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What does falling consumption mean for the Chinese economy?



What does falling consumption mean for the Chinese economy?

Deflation fears are imposing themselves on the Chinese economy

While central banks in developed countries struggle to combat rising inflation, China faces the opposite problem: The world’s second-largest economy is at risk of slipping into deflation.

For China, consumer prices last week were flat from a year ago in June, while producer prices fell at their fastest pace since 2016.

This compares with the US inflation rate, which fell to 3 percent (compared to 4 percent in May) from 9.1 percent in June last year (the highest in four decades at the time).

According to an analytical report published by the British “Financial Times” newspaper, after the war in Ukraine, developed economies were hit hard by a sharp rise in energy and food prices, while energy price controls in China protected them from the worst. Up and Down.

But the country is now at risk of contraction due to weak consumer demand and private investment as the economy emerges from strict restrictions against the Covid-19 virus.

China’s economy.. data defies expectations and confuses markets

The British newspaper report analyzes the policies that China has been following since 2020 and the details of the policies that have led to the current situation. and fiscal policy, as follows:

  • In 2020, the government issued 1 trillion yuan ($140 billion) in bonds, ran a fiscal deficit of 3.6 percent of GDP and cut interest rates by 30 basis points.
  • In 2022, it channeled another 1.4 trillion yuan in “quasi-fiscal financing” through state-owned banks, according to Citi Research. Local government bond issuances were also allowed to increase, and interest rates were cut by another 20 basis points.
  • Beijing’s fiscal stimulus is focused on infrastructure and corporate spending, tax cuts, cuts in mandatory social security payments on wages and other measures aimed at stemming job losses.

In contrast, the United States has introduced a very large fiscal and monetary stimulus program, reducing the reward in direct payments and unemployment benefits to American consumers. The US and other Western countries also suffered from supply disruptions as people left the workforce and supply chains were disrupted.

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In China, supply chain problems were minimal. Chinese citizens are confined to their homes for long periods of time and their businesses are closed, leading to increased unemployment and severe damage to family budgets. The real estate slump also affected commodity prices, leading to lower producer price inflation.

Chinese policies during and after the pandemic

At the same time, many local governments have emerged from debt contagion. The private sector had overcapacity, weak consumer demand and a reluctance to invest.

Dr. Samar Adel, an international economic analyst, comments in an exclusive report to the “Sky News Arabia Economy” website: “The policies adopted by China during the Corona pandemic and the strict “Zero Covid” restrictions since then are negative. The impact on the dynamics of economic activity, after the Ukraine war affected supply chains and trade, taxed the Chinese economy at a time when Beijing relied mainly on a high export base to drive manufacturing and economic activity. These factors are combined.

He added to these factors the continuing effects of US-Chinese escalation (the trade war between Washington and Beijing), despite the positive messages sent by US officials, the latest of which was US Treasury Secretary Janet Yellen, during her visit. China, President Joe Biden is shaking up more restrictions (. .) and this is reflected in many areas, including the problems the Chinese economy is facing in the technology sector against the backdrop of pressures emanating from the US and the West. and affecting economic activity.

According to the aforementioned data and policies, the international economist points to a slowdown in consumption in China based on rising consumer concerns and reduced spending, in light of the pressures facing Beijing in the past three years from 2020. , which puts pressure on the economy and threatens financial contraction.

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A risk for Chinese policymakers is if the deflationary trend stabilizes in consumer and business expectations. As a result, companies will curb investment as profits dry up, while consumers will spend less as they worry about their job security and further declines in property prices, according to a British newspaper report.

Crisis in real estate sector

The same report notes that there is evidence that the real estate sector – after stabilizing at the beginning of the year – is again on a downward path (..).

In this context, Adel pointed out in an interview with Sky News Arabia that the real estate sector crisis that Beijing faced a few years ago and real estate assets, although one of the pillars of the Chinese economy, is still a shadow. On the scene, because many companies exited with huge debts when the crisis hit, and developers were hit hard, it caused a shock to the Chinese economy, the effects of which are still there.

Returning to the Financial Times report, analysts cited their estimates regarding:

  • Possible further weakness in consumer prices.
  • Inflation is expected to pick up slightly in the coming months due to lower base effect (year-on-year inflation).
  • “Further easing of housing and infrastructure-related policy will be critical to stabilizing aggregate demand,” Morgan Stanley analysts wrote in a research note.

Economic data

The latest official data showed China’s economy grew at a slower pace in the second quarter, although the overall pace fell quickly due to weak demand at home and abroad, and the annual figure was encouraging due to underlying stimulus.

According to data released by the National Bureau of Statistics, China’s gross domestic product grew just 0.8 percent in the April-June period, compared with a 0.5 percent increase from the previous quarter, compared with analysts’ expectations in a Reuters poll. This compares to the 2.2 percent growth recorded in the first quarter of this year.

  • GDP in the second quarter was 6.3 percent year-on-year (expectations were 7.3 percent, 4.5 percent in the first quarter).
  • GDP for the second quarter was 0.8% qoq (2.2% in the first quarter, expectations were 0.5%).
  • Industrial production for June 4.4% y/y (expected 2.6%, May 2.7%).
  • Retail sales for June 3.1% yoy (expectations 3.2%, May 12.7%).
  • Investment in fixed assets rose 3.8% y-o-y in January-June (expectations 3.5%, 4% January-May).
  • Real estate investment from January to June – 7.9 percent per annum (January to May -7.2 percent).
  • Real estate sales on a Jan-Jun landscape basis -5.3% yoy (Jan-May -0.9%).
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Broad challenges

For his part, Professor of Economics, Advisor to the World Bank, Dr. Mahmoud Anbar points to the uncertainty that dominates the markets, which leads to restrictions on investments and spending (in the case of China it is slow consumption and unwillingness to invest).

Although China has not entered a state classified as an economic recession, it is more likely to record a two-quarter recession, Anbar argues in exclusive reports to “Sky News Arabia Economy”, the global economy, in light of the consequences of the war in Ukraine , according to the latest reports of the United Nations Conference, various countries around the world. A rare event of inflationary stagnation is threatened, triggering a general state of uncertainty affecting economies. Trade and Development (UNCTAD), which indicates that global foreign direct investment will decline by 12 percent to $1.3 trillion in 2022.

He mentions a group of factors specifically related to China that are putting broader pressure on the Chinese economy in light of the uncertainty in the global economy, chief among them related to the trade crisis China is facing with the United States. , as well as factors related to the Chinese economy and the policies pursued, indicate that Beijing relies on exports for a large part of its domestic production and that it has been hit hard by the recession. A slowdown in global trade poses broader challenges for the Chinese economy.

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ADNOC and TAQA finalize financing agreement for sustainable water supply project



ADNOC and TAQA finalize financing agreement for sustainable water supply project

This strategic investment by two major energy companies in Abu Dhabi aims to build and operate sustainable seawater desalination facilities and supply ADNOC’s onshore operations at the Bab and Bu Hassa fields in Abu Dhabi. Reducing emissions, improving its operations and ensuring it is future-proof.

The consortium, which includes Orascom Construction and Medito, will also build a world-class central seawater treatment facility and a network to transport and distribute treated water.

ADNOC and TAQA hold a majority stake of 51 percent (25.5 percent each) in the project company, while the construction consortium holds the remaining stake (49 percent). , then Transfer of Ownership (BOOT), the entire ownership of the project will be transferred to ADNOC after 30 years of operation.

The project will be financed by nine local and international banks. First Abu Dhabi Bank, Gulf International Bank, Natixis Bank, Abu Dhabi Commercial Bank, Abu Dhabi Islamic Bank, Dubai Commercial Bank, Emirates NPT, Emirates Development Bank and Warba Bank by providing commercial and Islamic finance facilities. The rest of the project cost will be paid by the shareholders according to the ownership stake.

On this occasion, Abdul Monim Saif Al Kindi, Chief Executive Officer of ADNOC’s Exploration, Development and Production Division, said: “This sustainable strategic investment is another example of ADNOC’s efforts and efforts to improve and ensure the reduction of emissions from its operations. They are future-proof in an effort to contribute to enabling transformation in the energy sector and accelerate a paradigm shift in ADNOC’s ongoing efforts to improve and modernize its business to contribute to creating a low-emission future. I am pleased to collaborate with TAQA in the implementation of this new innovative project, which will provide energy-efficient water supplies to ADNOC’s onshore operations and contribute to reducing its environmental impact.

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More than 60 percent of the project’s value is expected to be redirected to the UAE economy through the ADNOC project.

For his part, Jassim Hussain Thabet, Group CEO and Managing Director of Abu Dhabi National Energy Company (TAQA), said: “This collaboration between TAQA and ADNOC, two leading companies in the sector, will enable us to complete the world class. Sustainable project to reduce electricity consumption.” This enhances our efforts to ensure energy security. Based on TAQA’s position as a leader in fully integrated low-carbon applications, it is considered the partner of choice for companies in other sectors looking to decarbonize. “Climate.” By providing sustainable solutions for operations, water and electricity, and investing in key infrastructure needed to achieve neutrality.

By replacing the deep, high-salinity groundwater system currently used in fields, the project is expected to contribute to a 30 percent reduction in electricity consumption required for water injection operations. The project is expected to get all its electricity needs from clean sources.

The project is notable for:

  • It includes a water transportation network spanning over 75 km, distribution pipelines spanning over 230 km and two pumping stations.
  • It will provide more than 110 million gallons of filtered seawater per day based on nanofilter technology.
  • The total cost of the project is $2.2 billion (as per market conditions at the time of funding), compared to $2.4 billion when announced on May 24, 2023.

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Cybersecurity Council exposes phishing methods



Cybersecurity Council exposes phishing methods

Abu Dhabi: Imad Al-Din Khalil

The UAE Government’s Cyber ​​Security Council has revealed the methods that electronic phishing hackers use to capture personal data of individuals, companies, public and private institutions, and put businesses and finances at risk.

If a hacker wants to penetrate the security system of a company or bank, for example, it would take weeks or months for him to access a loophole that he could use to launch a cyber attack, the council said, however, there is another quick and relatively easy solution. A safe method used by many attackers is phishing.

He explained that electronic phishing is harmful messages that stimulate the senses of the user until he clicks on a particular link, whether this user is a general visitor or a specific person, once the user opens the link, he falls into the hacker’s trap and becomes a victim of unwanted curiosity and intrusion. He and his business are at risk. are exploited.

Through electronic phishing, a hacker tricks the user through a fake message containing a link containing malicious and harmful software. If the user does not carefully read the content of the message and opens it or clicks on the links in it. That, he faces a big problem that his money is stolen or his money is hacked, destroys his system or even his reputation because he has no control over the computer he is using.

In order to protect ourselves from the dangers of electronic phishing attacks, the Council emphasized the need not to disclose any personal information that could be used to identify you, as official organizations would never request such information and would not open any links from sources. What you didn’t know before, you should also use programs like protection from cyber attacks, updating all software periodically, changing passwords regularly and using double security keys.

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The Cyber ​​Security Council has called on mobile phone users to be cautious, avoid falling prey to phishing attacks and malicious scams, and avoid opening unknown links such as encrypted websites and suspicious links.

The Council called on users to regularly update their mobile device software to prevent device vulnerabilities from being exposed, citing ways to hack mobile devices, including using suspicious links, vulnerabilities and unencrypted public programs, and direct connection to lure unsuspecting users. to send their confidential data.

The Council emphasized the importance of mobile phone users adhering to usage standards, particularly for workplace phones, and continuous auditing and monitoring.

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Recovering from the conductor crisis… Toyota production rises in February



Recovering from the conductor crisis… Toyota production rises in February

Japan – Toyota Motor Production Line

Japan’s Toyota Motor reported its global production rose 1.4 percent in February, after it recovered from disruptions caused by the semiconductor shortage crisis and the coronavirus pandemic.

Last month, Toyota, the world’s largest automaker, produced 896,712 cars.

Its global sales, including its subsidiaries Daihatsu Motor and Hino Motors, rose 10.5 percent to 856,376 units, the company said in a statement, as reported by Bloomberg.

According to the report, Toyota topped global sales of combustion engine cars just days before Lexus chief Koji Sato is set to take over as CEO of the iconic Japanese company.

Chatto is expected to lead the company into producing electric cars and vehicles based on renewable energy sources.

According to Toyota data, local sales rose 38 percent to 213,698 units, as both sales and production within Japan rose for the second month in a row on a year-on-year basis.

On the other hand, Nissan Motor saw its global production increase by 9.2 percent to 300,734 cars, while sales increased by 1.2 percent to 265,101 units.

In contrast, Honda Motor Co.’s global production fell 1.2 percent to 340,574 cars, the fourth straight month of decline.

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