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China Sets Annual GDP Growth Target At “Around 5.5%” Signaling More Stimulus

China Sets Annual GDP Growth Target At "Around 5.5%" Signaling More Stimulus

China’s legislature began its annual session on Saturday by targeting…

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China Sets Annual GDP Growth Target At "Around 5.5%" Signaling More Stimulus

China's legislature began its annual session on Saturday by targeting "around 5.5%" GDP growth for 2022. The GDP goal, delivered by Premier Li Keqiang to the National People's Congress, compares with the "over 6%" target Li presented last year.

This year's National People's Congress session will run seven days, down from the pre-COVID norm of 10.  

In an hourlong speech at the opening of the National People’s Congress to nearly 2,800 attendees including President Xi Jinping, Li described a gloomy environment and committed the government to a conservative fiscal policy, vowed to “step up implementation” of monetary policy and stabilize house prices, and signaling that more stimulus is on the cards by setting an aggressive economic growth target, calling for confidence amid rising domestic strains and global instability stemming from Russia’s invasion of Ukraine.

"A comprehensive analysis of evolving dynamics at home and abroad indicates that this year, our country will encounter many more risks and challenges," Li said.

As Bloomberg notes, "the slump in China’s huge property market and sporadic outbreaks of coronavirus have been a drag on the world’s second-largest economy, a key source of global demand." China's economy grew 4% in the October-December quarter from a year earlier, down from 4.9% in July-September and the lowest reading since the second quarter of 2020 when China's economy had been shut down due to the Wuhan virus.

The latest slowdown was due to a spike in commodity prices caused by Russia’s invasion of Ukraine, as well as weakening property sales caused by a collapse in the property market driven by tighter regulations. Production and consumption, meanwhile, were hit by strict COVID restrictions imposed to prevent the spread of the virus ahead of the Beijing Winter Olympics.

According to Nikkei Asia, some economists expect the new growth target to challenge policymakers.

"Unlike during previous policy cycles, investment demand has been particularly weak in the recent past, given property market turmoil," said Bank of America's economics team in a client note last month. "Therefore, we continue to expect persistent challenge in pushing GDP growth to above 5% this year and keep our forecast unchanged at 4.8%."

Goldman agreed with the downbeat view, noting that "a 5%+ GDP growth target would be quite challenging, barring significantly more policy easing, especially on the property front."

“The growth target of 5.5% is aggressive, implying that the government is willing to do more to arrest the property slump,” said Raymond Yeung, chief economist for Greater China at Australia & New Zealand Banking Group. “The Ukraine crisis presents a new external risk, notably food-energy security. This cannot be addressed by interest rate or reserve requirement rate cuts. The authorities will need to launch more measures to address the supply side constraints.”

“The target of around 5.5% growth is not easy to achieve, and requires more proactive policy support,” said Bruce Pang, head of macro and strategy research at China Renaissance Securities Hong Kong. “Investment, especially infrastructure investment, will be the most important and reliable driver to stabilize growth this year.”

Beijing also revealed its fiscal budget for 2022: Total expenditures are projected to grow 8.4%, to 26.71 trillion yuan ($4.2 trillion), while total revenues are expected to increase 3.8%, to 21.01 trillion yuan. Much of the spending growth will be focused on national defense, with allocations increasing 7.1%, to 1.45 trillion yuan, up from a 6.8% rise last year. The percentage growth represents the largest jump since 2019.

As an aside, China spends more on defense than any other country except the U.S., according to a U.S. Congressional Research Service report released in June. Beijing has increased its defense spending every year for more than two decades, and the annual outlay has nearly doubled since 2009, the report says.

Overall, the government expects to run a budget deficit of 2.8% of GDP this year, down from the 3.2% planned for 2021 even as it accelerates government spending. The improvement would come partly from a boost in dividends from state-owned companies' expanded profits. Jacqueline Rong, deputy chief China economist at BNP Paribas SA, estimates around 3-4 trillion yuan of unspent funds from previous years will boost government income this year. “Fiscal support for the economy will remain strong even though the budget deficit doesn’t expand,” she said.

Local governments have been allotted 9.8 trillion yuan, an 18% rise from last year and the biggest increase in recent times. Local administrations are to be allowed to issue up to 3.65 trillion yuan in special-purpose bonds, the same maximum as last year.  The government will also set up a fund to ensure financial stability and prevent systemic risks, he said, without giving details.

The spotlight on local spending follows the recent massive influx in credit, with China reporting last month that in the first month of the year, Chinese Total Social Financing exploded by a record 6.17 trillion, or almost $1 trillion USD...

... which in turn has helped spark a rebound in China's all important credit impulse, a leading indicator for the global reflationary wave (not that it needs much help these days).

Also on the fiscal stimulus side, taxes are to be cut for small businesses, with other support measures to be introduced. The government will also step up efforts to crack down on anti-competitive practices and encourage foreign investment in medium and high-end manufacturing.

Turning to monetary policy, Li said, "We will expand the scale of new loans, and see that the increases in money supply and aggregate financing are generally in step with nominal economic growth." The government will keep its consumer inflation target of 3%.

While curbs on borrowing by real estate developers will remain in place, other property market controls may be relaxed on a city-by-city basis to support price stability. To lend support for last year's move to allow families to have up to three children, an attempt to arrest the fall in the country's birthrate, a tax exemption for child care expenses will be enacted, along with other measures to ease the cost of raising children.

With a nod toward Xi's pledge to achieve carbon neutrality by 2060, Li said China would use coal more efficiently and at the same time work toward replacing power derived from the dirty fuel with wind, solar and other alternative sources.

On the pandemic front, Li said China will stick to its "zero COVID" policy but further refine containment measures to reduce social and economic disruptions, as reported recently.

Regarding foreign policy, Li avoided discussing tensions with the U.S. and Russia's war on Ukraine. He said China will forge a "new type of international relations" and oppose any foreign interference with Taiwan, over which Beijing seeks to assert sovereignty.

The congressional session will run through March 11. What used to be a 10-day affair has been cut to seven since 2020 due to the pandemic. Authorities have also slashed the number of journalists allowed into the meeting venue, the Great Hall of the People.

By keeping growth above 5%, China should be able to stay on track toward its long-term goal of doubling total GDP by 2035 from 2020 levels, economists say. Stable growth is also seen as vital for easing Xi's path to seeking a third term as party leader when the Chinese Communist Party convenes in congress late this year.

China’s monetary stimulus puts it in sharp contrast with the U.S. and other developed nations, which are hiking or preparing to hike interest rates to curb rampant inflation. Beijing kept its inflation target unchanged at around 3% for this year, although recent consumer price data has been more subdued than that.

“Compared to previous rounds of macro-policy adjustments by developed nations, China’s capacity to respond to external shocks has increased significantly,” said Song Li, a senior official at the State Council Research Office.

Economists said the ability of China to meet its growth target this year will largely depend on whether policy steps to stabilize the housing market are effective. Dozens of Chinese cities have made it easier for residents to obtain mortgages or lowered down payments required for housing since the beginning of the year to encourage more home sales. Much will also depend on whether Beijing can encourage local officials to launch more infrastructure projects.

“China set a target that requires some effort to achieve, unlike last year, which was too low and weakened local governments’ motivation to do things,” said Ding Shuang, chief economist for Greater China and North Asia at Standard Chartered Plc. “The target is still within the range of China’s potential growth rate, and requires policy support and efforts by local governments.”

“China has very large room to expand effective investment,” Liu Rihong, a senior official at the State Council Research Office, said Saturday in Beijing. “Expanding investment at the current stage does not mean China is returning to its old path of extensive development and relying on big-ticket projects to boost economic growth.”

Tyler Durden Sat, 03/05/2022 - 12:30

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Buyouts can bring relief from medical debt, but they’re far from a cure

Local governments are increasingly buying – and forgiving – their residents’ medical debt.

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March 13, 2024

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Medical debt can have devastating consequences. PhotoAlto/Odilon Dimier via Getty Images

One in 10 Americans carry medical debt, while 2 in 5 are underinsured and at risk of not being able to pay their medical bills.

This burden crushes millions of families under mounting bills and contributes to the widening gap between rich and poor.

Some relief has come with a wave of debt buyouts by county and city governments, charities and even fast-food restaurants that pay pennies on the dollar to clear enormous balances. But as a health policy and economics researcher who studies out-of-pocket medical expenses, I think these buyouts are only a partial solution.

A quick fix that works

Over the past 10 years, the nonprofit RIP Medical Debt has emerged as the leader in making buyouts happen, using crowdfunding campaigns, celebrity engagement, and partnerships in the private and public sectors. It connects charitable buyers with hospitals and debt collection companies to arrange the sale and erasure of large bundles of debt.

The buyouts focus on low-income households and those with extreme debt burdens. You can’t sign up to have debt wiped away; you just get notified if you’re one of the lucky ones included in a bundle that’s bought off. In 2020, the U.S. Department of Health and Human Services reviewed this strategy and determined it didn’t violate anti-kickback statutes, which reassured hospitals and collectors that they wouldn’t get in legal trouble partnering with RIP Medical Debt.

Buying a bundle of debt saddling low-income families can be a bargain. Hospitals and collection agencies are typically willing to sell the debt for steep discounts, even pennies on the dollar. That’s a great return on investment for philanthropists looking to make a big social impact.

And it’s not just charities pitching in. Local governments across the country, from Cook County, Illinois, to New Orleans, have been directing sizable public funds toward this cause. New York City recently announced plans to buy off the medical debt for half a million residents, at a cost of US$18 million. That would be the largest public buyout on record, although Los Angeles County may trump New York if it carries out its proposal to spend $24 million to help 810,000 residents erase their debt.

HBO’s John Oliver has collaborated with RIP Medical Debt.

Nationally, RIP Medical Debt has helped clear more than $10 billion in debt over the past decade. That’s a huge number, but a small fraction of the estimated $220 billion in medical debt out there. Ultimately, prevention would be better than cure.

Preventing medical debt is trickier

Medical debt has been a persistent problem over the past decade even after the reforms of the 2010 Affordable Care Act increased insurance coverage and made a dent in debt, especially in states that expanded Medicaid. A recent national survey by the Commonwealth Fund found that 43% of Americans lacked adequate insurance in 2022, which puts them at risk of taking on medical debt.

Unfortunately, it’s incredibly difficult to close coverage gaps in the patchwork American insurance system, which ties eligibility to employment, income, age, family size and location – all things that can change over time. But even in the absence of a total overhaul, there are several policy proposals that could keep the medical debt problem from getting worse.

Medicaid expansion has been shown to reduce uninsurance, underinsurance and medical debt. Unfortunately, insurance gaps are likely to get worse in the coming year, as states unwind their pandemic-era Medicaid rules, leaving millions without coverage. Bolstering Medicaid access in the 10 states that haven’t yet expanded the program could go a long way.

Once patients have a medical bill in hand that they can’t afford, it can be tricky to navigate financial aid and payment options. Some states, like Maryland and California, are ahead of the curve with policies that make it easier for patients to access aid and that rein in the use of liens, lawsuits and other aggressive collections tactics. More states could follow suit.

Another major factor driving underinsurance is rising out-of-pocket costs – like high deductibles – for those with private insurance. This is especially a concern for low-wage workers who live paycheck to paycheck. More than half of large employers believe their employees have concerns about their ability to afford medical care.

Lowering deductibles and out-of-pocket maximums could protect patients from accumulating debt, since it would lower the total amount they could incur in a given time period. But if the current system otherwise stayed the same, then premiums would have to rise to offset the reduction in out-of-pocket payments. Higher premiums would transfer costs across everyone in the insurance pool and make enrolling in insurance unreachable for some – which doesn’t solve the underinsurance problem.

Reducing out-of-pocket liability without inflating premiums would only be possible if the overall cost of health care drops. Fortunately, there’s room to reduce waste. Americans spend more on health care than people in other wealthy countries do, and arguably get less for their money. More than a quarter of health spending is on administrative costs, and the high prices Americans pay don’t necessarily translate into high-value care. That’s why some states like Massachusetts and California are experimenting with cost growth limits.

Momentum toward policy change

The growing number of city and county governments buying off medical debt signals that local leaders view medical debt as a problem worth solving. Congress has passed substantial price transparency laws and prohibited surprise medical billing in recent years. The Consumer Financial Protection Bureau is exploring rule changes for medical debt collections and reporting, and national credit bureaus have voluntarily removed some medical debt from credit reports to limit its impact on people’s approval for loans, leases and jobs.

These recent actions show that leaders at all levels of government want to end medical debt. I think that’s a good sign. After all, recognizing a problem is the first step toward meaningful change.

Erin Duffy receives funding from Arnold Ventures.

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Student Loan Forgiveness Is Robbing Peter To Pay Paul

Student Loan Forgiveness Is Robbing Peter To Pay Paul

Via SchiffGold.com,

With President Biden’s Saving on a Valuable Education (SAVE)…

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March 13, 2024

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Student Loan Forgiveness Is Robbing Peter To Pay Paul

Via SchiffGold.com,

With President Biden’s Saving on a Valuable Education (SAVE) plan set to extend more student loan relief to borrowers this summer, the federal government is pretending it can wave a magic wand to make debts disappear. But the truth of student debt “relief” is that they’re simply shifting the burden to everyone else, robbing Peter to pay Paul and funneling more steam into an inflation pressure cooker that’s already set to burst.

Starting July 1st, new rules go into effect that change the discretionary income requirements for their payment plans from 10% to only 5% for undergraduates, leading to lower payments for millions. Some borrowers will even have their owed balances revert to zero.

What the plan doesn’t describe, predictably, is how that burden will be shifted to the rest of the country by stealing value out of their pockets via new taxes or increased inflation, which still simmering well above levels seen in early 2020 before the Fed printed trillions in Covid “stimulus” money. They’re rewarding students who took out loans they can’t afford and punishing those who paid their way or repaid their loans, attending school while living within their means. And they’re stealing from the entire country to finance it.

Biden actually claims that a continuing Covid “emergency” is what gives him the authority to offer student loan forgiveness to begin with. As with any “temporary” measure that gives state power a pretense to grow, or gives them an excuse to collect more revenue (I’m looking at you, federal income tax), COVID-19 continues to be the gift that keeps on giving for power and revenue-hungry politicians even as the CDC reclassifies the virus as a threat similar to the seasonal flu.

The SAVE plan takes the burden of billions of dollars in owed payments away from students and adds it to a national debt that’s already ballooning to the tune of a mind-boggling trillion dollars every 3 months. If all student loan debt were forgiven, according to the Brookings Institution, it would surpass the cumulative totals for the past 20 years for multiple existing tax credits and welfare programs:

“Forgiving all student debt would be a transfer larger than the amounts the nation has spent over the past 20 years on unemployment insurance, larger than the amount it has spent on the Earned Income Tax Credit, and larger than the amount it has spent on food stamps.”

Ironically enough, adding hundreds of billions to the national debt from Biden’s program is likely to cause the most pain to the very demographics the Biden administration claims to be helping with its plan: poor people, anyone who skipped college entirely or paid their loans back, and other already overly-indebted young adults, whose purchasing power is being rapidly eroded by out-of-control government spending and central bank monetary shenanigans. It effectively transfers even more wealth from the poor to the wealthy, a trend that Covid-era measures have taken to new extremes.

As Ron Paul pointed out in a recent op-ed for the Eurasia Review:

“…these loans will be paid off in part by taxpayers who did not go to college, paid their own way through school, or have already paid off their student loans. Since those with college degrees tend to earn more over time than those without them, this program redistributes wealth from lower to higher income Americans.”

Even some progressives are taking aim at the plan, not because it shifts the debt burden to other Americans, but because it will require cutting welfare or sacrificing other expensive social programs promised by Biden such as universal pre-K. For these critics, the issue isn’t so much that spending and debt are totally out of control, but that they’re being funneled into the wrong issues.

Progressive “solutions” always seem to take the form of slogans like “tax the wealthy,” a feel-good bromide that for lawmakers always seems to translate into increased taxes for the middle and lower-upper class. Meanwhile, the .01% continue to avoid taxes through offshore accounts, money laundering trickery dressed up as philanthropy, and general de facto ownership of the system through channels like political donations and aggressive lobbying.

If new waves of college applicants expect loan forgiveness plans to continue, it also encourages schools to continue raising tuition and motivates prospective students to continue with even more irresponsible borrowing.

This puts pressure on the Fed to keep interest rates lower to help accommodate waves of new student loan applicants from sparkly-eyed young borrowers who figure they’ll never really have to pay the money back.

With the Fed already expected to cut rates this year despite inflation not being properly under control, the loan forgiveness scheme is just one of many factors conspiring to cause inflation to start running hotter again, spiraling out of control, as the entire country is forced to pay the hidden tax of price increases for all their basic needs.

Tyler Durden Wed, 03/13/2024 - 06:30

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Analyst reviews Apple stock price target amid challenges

Here’s what could happen to Apple shares next.

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13 hours ago

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March 12, 2024

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They said it was bound to happen.

It was Jan. 11, 2024 when software giant Microsoft  (MSFT)  briefly passed Apple  (AAPL)  as the most valuable company in the world.

Microsoft's stock closed 0.5% higher, giving it a market valuation of $2.859 trillion. 

It rose as much as 2% during the session and the company was briefly worth $2.903 trillion. Apple closed 0.3% lower, giving the company a market capitalization of $2.886 trillion. 

"It was inevitable that Microsoft would overtake Apple since Microsoft is growing faster and has more to benefit from the generative AI revolution," D.A. Davidson analyst Gil Luria said at the time, according to Reuters.

The two tech titans have jostled for top spot over the years and Microsoft was ahead at last check, with a market cap of $3.085 trillion, compared with Apple's value of $2.684 trillion.

Analysts noted that Apple had been dealing with weakening demand, including for the iPhone, the company’s main source of revenue. 

Demand in China, a major market, has slumped as the country's economy makes a slow recovery from the pandemic and competition from Huawei.

Sales in China of Apple's iPhone fell by 24% in the first six weeks of 2024 compared with a year earlier, according to research firm Counterpoint, as the company contended with stiff competition from a resurgent Huawei "while getting squeezed in the middle on aggressive pricing from the likes of OPPO, vivo and Xiaomi," said senior Analyst Mengmeng Zhang.

“Although the iPhone 15 is a great device, it has no significant upgrades from the previous version, so consumers feel fine holding on to the older-generation iPhones for now," he said.

A man scrolling through Netflix on an Apple iPad Pro. Photo by Phil Barker/Future Publishing via Getty Images.

Future Publishing/Getty Images

Big plans for China

Counterpoint said that the first six weeks of 2023 saw abnormally high numbers with significant unit sales being deferred from December 2022 due to production issues.

Apple is planning to open its eighth store in Shanghai – and its 47th across China – on March 21.

Related: Tech News Now: OpenAI says Musk contract 'never existed', Xiaomi's EV, and more

The company also plans to expand its research centre in Shanghai to support all of its product lines and open a new lab in southern tech hub Shenzhen later this year, according to the South China Morning Post.

Meanwhile, over in Europe, Apple announced changes to comply with the European Union's Digital Markets Act (DMA), which went into effect last week, Reuters reported on March 12.

Beginning this spring, software developers operating in Europe will be able to distribute apps to EU customers directly from their own websites instead of through the App Store.

"To reflect the DMA’s changes, users in the EU can install apps from alternative app marketplaces in iOS 17.4 and later," Apple said on its website, referring to the software platform that runs iPhones and iPads. 

"Users will be able to download an alternative marketplace app from the marketplace developer’s website," the company said.

Apple has also said it will appeal a $2 billion EU antitrust fine for thwarting competition from Spotify  (SPOT)  and other music streaming rivals via restrictions on the App Store.

The company's shares have suffered amid all this upheaval, but some analysts still see good things in Apple's future.

Bank of America Securities confirmed its positive stance on Apple, maintaining a buy rating with a steady price target of $225, according to Investing.com. 

The firm's analysis highlighted Apple's pricing strategy evolution since the introduction of the first iPhone in 2007, with initial prices set at $499 for the 4GB model and $599 for the 8GB model.

BofA said that Apple has consistently launched new iPhone models, including the Pro/Pro Max versions, to target the premium market. 

Analyst says Apple selloff 'overdone'

Concurrently, prices for previous models are typically reduced by about $100 with each new release. 

This strategy, coupled with installment plans from Apple and carriers, has contributed to the iPhone's installed base reaching a record 1.2 billion in 2023, the firm said.

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Apple has effectively shifted its sales mix toward higher-value units despite experiencing slower unit sales, BofA said.

This trend is expected to persist and could help mitigate potential unit sales weaknesses, particularly in China. 

BofA also noted Apple's dominance in the high-end market, maintaining a market share of over 90% in the $1,000 and above price band for the past three years.

The firm also cited the anticipation of a multi-year iPhone cycle propelled by next-generation AI technology, robust services growth, and the potential for margin expansion.

On Monday, Evercore ISI analysts said they believed that the sell-off in the iPhone maker’s shares may be “overdone.”

The firm said that investors' growing preference for AI-focused stocks like Nvidia  (NVDA)  has led to a reallocation of funds away from Apple. 

In addition, Evercore said concerns over weakening demand in China, where Apple may be losing market share in the smartphone segment, have affected investor sentiment.

And then ongoing regulatory issues continue to have an impact on investor confidence in the world's second-biggest company.

“We think the sell-off is rather overdone, while we suspect there is strong valuation support at current levels to down 10%, there are three distinct drivers that could unlock upside on the stock from here – a) Cap allocation, b) AI inferencing, and c) Risk-off/defensive shift," the firm said in a research note.

Related: Veteran fund manager picks favorite stocks for 2024

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