Pre-commercialization actions: the Chinese economy is the envy of the world

The pace of growth has been a little slower than economists expected. But there were many signs of strength, with the services and construction sectors performing particularly well.

The Chinese economy has now recovered from its historically bad first quarter, when the coronavirus forced the country to shut down. GDP grew 0.7% in the first nine months of 2020, the data shows.

“The Chinese economy continued its rapid rebound in the last quarter, the recovery widening and becoming less dependent on investment incentives,” said Julian Evans-Pritchard, senior Chinese economist for Capital Economics.

Growth below 5% would normally be a real cause for concern in China, used to much faster expansion. But that’s pretty good given the circumstances, and even more remarkable compared to the extremely fragile recoveries underway in most other major economies.

The big picture: The International Monetary Fund expects China’s economy to grow by 1.9% in 2020. This compares to contractions of 5.8% in the United States and 8.3% in the 19 countries that use the euro.

Benefits of control: How Beijing handled the initial coronavirus outbreak late last year has been criticized by some western politicians. But China’s strict lockdown and population tracking policies have helped bring the virus under control within its borders. The country has also set aside hundreds of billions of dollars for major infrastructure projects to spur economic growth. The central bank has also done its part.

The virus control plan has proven difficult to replicate for other countries, especially in places where leaders do not exercise the same level of control over their populations as Beijing.

Europe and the United States are now facing a new wave of coronavirus cases. Paris has imposed a nighttime curfew. In London, people from different households are prohibited from meeting indoors. The United States averages over 55,000 new cases a day – up more than 60% from a low in mid-September, and just about every state is heading in the wrong direction.

And after: The United States is unlikely to be heading for a nationwide lockdown anytime soon, but its economy will remain crippled until there is a dramatic reduction in the number of coronavirus cases.

China, meanwhile, will continue to dominate. Economic data for September indicated that the country’s recovery is gaining even more strength. The figures for industrial production and retail sales were particularly strong.

“We believe growth will continue to accelerate in the near term,” said Evans-Pritchard. “Fiscal policy should remain favorable at least until early next year, which should keep activity in industry and construction going. At the same time, tighter labor market conditions and improved consumer confidence mean the recovery in consumer activity and services Course. “

Look even further: The International Monetary Fund predicts that the Chinese economy will grow by 8.2% in 2021, a much faster pace than that of the United States or the euro zone.

Alibaba sees an opportunity

Ali Baba (BABA) took a majority stake in one of the main supermarket chains in China as he tries to push back rival JD.com in the rapidly growing online grocery industry, my colleague Sherisse Pham reports.

Alibaba is spending 28 billion Hong Kong dollars ($ 3.6 billion) to increase its stake in Sun Art Retail Group from 36% to 72%, the company said in a statement on Monday. Alibaba will then make a general offer to shareholders to buy out the rest of the retail company.

The news pushed Sun Art shares up nearly 20% in Hong Kong. Alibaba’s listed shares in Hong Kong rose about 1%.

Alibaba is in a fierce battle with JD.com for China’s online food market. The e-commerce giants both use a mix of physical supermarkets and online platforms to gain buyers.

The game: The Sun Art Agreements signal that Alibaba is pushing for the “accelerated digitization” of Chinese consumers after the pandemic, according to Jefferies analyst Thomas Chong. Sun Art operates nearly 500 hypermarkets and supermarkets across China.

Alibaba “has highlighted digitization as the greatest opportunity to change the way people live and work”, and is seeking “opportunities in traditional retail” by solving issues such as scalability and sustainability, Chong said.

And after: Ant Group, a jewel in the empire of Alibaba co-founder Jack Ma, is preparing to go public in what may be the largest IPO in history.

Ant Group is one of the world’s largest technology companies and the largest online payment platform in China. The app has established its presence in all aspects of financial life in China, from investment accounts and micro-savings products to insurance, credit scores and even dating profiles.

The company has obtained key approval from the China Securities Regulatory Commission for listing in Hong Kong, Bloomberg reported on Monday. The IPO is expected to include a listing in Shanghai.

US debt has not been this high since World War II

The amount of money the United States owes investors reached record levels in more than one way, reports my colleague Jeanne Sahadi.

The annual deficit and total debt accumulated over the years have reached levels not seen since World War II.

Last week, the US Treasury announced that for fiscal 2020, which ended September 30, the US deficit reached $ 3.13 trillion. As a proportion of the economy, the 2020 deficit is more than three times what the 2019 annual deficit was.

After surpassing $ 21 trillion, the country’s total debt to investors is now estimated to have exceeded the size of the economy, reaching nearly 102% of GDP, according to calculations by the Committee for a Responsible Federal Budget. Debt has not been so high since 1946, when it reached 106% of GDP.

Extraordinary hours: With millions of Americans still out of work and struggling to get by, the country’s growing debt is understandably not anyone’s number one concern right now. Even the deficit hawks are urging a dysfunctional Washington and a chaotic White House to approve another much-needed trillion-dollar stimulus package.

Big picture: The problem with debt levels this high going forward is that they will increasingly limit what the government can do to meet the country’s needs.

“There is no defined tipping point at which a budget crisis becomes likely or imminent, nor an identifiable point at which interest charges as a percentage of GDP become unsustainable,” the director of the Congressional Budget Office said last month. , Phillip Swagel. “But as the debt grows, the risks get greater.”

Following

Halliburton and Philips will release their latest quarterly results ahead of the bell.

Also today :

  • IBM and PPG Industries report after closing.
  • The NAHB Housing Market Index for October is released at 10 a.m. ET.


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