their staff quick answers to questions regarding the market, investment recommendations, and various internal processes. It aims to free up employees from administrative and research tasks to engage more with their clients. Morgan Stanley this summer rolled out another assistant , called Debrief, which uses AI to take notes on financial advisors’ behalf in their client meetings. The tool can summarize key discussion topics and even draft follow-up emails. “Our immediate focus is on using AI to increase the time our employees spend with clients. This means using AI to reduce time-consuming tasks like responding to emails, preparing for client meetings, finding information, and analyzing data,” said Jeff McMillan, head of firmwide AI for Morgan Stanley. He made these comments in a statement emailed to CNBC last week. “By freeing up this time, our employees can focus more on building relationships and innovating.” In the long run, AI could help Morgan Stanley’s wealth business get closer to reaching management’s goal of more than $10 trillion in client assets . In July, the firm reported client assets of $7.2 trillion. To be sure, McMillan said in June it would take at least a year to determine whether the technology is boosting advisor productivity. If it does, that would welcomed news for shareholders after Morgan Stanley’s wealth segment missed analysts’ revenue expectations in the second quarter . WFC YTD mountain Wells Fargo YTD It’s not just Morgan Stanley. Our other bank holding Wells Fargo has its own virtual AI assistant. Dubbed Fargo , it helps retail customers get answers to their banking questions and execute tasks such as turning on and off debit cards, checking credit limits, and offering details for transactions. Fargo, powered by Google Cloud’s artificial intelligence, was launched in March 2023. For a large money center bank like Wells Fargo — one that’s historically catered to Main Street — the Fargo assistant could bolster the bank’s largest reporting segment. The consumer, banking and lending unit in the second quarter accounted for roughly 43% of the $20.69 billion booked in companywide revenue. Striking AI deals, landing partnerships None of this would be possible without partnerships. Big banks have tapped startups and tech behemoths alike for access to their large language models (LLMs) to build their own AI products. In addition to Morgan Stanley’s OpenAI deal and Wells Fargo’s ties with Google, Deutsche Bank also partnered with Club name Nvidia in 2022 to help develop apps for fraud protection . BNP Paribas announced on July 10 a deal with Mistral AI — often seen as the European alternative to OpenAI — to embed the company’s LLMs across its customer services, sales and IT businesses. Shortly after that, TD Bank Group signed an agreement with Canadian AI unicorn Cohere to utilize its suite of LLMs as well. “We watch out for these [deals] because that means they are onboarding a lot of that capability,” Evident’s Mousavizadeh said. Big AI hires for top Wall Street firms Banks have also had to do a lot of hiring to make their AI dreams come true — poaching swaths of data scientists, data engineers, machine learning engineers, software developers, model risk analysts, policy and governance managers. Despite layoffs across the banking industry, AI talent at banks grew by 9% in the last six months, according to July data from Evident , which tracks 50 of the world’s largest banks. That was double the rate of growth seen in total headcount across the sector. Mousavizadeh said that one of the major “characteristics of the leading banks in AI is that they’re not stopping hiring. The leading banks are the [ones] that are hiring the most AI talent.” In July, Wells Fargo named Tracy Kerrins as the new head of consumer technology to oversee the firm’s new generative AI team. And Morgan Stanley’s McMillan was promoted to AI head in March after serving as a tech executive in the wealth division. He’s helped oversee Morgan Stanley’s OpenAI-related projects. JPMorgan last year also appointed Teresa Heitsenrether as its chief data and analytics officer in charge of AI adoption. Bottom line The more we see these firms spend and invest in AI talent, the more serious they appear to be about the future of the nascent tech. We don’t expect these third-party partnerships, new use cases, and slew of hires to create exponential returns overnight. However, As long as these costs don’t outweigh return on investment (ROI), we’re happy with Wells Fargo and Morgan Stanley’s moves to innovate. “We’re very much in the foothills of this, and we’re going to see much more ROI generated off the AI use cases in 2025,” Mousavizadeh said. “But, I think you’re going to see a real tipping point in 2026.” (Jim Cramer’s Charitable Trust is long NVDA, WFC, GOOGL, MSFT, MS. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.

Pedestrians walk along Wall Street near the New York Stock Exchange (NYSE) in New York, US, on Tuesday, Aug. 27, 2024.
Bloomberg | Bloomberg | Getty Images

Big banks are jumping headfirst into the AI race. More

Employers added 142,000 jobs in August, less than expected. The unemployment rate declined to 4.2%, according to the Bureau of Labor Statistics jobs report.
The U.S. job market has slowed considerably over the past year or so. The Federal Reserve has raised interest rates to tame inflation.
If the labor market continues to cool at this rate, the economy would likely be at risk of recession, economists said.

A “Now Hiring” sign is seen at a FedEx location on Broadway on June 07, 2024 in New York City.
Michael M. Santiago | Getty Images

Why there’s ‘slowing momentum’

Employers added 142,000 jobs in August, the Bureau of Labor Statistics reported Friday, a figure that was lower than expected.
The good news: That figure is an increase from the 89,000 jobs added in July. The unemployment rate also fell slightly, to 4.2% from 4.3% in July.

However, several metrics point to “slowing momentum” throughout the labor market, said Ernie Tedeschi, director of economics at the Yale Budget Lab and former chief economist of the White House Council of Economic Advisers under the Biden administration.
The current level of job growth and unemployment “would be fine for the U.S. economy sustained over many months,” he said. “Problem is, other data don’t give us confidence we are going to stay there.”
For example, average job growth was 116,000 over the past three months; the three-month average was 211,000 a year ago. The unemployment rate has also steadily risen, from 3.4% as recently as April 2023.

Employers are also hiring at their slowest pace since 2014, according to separate Labor Department data issued earlier this week.
Hiring hasn’t been broad-based, either: Private-sector job growth outside of the health-care and social assistance fields has been “unusually slow,” at a roughly 39,000 average over the past three months versus 79,000 over the past year and 137,000 over 2015 to 2019, according to Julia Pollak, chief economist at ZipRecruiter.
Workers are also quitting their jobs at the lowest rate since 2018, while job openings are at their lowest since January 2021. Quits are a barometer of workers’ confidence in their ability to find a new job.

Job-finding among unemployed workers is around 2017 levels and “continues to drift down,” Bunker said.
“There’s a very consistent picture that the strong labor-market momentum we saw in 2022 and 2023 has slowed considerably,” Tedeschi said.
Overall, data points “are not necessarily concerning or at recessionary levels yet,” he added. “[But] they are softer. They may be preludes to a recession.”

Why layoff data is a silver lining

However, there is some room for optimism, economists said.
Permanent layoffs — which have historically been “the soothsayer of recessions” — haven’t really budged, Tedeschi said.

Federal data for unemployment insurance claims and the rate of layoffs suggest employers are holding on to their workers, for example.
The recent gradual rise in unemployment is largely not attributable to layoffs, economists said. It has been for a “good” reason: a large increase in labor supply. In other words, many more Americans entered the job market and looked for work; they’re counted as unemployed until they find a job.

“Once we start seeing layoffs, the game is over and we are in a recession,” Tedeschi said. “And that has not happened at all.”
That said, the job hunt has become more challenging for job seekers than in the recent past, according to Bunker.

Relief from the Fed won’t come quickly

Federal Reserve officials are expected to start cutting interest rates at their upcoming meeting this month, which would take pressure off the economy.
Lower borrowing costs may spur consumers to buy homes and cars, for example, and for businesses to make more investments and hire more workers accordingly.

That relief likely wouldn’t be instantaneous but would probably take many months to wind through the economy, economists said.
Overall, though, the current picture is “still consistent with an economy experiencing a soft landing rather than plummeting into recession,” Paul Ashworth, chief North America economist at Capital Economics, wrote in a note Friday. More

The company said the proposal was “opportunistically timed and grossly undervalues our standalone path and the additional actionable avenues we see to realize and unlock shareholder value in the near- to medium-term.”
Even if Couche-Tard increases its offer “very significantly,” Seven & i said the proposal does not consider the “multiple and significant challenges” the takeover would have from U.S. anticompetition agencie.

Customers exit a 7-Eleven convenience store, operated by Seven & i Holdings Co., in Kobe, Japan, on Friday, Aug. 30, 2024. Alimentation Couche-Tard Inc. had made a preliminary non-binding proposal to buy Seven & i, which operates more than 85,000 stores across the globe, and the deal would be the biggest-ever foreign takeover of a Japanese company. Photographer: Soichiro Koriyama/Bloomberg via Getty Images
Bloomberg | Bloomberg | Getty Images

Seven & i Holdings has rejected the takeover offer from Canadian convenience store operator Alimentation Couche-Tard, saying the offer “is not in the best interest” of its shareholders and stakeholders.
In a filing with the Tokyo Stock Exchange, the owner of 7-Eleven revealed that Couche-Tard had offered to acquire all outstanding shares of Seven & i for $14.86 per share. According to LSEG data, the offer price will value Seven & i at $38.55 billion.

Stephen Dacus, chairman of the special committee that Seven & i had formed to evaluate Couche-Tard’s proposal, called the proposal “opportunistically timed and grossly undervalues our standalone path and the additional actionable avenues we see to realize and unlock shareholder value in the near- to medium-term.”
In April, Seven & i announced a restructuring plan for the company, aimed at growing 7-Eleven’s presence globally as well as divesting its underperforming supermarket business.

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Dacus wrote that even if Couche-Tard increases its offer “very significantly,” the proposal does not consider the “multiple and significant challenges” the takeover would face from U.S. anticompetition agencies.
“Beyond your simple assertion that you do not believe that a combination would unfairly impact the competitive landscape and that you would ‘consider’ potential divestitures, you have provided no indication at all of your views as to the level of divestitures that would be required or how they would be effected,” he wrote in a letter that appeared to be addressed to ACT Chair Alain Bouchard that was published in the Tokyo Stock Exchange filing.
He also pointed out that the Couche-Tard proposal did not indicate any timeline for clearing regulatory hurdles or whether the company was “prepared to take all necessary action to obtain regulatory clearance, including by litigating with the government.”

Dacus said Seven & i is open to sincerely considering proposals that are in the best interests of the company’s stakeholders and shareholders, but warned it will also resist one that “deprives our shareholders of the company’s intrinsic value or that fails to specifically address very real regulatory concerns.”

Shareholder speaks out

Speaking to CNBC’s “Squawk Box Asia” shortly before the response was filed on Friday, Ben Herrick, associate portfolio manager at Artisan Partners, said the Couche-Tard offer “highlights the fact that this management team and the board have not done all of the things in their power to increase the corporate value of this organization.”

Artisan Partners is a U.S. fund that holds a stake of just over 1% in Seven & i. In August, the firm had reportedly urged Seven & i Holdings to “seriously consider” the buyout offer and solicit offers for the company’s Japanese subsidiaries “as quickly as possible.”
Herrick explained Artisan asked Seven & i to consider the offer because the fund feels that capital allocation overseas has been overlooked.
He said Seven & i’s Japanese convenience store business does not need much change, but said there’s a “huge opportunity” in international licensees operating outside the United States.
“You have more than 50,000 stores, or about 50,000 stores that are generating about $100 million or just over $100 million of operating profit for for the company. So I think there’s a big mismatch there,” he said.

Herrick also thinks that Seven & i has been slow to adopt changes due to insufficient oversight and accounting.
“We really need the company to enact its plan at a faster pace here. So [Seven and i President Ryuichi] Isaka came out with his 100 day plan in 2016 to reform [general merchandise store] Ito-Yokado. And we’re approaching day 3,000 here. So I don’t think that speed has been a big part of this culture, and that needs to change,” he pointed out.
On Monday, Richard Kaye, portfolio manager at independent asset management group Comgest, disagreed in an interview on CNBC’s “Squawk Box Asia,” saying: “I don’t think there’s a case for a radical reform to be to be done by a foreign acquirer.”
The company is doing a “phenomenal job” in terms of logistics and product innovation and “I think it’s very hard to assume that that could be done an awful lot better,” he added. More

China’s policymakers need to focus on boosting domestic demand, Yi Gang, former head of the People’s Bank of China, said Friday at the Bund Summit in Shanghai.
Yi said he expected the consumer price index to “converge above zero by the end of the year.”
“Central banks should avoid prolonged deflation even if it is mild, that could affect wage determination,” Haruhiko Kuroda, former head of the Bank of Japan, said.

Yi Gang was governor of the People’s Bank of China from 2018 to 2023. He is pictured here speaking at the Peterson Institute for International Economics in Washington, DC, US, on Saturday, April 15, 2023.
Bloomberg | Bloomberg | Getty Images

SHANGHAI — China’s policymakers need to focus on boosting domestic demand, Yi Gang, former head of the People’s Bank of China, said Friday at the Bund Summit in Shanghai.
“I think right now they should focus on fighting the deflationary pressure,” Yi said, adding that “the key word is: how to improve domestic demand, how they can successfully deal with the situation of the real estate market as well as the local government debt problem, and influence the confidence of society.”

“At this point, proactive fiscal policy and accommodative monetary policy are important,” he said.
In contrast to high inflation in the U.S. and Europe, China’s consumer prices fell in 2023 and have only picked up marginally so far this year as domestic demand remains lackluster.
The latest CPI read, due out on Monday, is expected to tick up from 0.5% year-on-year growth in July to 0.70% in August, according economists polled by Reuters. That would still be only the fastest since February’s 0.7% CPI increase.

Yi said he expected the consumer price index to “converge above zero by the end of the year,” while the producer price index would likely reach zero, after negative prints in recent months.
The core CPI, which strips out food and energy prices, rose by 0.4% in July from a year ago, down from 0.6% in June and May.

Yi was PBoC governor from March 2018 to July 2023. Pan Gongsheng is the current head of China’s central bank.
Zou Lan, director of the PBoC’s monetary policy department, told reporters Thursday the central bank still had room to lower the reserve requirement ratio, which determines the amount of cash banks need to have on hand. It is just one of the PBoC’s several monetary policy tools.
In July, Chinese policymakers announced major support for a trade-in policy to boost consumption. While central and local authorities have also taken steps to bolster the massive real estate market, sales and investment in new properties have still fallen.
“The challenge for Chinese policymakers is to manage the housing crisis, and to ensure that there is enough domestic demand to maintain the high level of economic growth,” Jeffrey J. Schott, senior fellow at the Peterson Institute for International Economics, told reporters Thursday.
“That is so important for the Chinese economy and for moving more and more people up to higher standards of living,” he said.

Contrast with Japan

Chinese consumption has remained lackluster since the pandemic. In the major cities of Beijing and Shanghai, retail sales fell by 3.8 % and by 6.1%, respectively, in July from a year ago, official data showed.
Major factors behind low consumer sentiment include uncertainty about future income and the wealth impact from the real estate market slump.
“Central banks should avoid prolonged deflation even if it is mild, that could affect wage determination,” Haruhiko Kuroda, former head of the Bank of Japan, said during the same panel session as Yi.
Kuroda pointed out that China’s current deflationary situation has been far shorter than what Japan faced. But he said that 15 years of deflation in Japan prevented wages from going up significantly, until the last year or two.
— CNBC’s Sonia Heng contributed to this report. More

China’s wealthy want to pursue business opportunities abroad, rather than just investment returns, according to asset managers and consultants.
This year, there’s been a “very significant” trend of requests from Chinese family offices that want to acquire smaller businesses in Japan, said Ryota Kadogaki, co-founder and global CEO of Monolith, a Japan-based consulting firm for family offices.
“Most of our clients are China-rooted entrepreneurs who are looking to further globalize,” Grant Pan, CFO of China-based wealth management firm Noah Holdings, told CNBC.

Instead of high-net-worth individuals, C-suite executives in China are increasingly using business jets, said Paul Desgrosseilliers, general manager at ExecuJet Haite General Aviation Services. The company opened a new service center at Beijing Daxing International Airport on Aug. 27, 2024.
ExecuJet Haite

BEIJING — China’s wealthy are increasingly looking for ways to move capital outside the mainland to pursue business opportunities, rather than just chasing investment returns, according to asset managers and consultants.
This year, there’s been a “very significant” trend of requests from Chinese family offices that want to acquire smaller businesses in Japan, said Ryota Kadogaki, co-founder and global CEO of Monolith, a Japan-based consulting firm for family offices.

“I’m studying Chinese as well, and I’m thinking to hire Chinese speakers in my company right now,” he said, noting that slower growth in China and a weaker Japanese yen are supporting the increased interest. Even with recent strengthening to around 20 yen versus the Chinese yuan, that’s still weaker than the 15 level seen in 2020.
Investors based in mainland China increased their non-financial direct investments overseas by 16.2% to the equivalent of $83.55 billion during the January to July period, according to the Ministry of Commerce. It said the investments covered more than 6,100 businesses in 152 countries and regions.
“Most of our clients are China-rooted entrepreneurs who are looking to further globalize,” Grant Pan, CFO of China-based wealth management firm Noah Holdings, told CNBC. “Obviously they are at least keeping their eyes open for opportunities for their businesses all over the world. Obviously there’s slowdown pressure in terms of domestic markets for many industries.”

“Many of our clients appear to be busier than before,” he said. “As they are exploring new markets, they travel more frequently, which more or less gives them a better perspective of global allocation.”
Noah Holdings said the number of its overseas registered clients rose by 23% from a year ago to nearly 16,800 as of the end of June. The company’s active overseas clients rose by nearly 63% year on year to 3,244.

Overseas assets under management rose nearly 15% to $5.4 billion from a year earlier, while mainland China assets under management fell over 6% to $15.8 billion, according to Noah’s quarterly earnings report.
Mainland China keeps a tight control on capital with an official limit of $50,000 in overseas foreign exchange a year. That’s meant affluent Chinese have long looked for alternative ways to grow wealth outside the country.
Kadogaki noted that buying foreign companies is a way for Chinese investors to move assets abroad. He also shared examples of how a fund investing in a tech company in China might now look to acquire a retail store in Japan to expand potential revenue.
In June 2023, Kadogaki said his company started working with Canopy, a Singapore-based wealth management software company working with many China-related funds, to help them localize in Japan. “We can be a gateway for their clients to invest in Japan,” he said.
Right now, Canopy says its system supports English, simplified and traditional Chinese and German. The company claims it works with more than 300 custodians with more than $160 billion in assets under reporting.

A ‘rational’ shift after the post-Covid rush

“Typically we deal with the professionals that help manage the money for the wealth owners,” said Mu Chen, executive director at Canopy. “What we are hearing from them is that the fastest growth in terms of interest from Chinese clients [occurred] in the post-Covid [period to] early last year.”
“In 2022, 2023, maybe it was more a reactionary behavior to think about going overseas,” he said. “I think now it becomes more rational and it’s more about these families, and these families planning not just their assets globally, but planning their assets, their business, their family globally using Hong Kong or Singapore as a base to look more outward.”
This interest in moving their wealth abroad to tap business opportunities comes as many Chinese companies have accelerated their global expansion in the last few years. That’s largely due to slower domestic growth, following years of rapid expansion.
That contrasts with how an earlier generation of Chinese entrepreneurs primarily tapped global markets by simply exporting China-made goods, or acquiring overseas real estate.
Noah Holdings’ Pan pointed out that many of the company’s affluent clients have set up offices and alternative residences in Hong Kong, Singapore or Japan as a way to explore global business opportunities while keeping proximity to China operations.
“Many entrepreneurs don’t have a very clear distinction between enterprise and family,” Pan said. “They get their wealth from operating such business and sometimes they inject capital back [to the family.]”
Affluent Chinese residents’ attempts to increasingly venture into global markets can also be witnessed in the demand for private, international travel.
“Whether it’s Southeast Asia, the Middle East, Africa, there’s been a lot of growth in these areas for Chinese conglomerates, so I think that the executives from China have a need to utilize [private] long-range aircraft … We see a lot of flights going there,” said Paul Desgrosseilliers, general manager at ExecuJet Haite General Aviation Services, which operates maintenance centers for private planes.
As part of a multi-year plan, ExecuJet Haite opened on Aug. 27 a maintenance, repair and operations center for private jets at Beijing Daxing International Airport. The center, which claims to be the largest for business aviation in Asia Pacific, can access a designated channel at the airport for international immigration processing and customs.

Tackling slower growth

Desgrosseilliers said international business jet flights across ExecuJet Haite’s other facilities at Beijing Capital Airport and in Tianjin have recovered, but not yet to pre-pandemic levels.
Major U.S. and Chinese corporations have also noted a slowdown in Chinese consumer demand in their second-quarter earnings.
The trend of affluent Chinese looking to expand their businesses globally is still in relatively early stages, and not every family will choose to go abroad, Canopy’s Chen said. He cited how a family of a seasoning products business in China, whose founder is getting older, didn’t feel the need to globalize their business or wealth planning.
“As the newer generations’ founders, entrepreneurs think more globally, they also think [about] their business more globally.” More

JPMorgan’s top economist Michael Feroli believes the Federal Reserve should cut interest rates by a half point this month.
Traders are pricing in a 39% chance that the Fed’s target range for the federal funds rate will be lowered by a half percentage point, per the CME FedWatch Tool.
Feroli’s remarks come as August saw the weakest private payrolls growth in more than three-and-a-half years.

Michael Feroli, chief U.S. economist of JPMorgan Securities, listens during a Bloomberg Television interview in New York on March 6, 2018.
Christopher Goodney | Bloomberg | Getty Images

The Federal Reserve should cut interest rates by 50 basis points at its September meeting, according to JPMorgan’s Michael Feroli.
“We think there’s a good case that they should get back to neutral as soon as possible,” the firm’s chief U.S. economist told CNBC’s “Squawk on the Street” on Thursday, adding that the high point of the central bank’s neutral policy setting is around 4%, or 150 basis points below where it is currently. “We think there’s a good case for hurrying up in their pace of rate cuts.”

According to the CME FedWatch Tool, traders are pricing in a 39% chance that the Fed’s target range for the federal funds rate will be lowered by a half percentage point to 4.75% to 5% from the current 5.25% to 5.50%. A quarter-percentage-point reduction to a range of 5% to 5.25% shows odds of about 61%.
“If you wait until inflation is already back to 2%, you’ve probably waited too long,” Feroli also said. “While inflation is still a little above target, unemployment is probably getting a little above what they think is consistent with full employment. Right now, you have risks to both employment and inflation, and you can always reverse course if it turns out that one of those risks is developing.”
His comments come as August marked the weakest month for private payrolls growth since January 2021. This follows the unemployment rate inching higher to 4.3% in July, triggering a recession indicator known as the Sahm Rule.
Even still, Feroli said he does not believe the economy is “unraveling.”
“If the economy were collapsing, I think you’d have an argument for going more than 50 at the next FOMC meeting,” the economist continued.
The Fed will make its decision about where rates are headed from here on Sept. 17-18.

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