Chinese Economy Grows Slower Than Expected in Q2 2024
China’s economy grew at a slower pace than economists had anticipated in the second quarter of 2024. The world’s second-largest economy continues to grapple with trade tensions with the US and Europe. The United States and the European Union are trying to restrict China’s access to critical technologies to protect their markets from cheap, subsidized Chinese goods. These countries have imposed high import tariffs on China, which is slowing the country’s economic growth. Additionally, Chinese consumers are spending less. Retail sales in China increased by only 2 percent last month, marking the smallest growth since December 2022. In May, sales had risen by 3.7 percent. The Chinese government previously implemented measures to boost consumer confidence, but these have had little impact so far. “Domestic demand remains insufficient,” stated the Chinese National Bureau of Statistics (NBS). The debt crisis in the real estate market is also hindering China’s economy. Home sales have been declining for three years, leaving large numbers of properties vacant in many cities. The Chinese population cannot afford them. The government has taken several measures to address this issue. Earlier this year, they announced plans to buy homes and sell them at lower prices. However, this plan has yet to yield significant results. Economists had predicted a growth rate of 5.1 percent, but the Chinese economy grew by only 4.7 percent in the second quarter, according to the NBS. This is the lowest growth rate since early 2023. In the first quarter, the economy had grown by 5.3 percent.
France’s Budget Deficit Set to Surge, Central Bank President Warns
France’s budget deficit is expected to increase significantly in the coming years, prompting the government to tighten its belt, warned the president of the French central bank. François Villeroy de Galhau expressed his concerns in an interview with the French radio station Franceinfo, citing the results of the parliamentary elections as a particular worry. The victorious left-wing alliance is expected to substantially increase public spending. This increased spending could further inflate the budget deficit. Last year, France’s deficit was already 5.5 percent of its gross domestic product (GDP), which represents the total value of goods and services produced in the country. This year, the deficit is projected to be 5 percent, with potential for further increase. According to European Union regulations, member states are required to limit their budget deficits to a maximum of 3 percent of GDP. Bloomberg reports that France would need to cut spending by 15 billion euros annually in the coming years to comply with EU guidelines. This estimate is based on correspondence between the French government and the European Commission. Villeroy de Galhau also expressed doubts about the left-wing alliance’s plans to raise corporate taxes, increase the minimum wage, and lower the retirement age, arguing that these measures could harm France’s competitive position. Earlier, major credit rating agencies such as Moody’s and S&P Global had already voiced concerns about the impact of the election results on France’s public finances.
U.S. Inflation Drops to 3 Percent in June, Lower Than Previous Month
Inflation in the United States reached 3 percent in June, a notable decrease from May’s rate of 3.3 percent. This indicates a significant slowdown in the rate at which prices are increasing compared to a year earlier. The drop in inflation also includes a reduction in core inflation, which excludes the more volatile prices of energy and food. This core measure is often considered a better indicator of underlying inflation trends. In addition to the year-over-year decrease, consumer prices on a month-to-month basis also showed a decline. In June, consumer prices were 0.1 percent lower than in May. This monthly drop is particularly significant as it marks the first decline in consumer prices since the beginning of the COVID-19 pandemic, indicating a potential shift in inflationary pressures. The Federal Reserve, similar to the European Central Bank (ECB), has a target inflation rate of around 2 percent. To achieve this goal and curb inflation, the Federal Reserve has implemented a series of interest rate hikes over the past few years. Higher interest rates make borrowing more expensive, which tends to reduce spending by both consumers and businesses. This decrease in spending helps to limit price increases, thus keeping inflation in check. Since the summer of 2023, the Federal Reserve’s interest rate has been at its highest level since 2001. This prolonged period of high rates reflects the central bank’s aggressive stance on controlling inflation. Despite the ECB’s decision to implement its first rate cut in five years in early June, the Federal Reserve has opted to maintain its current rate levels. This cautious approach suggests that the Fed is waiting for more consistent evidence of sustained lower inflation before considering a rate cut. The recent trends in inflation and consumer prices provide mixed signals about the future economic outlook. On one hand, the decline in inflation and the first monthly drop in prices in years could indicate that the Federal Reserve’s measures are beginning to take effect. On the other hand, the ongoing high interest rates may continue to pose challenges for economic growth, as higher borrowing costs can dampen investment and consumer spending. Overall, the reduction in inflation to 3 percent in June, along with the first monthly decrease in consumer prices since the pandemic began, marks a potentially pivotal moment in the U.S. economic recovery. However, the path forward remains uncertain as the Federal Reserve continues to navigate the complex landscape of post-pandemic economic dynamics.
EU Implements Import Duties on Chinese Electric Cars to Curb Unfair Competition
The European Union is set to enforce high import duties on Chinese electric vehicles starting this Friday, as announced by the European Commission on Thursday. The new tariffs aim to address the issue of unfair competition from China, which heavily subsidizes its domestic manufacturers. The punitive tariffs will see a 17.4 percent duty imposed on cars from BYD, a major sponsor of the European Football Championship. Geely vehicles will face a 19.9 percent surcharge, while SAIC cars will incur a substantial 37.6 percent levy. For other Chinese manufacturers, the EU will impose a 20.8 percent duty, which could escalate to 37.6 percent in cases of non-compliance. These rates are slightly lower than initially proposed. However, these measures are provisional and will be lifted if Brussels and Beijing reach an agreement within the next four months. Should the European Commission determine that China has not made sufficient improvements, these tariffs will be enforced for a five-year period. The commission, which oversees EU trade, launched an investigation in September into Chinese-made electric vehicles. The inquiry concluded that these vehicles benefit from unfair government subsidies, allowing them to be sold at prices up to 20 percent lower than their European counterparts. This price advantage has made it difficult for European manufacturers to compete. Last year, Europe saw a surge of low-cost electric cars from China, intensifying price competition and resulting in significant market share losses for many European carmakers. The new tariffs are a strategic response to protect the European automotive industry from this aggressive pricing strategy.
Shein Secretly Files for IPO in London, Valued at £50 Billion
Shein, the Chinese-origin online retailer, has quietly filed documents for an initial public offering (IPO) in London, according to anonymous sources cited by Reuters. Although the IPO has been anticipated for some time, an official announcement has yet to be made. Bloomberg reported earlier this month that Shein, which is officially headquartered in Singapore, could be valued at approximately £50 billion with this public offering. The move to list in London is significant for both Shein and the London Stock Exchange (LSE). For Shein, the IPO represents a major milestone in its rapid growth trajectory, potentially providing substantial capital to further expand its global operations. The company’s valuation, estimated at £50 billion, underscores its position as a leading player in the fast-fashion e-commerce sector, competing with giants like Zara and H&M. For London, the IPO is a much-needed boost. The LSE has struggled to attract high-profile listings in recent years, with a notable number of companies choosing to list in New York instead. This trend has resulted in a decline in the market value of the London Stock Exchange. The listing of a major company like Shein could help reverse this trend, bringing significant trading activity and investor interest back to London. The timing of Shein’s IPO also aligns with broader market dynamics. Despite global economic uncertainties, there has been a resurgence in IPO activity, particularly in Europe. However, London has been largely bypassed in this wave of new listings. Securing Shein’s IPO could signal a turnaround for the LSE, demonstrating its ability to attract high-growth, international companies. Shein’s choice of London for its IPO is also notable given the regulatory and market challenges in its home country. By listing outside of China, Shein may be seeking to mitigate some of the risks associated with the increasingly stringent regulatory environment for Chinese companies. Additionally, London offers a stable and mature financial market, which could provide a favorable environment for Shein’s continued growth.
US Increases Import Tariffs on Various Chinese Goods
The United States is raising import tariffs on numerous Chinese goods, particularly targeting strategic sectors such as electric cars, chips, batteries, steel, and key minerals. The measures aim to compel China to cease unfair trade practices. Of particular note is the tariff hike on imported electric cars from China, which will quadruple to 100 percent this year. The tariff on Chinese semiconductors will increase from 25 to 50 percent next year. In addition to tariffs on electric cars and chips, the US government will triple import duties on certain steel and aluminum products, as well as on batteries and battery components for electric vehicles. The tariff on graphite and some other key minerals will rise from 0 to 25 percent, and the tariff on solar cells will double from 25 to 50 percent. The Chinese Ministry of Foreign Affairs has stated that the country will oppose unilateral tariff increases, arguing that they violate World Trade Organization (WTO) rules. In recent months, the European Union has also threatened to impose new tariffs on electric cars from China, accusing Beijing of providing illegal government support to the sector to artificially keep prices low.
ECB’s First Interest Rate Cut in Five Years Likely in June
The first interest rate cut by the ECB in five years appears imminent, according to meeting documents from European central bankers. If European inflation continues on its path towards 2 percent, the interest rate could be lowered in June. Minutes from the ECB’s latest interest rate meeting in April were made public on Friday. This board comprises central bankers from all eurozone countries. In April, following that meeting, the ECB kept the interest rate unchanged at 4 percent, its highest level ever. The ECB interest rate is crucial as it affects lending and saving rates at European banks. Lower rates mean cheaper borrowing, while savings rates may not rise further. Preceding the latest interest rate decision, meeting documents indicated that it’s likely the board could decide on a rate cut in June, especially if European inflation continues to decline towards 2 percent by 2025. Notably, some members of the ECB board were already in favor of a rate cut in April, although it didn’t materialize then. Economists, analysts, and investors have been anticipating this move for some time, expecting it to happen in June. However, whether the ECB will indeed take this step remains uncertain.
Tech Titans Achieve Record-Breaking Profits in First Quarter Amid Cloud Dominance
In a display of their formidable financial strength and resilience, the first quarter of this year witnessed Meta, Alphabet, and Microsoft soaring to unprecedented levels of profitability, solidifying their positions as leading forces in the tech industry. Each company reported staggering profits, showcasing their ability to navigate complex market dynamics and capitalize on emerging opportunities. Meta, the parent company of Facebook, led the charge with an astounding net profit of €11.5 billion, representing a remarkable increase of over 100% compared to the same period last year. This surge in profits underscores Meta’s ability to leverage its vast user base and advertising ecosystem to drive revenue growth, despite facing challenges such as increased scrutiny over privacy practices and regulatory changes. Similarly, Microsoft demonstrated its robust performance, with earnings surging by nearly 20% to reach an impressive €20.4 billion. This substantial growth in profitability highlights Microsoft’s diverse portfolio of products and services, including its cloud computing platform Azure, which has emerged as a key revenue driver for the company. Meanwhile, Alphabet, the parent company of Google, experienced an even more remarkable surge in profits, with earnings skyrocketing by over 57% to a staggering €22 billion. Alphabet’s dominance in the digital advertising space, coupled with the continued success of its cloud computing division, underscores the company’s ability to capitalize on the growing demand for online services and solutions. The substantial growth in profits for Meta, Alphabet, and Microsoft can largely be attributed to the robust performance of their cloud services divisions. Both Google and Microsoft have seen significant contributions to their bottom lines from their respective cloud offerings, as businesses and consumers increasingly rely on cloud-based solutions for storage, computing, and productivity needs. Furthermore, with Amazon, another major player in the cloud computing arena, set to release its quarterly earnings next week, anticipation is high for further insights into the financial performance of the cloud industry as a whole. Amazon’s results will likely provide additional context to the ongoing narrative of the cloud’s pivotal role in driving profitability for tech giants. As these companies continue to navigate the complexities of the digital economy and pursue new avenues for growth, their record-breaking profits serve as a testament to their ability to innovate, adapt, and thrive in an ever-changing landscape. The enduring significance of cloud services as a key revenue driver underscores the importance of strategic investments, technological advancements, and forward-thinking strategies in the competitive tech landscape.
Global Wine Consumption Hits 27-Year Low in 2023 Due to Rising Prices
The amount of wine consumed internationally reached its lowest level in 27 years in 2023, according to the International Organisation of Vine and Wine (OIV). The organisation attributes this decline to the increased price of wine. Based in Paris, the OIV estimates that 221 million hectoliters of wine were consumed last year, which is 2.6 percent less than in 2022. A hectoliter is 100 liters, roughly equivalent to 133 standard wine bottles. The OIV cites several reasons for the price hike of wine, including disruptions in global supply chains and higher production and distribution costs. The organisation also anticipates that production in 2023 will be lower than previously estimated. The OIV now expects 237 hectoliters of wine, compared to a November estimate of 244 million hectoliters. This places wine production significantly lower than in 2022. The downward revision is due in part to adverse weather conditions last year, including early frost, heavy rainfall, and drought. Global fungal diseases also had an impact. Italy experienced a staggering 23 percent decrease in wine production compared to 2022, marking its worst year since 1950. France also saw a decline in sales last year.
Founder of Binance Faces Three-Year Prison Sentence for Money Laundering Violations
In a significant development in the world of cryptocurrency, American prosecutors are advocating for a three-year prison sentence for Changpeng Zhao, the renowned founder of Binance, widely recognized as the largest digital currency trading platform globally. Zhao, often referred to by his nickname ‘CZ’, has long been a prominent figure in the crypto industry. The charges against Zhao stem from alleged violations of anti-money laundering regulations. Prosecutors assert that he neglected to report over 100,000 suspicious transactions to authorities, raising concerns about the platform’s role in facilitating illicit activities. Among these transactions are those associated with notorious organizations such as Al Qaeda, ISIS, and Hamas, as well as instances where hackers exploited the platform to receive ransom payments in cryptocurrencies. Shockingly, investigations have also uncovered links to transactions involving the despicable trade of child pornography. Zhao’s impending sentencing, scheduled for next week, marks a pivotal moment in his legal battle. Having previously admitted guilt, Zhao has initiated steps to bring closure to the protracted investigation into Binance’s operations. As part of his acknowledgment of wrongdoing, Zhao has agreed to pay a substantial fine totaling approximately 46.7 million euros. Moreover, in a separate agreement, Binance is obligated to pay a staggering fine exceeding 4 billion euros, underscoring the gravity of the allegations against the platform. This settlement, reached through negotiations between federal prosecutors and the company, also mandates a stringent five-year period of oversight by an independent regulatory body. This oversight mechanism aims to ensure Binance’s compliance with regulatory standards and prevent future breaches of anti-money laundering protocols. The outcome of Zhao’s sentencing and the repercussions for Binance are anticipated to have far-reaching implications within the cryptocurrency industry. As regulatory scrutiny intensifies and authorities crack down on illicit activities in the digital asset space, this case serves as a stark reminder of the importance of robust compliance measures and ethical conduct in the burgeoning realm of cryptocurrency trading.