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IFF Newsletter Issue 62

TIME:2023-02-09

From the Editor

Fitch raised China growth outlook to 5%, citing faster recovery of consumption and factory activity. Ten of thousands of people crossed the border between the Chinese mainland and Hong Kong as China fully resumed travel between the mainland and the special administrative regions of Hong Kong and Macau. China’s luxury market fell in 2022 but recovery is expected by the end of Q1 as the country relax Covid measures according to consulting firm Bain.

The Fed raised interest rates by a quarter point, the smallest increase since March. Meanwhile US unemployment rate reached record low in January. Japan’s current account surplus fell sharply in December. And countries rushed to send aid and rescue to Turkey and Syria after earthquake. 

The IFF continues to bring you the latest China news and global development.

 

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China’s economy is to rapidly bounce back as domestic consumption and the service sector recover, which will contribute greatly to global development, said the Vice President of the International Finance Forum (IFF) and former Secretary of the International Monetary Fund Lin Jianhai in an interview with People.cn, the official portal of People’s Daily.

“(Chinese economy’s) rebound could be very quick as pent-up demand in the past three years will drive up domestic consumption and accelerate growth in service and other sectors,” said Lin.

Lin said the relaxation of China’s Covid control measures will boost domestic demand for investment and consumption and the recovery of Chinese economy will help stabalise global supply chain.

China’s GDP, which made up one third of the world economy before the pandemic, could return to the same level this year.

“Whether China could maintain this level of contribution to the world economy will hinge on China’s economic policies and structural reform and whether China could maintain high-level opening-up,” said Lin.


 
 

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Mainland fully resumes travel with Hong Kong and Macau

The Chinese mainland has fully resumed travel with the special administrative regions of Hong Kong and Macau on Monday.
Three checkpoints including Lo Wu, Lok Ma Chau/Huanggang and Heung Yuen Wai/Liantang opened on Monday, marking the full resumption of crossing between the mainland and Hong Kong.
Around 22,000 passengers used the Lo Wu checkpoint by midday on Monday, Reuters reported citing a statement from Hong Kong’s MTR Corp.

 

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Fitch raises China growth outlook to 5%

Fitch Ratings raised its China growth forecast to 5% from 4.1% on Wednesday, citing faster recovery of consumption and factory activity.

China’s economic recovery will be primarily consumption-led, said Fitch.

The country’s economic rebound will be less vigorous than that of 2021 thanks to its troubled property sector.

Trade could be another drag on China’s GDP this year as economic slowdowns in the US and Europe may damp export demand.

Fitch expected a budget deficit of around 7% of GDP this year and the direction of fiscal policy remains uncertain ahead of March’s National People’s Congress.

 
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China's luxury market drops 10% in 2022 

China’s luxury market fell 10% year on year in 2022, the first decline in five years according to consulting firm Bain & Company.

The decline was brought by China’s Covid control measures which had affected luxury brands.
Nearly every luxury category and most brands experienced their first major decline in five years, Bain said in a research note.
Luxury categories including watch, fashion, jewelry and leather goods with lower online penetration were badly affected by lockdowns whereas luxury beauty brands with strong online sales managed to maintain a decline of 6%.
The Chinese market will return to growth by the end of the first quarter, according to Bain. 
 
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China's internet firms 2022 revenues drop first time in decade

Revenues of China’s internet firms saw revenues drop for the first time since 2013, official data showed on Friday.

The combined revenues of internet firms fell 1.1% to 1.46 trillion yuan in 2022, according to data from the Ministry of Industry and Information Technology.

Revenues of internet services in ride-hailing, travel, financial and flat rental services was hit the hardest with a 17.5% drop in revenue last year.

 
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Chinese provinces to invest big in infrastructure 
 

Ten Chinese provinces or regions including Henan, Anhui and Hainan have set growth target for investment in fixed asset at 10% and above this year in an effort to boost growth, according to Chinese media.

Tibet, Hainan and Xinjiang set growth targets for fixed asset at around 13%, 12% and 11% respectively while seven other provinces including Henan, Liaoning and Anhui set growth targets at 10% and above.

China’s investment in fixed asset rose 5.1% in 2022 with investment in manufacturing grew 9.1% and power, heat, gas and water production and supply rose 19.3%. 
 
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China's logistics activities further contract in January    

China’s logistics activities slowed down in January as the country celebrated the Spring Festival holiday, Xinhua reported.
The index tracking logistics market performance dropped 1.3% from December to 44.7%, according to the China Federation of Logistics and Purchasing. The 50-mark separates growth from contraction.
The drop reflects reduced logistics activities as most people went on holidays during the Spring Festival. 
 
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International News 
 
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Fed raises interest rates by a quarter point

The Federal Reserve raised interest rates by a quarter percentage point last week, the eighth increase in less than a year.
It was the smallest increase since March.
The Fed signals more increase ahead and said in a statement that “ongoing increases in the target range will be appropriate in order to attain a stance of monetary policy that is sufficiently restrictive to return inflation to 2% over time”.
 
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US adds 517,000 jobs in January, unemployment rate hits record low 

The US economy added 517,000 jobs and unemployment rate hit a 53-year low of 3.4% in January, data from the Labour Department showed on Friday.

Job growth was led by gains in leisure and hospitality, professional and business services, and health care. Employment also increased in government, according to the Labour Department.

The number of unemployed stayed at 5.7 million in January and the number of people jobless less than five weeks decreased to 1.9 million in January.

 

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G7 expands sanctions on Russian oil industry 
 

Group of Seven economies agreed to expand sanctions on Russia oil industry on Sunday, according to media report.

The coalition set two caps on Russian oil products, one on products that trade at a premium to crude, such as diesel or gas oil and one for products that trade at a discount to crude like fuel oil, according to Reuters.

The G7 economies agreed to review the level of price cap on exports of Russian oil in March, Reuters reported.

German Chancellor Olaf Scholz said on Wednesday Europe will tighten sanctions against Russia again near the anniversary of the start of the Russia-Ukraine conflict.

 

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Japan current account surplus drops sharply in December

Japans current account surplus dropped sharply in December, Reuters reported on Wednesday citing data from the Ministry of Finance.

The current account surplus stood at 33.4 billion yen in December, down from November’s surplus of 1.8 trillion yen.

A weak yen has pushed up cost of imports and trade deficit stood at 15.78 trillion yen by the end of December.

 

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Countries rush to send aid and rescue to Turkey and Syria as death toll mounts

Governments around the world have sent aid and rescuers to Turkey and Syria after the 7.8-magnitude earthquake that killed more than 15,000 people.

China committed to send 40 million yuan in emergency aid to Turkey and 30 million yuan in emergency humanitarian aid to Syria.

An earthquake rescue team sent by China arrived in Turkey on Wednesday, China’s state media reported.  

The European Union sent 27 rescue and medical teams from 19 member states to assist Turkey and US President Joe Biden said US officials reached out to Turkish authorities to coordinate any and all needed assistance.

South Korea sent a 60-person rescue team and medical supplies to Turkey on Tuesday.

 

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International organisations call for urgent action for food and nutrition crisis

Leaders from five international organisations appealed for urgent action to prevent the global food and nutrition crisis from worsening.

Heads of the Food and Agriculture Organisation, the International Monetary Fund, the World Bank Group, the World Food Programme and the World Trade Organisation called for rescuing “hunger hotspots” and facilitating trade, according to the UN.

Nearly 350 million people across 79 countries are acutely food insecure, and undernourishment is on the rise, according to the UN.

 

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