The global economy was full of surprises in 2023. Despite the sharp rise in interest rates, the US successfully avoided a recession, and major emerging markets did not spiral into a debt crisis. Even Japan’s geriatric economy exhibited stunning vitality. By contrast, the EU fell behind, as its German growth engine sputtered after China’s four-decade era of hypergrowth abruptly ended. Looking ahead to 2024, several questions loom large. What will happen to long-term inflation-adjusted interest rates? Can China avoid a more dramatic slowdown, given the turmoil in its real estate…
Tag: Global economy
China’s many systemic problems dominate its outlook for 2024 | George Magnus
There were contrasting reactions when the US rating agency Moody’s downgraded China’s A1 credit rating outlook from stable to negative last month. Financial markets, focused on the economy, paid it barely any attention. Chinese state media, looking at the politics, saw red. Global Times called it “biased and unprofessional”. A few days later, the Ministry of State Security issued a statement stipulating that the only purpose of “negative talk” was to doubt or deny China’s socialist system, and to contain its development. The Chinese Communist party’s prickly attitude to criticism…
EU expected to issue veiled warning to China over supply of cut-cost goods
The EU is to tell China that its €400bn (£343bn) trade deficit is not sustainable long term amid fears that it will flood the bloc with subsidised electric cars, solar panels and medical devices, threatening European manufacturing and jobs. Ursula von der Leyen, the European Commission chief, and Charles Michel, the European Council president, will meet Xi Jinping at a summit on Thursday, the second of its kind this year. They are expected to issue the Chinese president with a veiled warning that unless China does something about the supply…
Moody’s cuts China credit outlook to negative as economy slows
China’s ability to repay its government borrowing has been downgraded by the credit rating agency Moody’s, which said the ripple effects from a crisis in the property sector would undermine efforts to revive its flagging economy. Moody’s warned that Beijing would need to bail out local and regional governments and state-owned enterprises that were struggling with rising debts, hampering efforts to boost investment and growth. The rating agency downgraded its outlook for Chinese sovereign bonds from stable to negative on Tuesday, sending a signal to potential lenders that the risk…
China launches tax investigations into Apple iPhone maker Foxconn
China’s tax authorities have launched multiple investigations into the company that makes the iPhone, months after its billionaire founder announced he would run in Taiwan’s presidential elections. Foxconn faces tax audits of its operations in China, as well as investigations into land use in two Chinese provinces, according to reports by local media. The investigations, which were confirmed by the Taiwan-based manufacturer but have not been officially announced by any of China’s government departments, are thought to be politically motivated. Foxconn’s founder, Terry Gou, announced in August he would run…
Global economic fears deepen as service sector dips in China and Europe
Fears about the health of the global economy have intensified following downbeat news about service sector activity in China, the eurozone and the UK. Share prices fell in Asia and the pound dropped to a 12-week low against the US dollar after fresh signs of weakness in China triggered speculation that its post-lockdown recovery was running out of steam. Meanwhile, there were signs the steady rise in interest rates is leading to weaker service sector activity in both the UK and the 20-country eurozone. Markets were particularly rattled by news…
UK solar could be ‘dumping ground’ for products of Chinese forced labour, ministers warned
The UK risks becoming a dumping ground for the products of forced labour from Xinjiang province in China if it rejects reforms by members of the foreign affairs select committee with cross-party support, ministers have been warned. An amendment to the energy bill, due to be debated on Tuesday, would require solar energy companies to prove their supply chains are free of slave labour. The Xinjiang region is the source of 35-40% of the world’s solar-grade polysilicon, the key raw material in the solar photovoltaic supply chain. The amendment to…
A US growth-inflation ‘soft landing’ is vital to solving the global economy puzzle | Mohamed El-Erian
The global economy this year is full of puzzling surprises. Japan’s GDP growth is currently surpassing that of China, and July retail sales in the US were double the consensus forecast, despite the US Federal Reserve pursuing one of the most concentrated rate-hiking cycles in decades. In the UK, wage growth has risen to an annualised rate of 7.8% and core inflation has remained high, even after 14 consecutive rate increases by the Bank of England (with more to come). Meanwhile, Brazil and Chile have cut interest rates, diverging from…
China is too big for a Soviet Union-style collapse, but it’s on shaky ground
China’s economy is going through a rough patch. Growth is slowing and its property bubble has well and truly burst. Unemployment is rising. So what, you might say? Every country has difficult periods when past excesses catch up with it. Eventually the economic cycle turns and recovery begins. China is the world’s second biggest economy and has grown at a stupendous pace over the past four decades. It plays a pivotal role in the global economy and has invested heavily in advanced manufacturing and AI. Sure, it has problems but…
In previous downturns the world turned to China as an engine of growth – this time that driver may not be there
When Australia’s central bank released its quarterly economic update last week, China’s “uncertain” economic outlook topped a list of domestic worries for Australia. The International Monetary Fund too singled out China in its latest world economic outlook as among the “downside” tilts to its balance of risks. The recovery of the world’s second-biggest economy from the Covid pandemic was faltering, “with cross-border spillovers” likely if it slowed, the IMF said. Wednesday brought further confirmation of China’s disappointing performance as the economy slipped into deflation for the first time since late…