China's Rebound Helps to Stabilize a Shattered World Economy [feedly]

China's Rebound Helps to Stabilize a Shattered World Economy
https://www.bloomberg.com/news/articles/2020-10-18/china-s-rebound-helps-to-stabilize-a-shattered-world-economy

China's recovery from the coronavirus slump continued in the third quarter and showed signs of broadening in September, keeping the economy on track to be the world's only major growth engine and validating Beijing's aggressive approach to controlling the pandemic.

Gross domestic product expanded 4.9% in the third quarter from a year ago, missing economists' forecast for a 5.5% expansion. Both retail sales and industrial production gained momentum in September, reassuring markets that the recovery is intact.

The numbers show China's early and fierce containment of the virus has set the economy up for a faster rebound than any of its peers. That's a rare positive for a global economy still clawing its way out of its worst slump since the Great Depression -- a revival further complicated by the resurgence of Covid-19 in Europe and the U.S.

"It's an encouraging and hopeful message for the rest of the world," said Rob Subbaraman, global head of macro research at Nomura Holdings Inc. in Singapore. "If you successfully handle the health crisis, your economy can recover."

Retail sales expanded 3.3% in September from a year earlier, industrial production grew 6.9% and investment growth accelerated to 0.8% in the nine months to the end of the quarter. Strong import growth in the third quarter may have dented the GDP number, even though it's broadly seen as a bullish sign for demand.

Read More:A Dive Into China's GDP Details Shows Recovery Broadening Out

Output expanded 0.7% in the year to date, meaning that the world's second-largest economy has now regained all the ground it lost in the early months of the year.

Markets were mixed on the news. The CSI 300 Index of stocks, which last week was within 1% of a five-year high, slipped 0.3% as of the mid-day break in Shanghai. The yuan was little changed near 6.7 per dollar, after briefly trading at its strongest in 18 months.

Underpinning the recovery has been the containment of the virus that has allowed factories to quickly reopen and capitalise on a global rush for medical equipment and work-from-home technology. That export strength was offset by a recent increase in imports, depressing the contribution of net trade to output growth.

"That should not be viewed negatively," said Liu Peiqian, China economist at Natwest Markets Plc in Singapore, because the strong import growth suggests the recovery in underlying economic growth is accelerating.

The improving picture has come with relatively restrained government borrowing and central bank easing compared to China's peers. Instead, the government has focused on targeted support for business and the central bank on keeping liquidity flowing; today's readings suggest there's no need to change tack.

What Bloomberg's Economists Say

"The data -- on balance -- suggest there is no urgency for the government to add fresh stimulus, though the window is not completely closed for a rate cut by year-end. The focus is still on targeted measures. Heading into next year, whether the tax measures are extended will shape the optimal mix of fiscal and monetary policy. In the event fiscal support is rolled back, more rate cuts are likely."

Click here to read the full report.

Chang Shu, chief Asia economist

Central bank Governor Yi Gang said Sunday that China has "pro-active fiscal policy" and "an acommodative monetary policy to support the economy."

"Right now, China has basically got Covid-19 under control," Yi said in a webinar organized by the Group of 30. "In general, the Chinese economy remains resilient with great potential. Continued recovery is anticipated which will benefit the global economy."

Yet the recovery isn't without its holes.

Even with the virus beaten back, shoppers have spent about 7% less in the first nine months of the year compared to the same period last year. Services sectors including tourism, education and travel are continuing to lag.

"The economy is not entirely back in its strongest shape," Helen Qiao, chief Greater China economist at Bank of America, told Bloomberg Television. "The services sector is not doing that well."

China Growth Accelerates, Broadening Recovery From Pandemic

Watch: China's economic recovery from the depths plunged during the Covid-19 pandemic continued.

(Source: Bloomberg)

It's also unclear how durable the recovery will prove to be given domestic pressures from unemployment and rising corporate and household debt. China Evergrande Group, the world's most indebted developer, has rattled investors amid fears for its financial health.

Much will also depend on how relations with the U.S. evolve after November's presidential election. Any worsening of trade frictions could throw a spanner in the export revival.

Analysis of International Monetary Fund data shows the proportion of worldwide growth coming from China is expected to increase from 26.8% in 2021 to 27.7% in 2025, according to Bloomberg calculations. The IMF says Chinese growth is virtually the only reason it expects global output to be 0.6% higher by the end of 2021 compared to the end of 2019.

Getting the economy quickly back on its feet is crucial to China's global ambitions. They were hammered home last week by President Xi Jinping during a tour of tech-hub Shenzhen, where he doubled down on calls to take the global lead in technology and other strategic industries.

Urging an "unswerving" commitment to technological innovation in a period of "changes unseen in a century," Xi again promoted a need to become more self reliant, a policy that is expected to be a central part of a new 5-year economic plan that will be discussed at a Communist Party gathering expected later this month.

Nearer term, the return in consumer confidence has set the economy up for a strong finish to the year, said Natwest's Liu. "GDP is on track to grow further into the fourth quarter."

— With assistance by Enda Curran, Lin Zhu, Miao Han, James Mayger, Tian Chen, Fran Wang, and Matt Turner

 -- via my feedly newsfeed

Bloomberg: Surging Imports Mask Strength of China's Economic Revival [feedly]

Surging Imports Mask Strength of China's Economic Revival
https://www.bloomberg.com/news/newsletters/2020-10-19/supply-chains-latest-imports-dent-china-s-gdp-revival

Sometimes a trade rebound can be a double-edged sword when it comes to gauging economic strength.

Take Monday's data dump showing China to be the only major economy in the world on a growth trajectory this year.

But drilling into the data, the numbers show that a surge in imports has acted as a counterweight against bumper exports. Gross domestic product expanded 4.9% in the third quarter from a year ago, missing economists' forecast for a 5.5% expansion.

That's partly because inbound shipments surged 13.2% in September from a year ago, depressing the net contribution of trade to the calculation of GDP. Net exports contributed only 0.6 percentage point to GDP's expansion in the third quarter, according to the National Bureau of Statistics.

That dynamic may not fade in the near term given that China's consumers are showing firm signs of resurgence — retail sales expanded 3.3% in September from a year earlier — while exports also stay strong.

Data last week showed that global demand for everything from hazmat suits to work-from-home technology has allowed China's products to win record global market share. That's a striking reversal from the first two months of the year, when China's exports contracted by 17.1%.

Francoise Huang, a senior economist for Asia-Pacific at Euler Hermes, calculates that out of the top 20 exporters in the world, China's total market share now stands at around 25% compared to an average of around 20% over the 2017-19 period.

With the U.S. election just weeks away, it's also worth reflecting how China has managed to build such a position of trade strength in the face of stiff U.S.-led protectionism. Such tensions probably help propel imports as technology firms stockpiled key components ahead of the imposition of sanctions.

The big questions now revolve around the sustainability of China's trade performance:

• Will the resurgent virus in the U.S. and Europe slow demand for Chinese goods?
• Will China's factories lose their competitive advantage as manufacturers in trading rivals get back on their feet?
• Or, will China remain as the standout economic performer among major peers due to its early and aggressive control of the coronavirus?

While the yuan's strength could act as a headwind, for now, the balance of issues looks like the trade revival can continue, according to Huang. "We expect Chinese exports to remain resilient in the coming quarters," she said.

—Enda Curran in Hong Kong

Charted Territory

Global trade is staying on a winning streak. The Port of Los Angeles has kept especially busy over the past two months, and all 10 gauges on the Bloomberg Trade Tracker have sustained "normal" status since early September.

Today's Must Reads

• Brexit mess | British officials are ready to water down Boris Johnson's lawbreaking Brexit legislation in a move that could revive failing trade deal talks with the European Union. Johnson has told the EU the U.K. intends to exit the bloc with a deal similar to Canada's or its setup with Australia — code for World Trade Organization terms.
• Pollution solution | Nearly 200 countries are nearing a legally binding agreement to reduce pollution from the world's cargo ships, a step forward after two years of talks on how the industry should clean up its emissions.
• WTO pitch | Nigeria's Ngozi Okonjo-Iweala, one of two candidates to lead the WTO, said she wants the body to overcome its problems so that it can create a level playing field for international commerce and see a return to a multilateral system.
• Equal measures | China passed a new law to restrict sensitive exports to protect national security, helping Beijing gain reciprocity against U.S. as tech tensions mount.
• Millwork slows | Nordic forestry companies are shuttering paper mills at an unprecedented pace as the Covid-19 pandemic accelerates a long-running decline in demand.
• Going local | Small companies are filling the vacuum for consumer goods as Iranians struggle to buy foreign brands, and "Made in Iran" has become a rare glimmer of hope for a nation cut off from the oil market and global trade while Covid-19 rages. 

 -- via my feedly newsfeed

Tim Taylor: Interview with Gary Hoover: Economics and Discrimination [feedly]

Gary Hoover's powerful testimony as an African American economist at the U of Alabama.

Interview with Gary Hoover: Economics and Discrimination
https://conversableeconomist.blogspot.com/2020/10/interview-with-gary-hoover-economics.html

The Southwest Economy publication of the Federal Reserve Bank of Dallas has published "A Conversation with Gary Hoover" (Third Quarter 2020, pp. 7-9). Here are some of Hoover's comments: 

On  his own career path: 

Although I have been successful in economics, it has not come without some amount of psychological trauma. When I arrived at the University of Alabama in 1998, the economics department had never hired a Black faculty member. Sadly, that is still the case at more economics departments than not. I would not call those initial years hostile, but they were not inviting either.

I stuck to my plan, which was to publish articles to the best of my ability and teach good classes. The pressures were there to mentor Black students, serve on countless committees to "diversify" things and be a role model. I took on the extra tasks but never lost track of my goal. I saw so many of my Black counterparts fall into the trap. They had outsized service burdens compared to their peers, which they took on with the encouragement of the administration. However, when promotion and tenure evaluation time arrived, they were dismissed for not "meeting the high standards of the unit."

On labor market impediments for black workers: 

The impediments begin for Blacks seeking employment from the very outset. Some research has shown that non-Black job applicants of equal ability receive 50 percent more callbacks than Blacks. To further amplify on the issue, some research has shown that Black males without criminal records receive the same rate of callbacks for interviews as white males just released from prison when applying for employment in the low-wage job market.

With such handicaps existing from the start, it is no surprise that a wage gap exists. Some estimates show that gap to be as large as 28 percent on average and as large as 34 percent for those earning in the highest end (95th percentile) of the wage distribution. ,,, 

Employers want workers who are trainable and present. Black workers, who have been poorly trained or suffer inferior health outcomes, will suffer disproportionately. In addition, the impacts of the criminal justice system cannot be overlooked. Some recent research has shown that for the birth cohort born between 1980 and 1984, the likelihood of incarceration transition for Blacks was 2.4 times greater than for their white counterparts. Given this outsized risk of incarceration, the prospects of long-term unemployment are dramatically increased.

On whether "the economy will evolve quickly enough to ensure the success and prosperity of minority groups":

I think that I must be optimistic about the future. What employers are yet to realize, but will have to come to grips with, is that successful market outcomes for minority groups mean success for them also. By that I mean, this is not a zero-sum game where one group will only improve at the expense of the other. In fact, history has shown us the opposite. Once minorities are fully utilized and integrated in the labor force, the economy as a whole will enjoy a different type of prosperity than has ever been experienced in the U.S. Once again, we must remember the introductory idea we teach to our college freshmen about the circular flow of the economy in that those fully engaged minority employees become fully engaged consumers.

For more on Hoover's thoughts about racial and ethnic diversity in the economic profession, a useful starting point is his co-authored article in the Summer 2020 issue of JEP, written with Amanda Bayer and Ebonya Washington. "How You Can Work to Increase the Presence and Improve the Experience of Black, Latinx, and Native American People in the Economics Profession" (Journal of Economic Perspectives, 34: 3, pp. 193-219).

For an overview of how economists seek to understand discrimination in theoretical and empirical terms, and how the views of economists differ from sociologists, a useful starting point is the two-paper
symposium on "Perspcctives on Racial Discrimination" in the Spring 2020 issue of JEP: 

• "Sociological Perspectives on Racial Discrimination," by Mario L. Small and Devah Pager
• "Race Discrimination: An Economic Perspective," by Kevin Lang and Ariella Kahn-Lang Spitzer

 -- via my feedly newsfeed

PK: How the G.O.P. Can Still Wreck America [feedly]

How the G.O.P. Can Still Wreck America
https://www.nytimes.com/2020/10/15/opinion/election-trump-republicans.html

After 2016, nobody will or should take anything for granted, but at this point Joe Biden is strongly favored to beat Donald Trump, quite possibly by a landslide. However, Trump's party may still be in a position to inflict enormous damage on America and the world over the next few years.

For one thing, while Democrats are also favored to take control of the Senate, the odds aren't nearly as high as they are in the presidential race. Why? Because the Senate, which gives the average voter in Wyoming 70 times as much weight as the average voter in California, is a deeply unrepresentative body.

And it looks as if a president who is probably about to become a lame duck — and who lost the popular vote even in 2016 — together with a Senate that represents a minority of the American people are about to install a right-wing supermajority on the Supreme Court.

If you want a preview of how badly this can go, look at what's happening in Wisconsin.

In 2018, Wisconsin voters elected a Democratic governor. A strong majority — 53 percent — also voted for Democratic legislators. But given the way the state's districts are drawn, Democrats ended up with only 36 out of 99 seats in the State Assembly. And Wisconsin's elected judiciary is also dominated by Republicans.

ADVERTISEMENT

Continue reading the main story

You probably won't be surprised to hear that the Wisconsin G.O.P. has tried to use its remaining power to undermine Gov. Tony Evers. What you may not know is that this power grab is now turning lethal.

You see, Wisconsin is experiencing a frightening coronavirus surge, which looks on track to match the wave that hit Arizona in the summer. Arizona eventually contained that surge with mask mandates, bar closures and limits on indoor gatherings. But Wisconsin's Republican legislature has obstructed Evers's attempts to get control of the pandemic. And on Wednesday a Republican judge blocked an order limiting the number of people who can gather in bars and other public places.

In Wisconsin, then, a party rejected by the voters is nonetheless managing to inflict immense damage, probably including hundreds of unnecessary deaths. And something similar but far worse could all too easily play out on a national level.

First of all, while Trump has very little chance of winning the popular vote, he might still eke out an Electoral College victory. If he does, it could be the end of American democracy.

A more likely outcome is that Trump loses but Republicans hold the Senate. In that case, we know exactly what will happen: fiscal sabotage on a grand scale. That is, the G.O.P., which has been completely indifferent to budget deficits under Trump, will suddenly rediscover the evils of government debt and block every effort by a Biden administration to sustain the economy and living standards in the face of a pandemic.

Editors' Picks

In England, Confusion Over Virus Rules That Change by the Day

In Trying Times, 20 Wines Under $20 That Revive and Restore

How the Most Socially Progressive Pro League Got That Way

Continue reading the main story

ADVERTISEMENT

Continue reading the main story

And even if Democrats take both the Senate and the White House, they're now almost certain to face a 6-3 Supreme Court — that is, a court dominated by appointees of an increasingly extremist party that has only won the popular vote for president once in the past three decades.

In the hearings for Amy Coney Barrett, Democrats have, rightly and understandably, hammered on the possibility that such a court would use transparently spurious arguments to overturn the Affordable Care Act, causing tens of millions of Americans to lose health insurance coverage. Roe v. Wade is also in obvious danger.

But I'd argue that the biggest threat this court will pose is to environmental policy.

Put it this way: Charles Koch is reportedly investing millions trying to get Barrett confirmed. That's not because he's passionately opposed to abortion rights, or, probably, even because he wants the A.C.A. overturned. What he's looking for, surely, is a court that will block government regulation of business — and above all a court that will hamstring a Biden administration's efforts to take action against climate change.

Sure enough, during her hearing, Barrett, asked about climate change, uttered the dreaded words, "I'm certainly not a scientist." At this point everyone knows what that means. It's not an expression of humility; it's a signal that the speaker intends to ignore the science and to oppose any attempt to avert the biggest threat facing humanity.

It's hard to overstate just how dangerous it will be if the power of the Supreme Court ends up being used to undermine environmental protection. Biden has made it clear that climate action will be at the core of his economic agenda. And this action would come not a moment too soon. We're already starting to see the effects of global warming in the form of fires and floods, and if we waste the next few years it will probably be too late to avoid catastrophe.

In other words, if a G.O.P.-stacked Supreme Court blocks effective climate policy, it won't just be an outrage, it will be a disaster, for America and the world. So that can't be allowed to happen. Never mind all the talk about norms (which only seem to apply to Democrats, anyway.) What's at stake here could be the future of civilization.

 -- via my feedly newsfeed