1—Helping the world
Is there an upside to China's economic downturn? Writing in the FT, Matt Klein argues that there is, because:
"...lower demand for imported metals, energy, food and capital goods is alleviating inflationary pressures in the rest of the world. For the first time in decades, the country's enormous trade surplus is a boon for workers elsewhere."
The downturn has been driven by China's housing market, a sector that for a long time has been the subject of strong demand largely as a result of:
- limited options for Chinese people to park their savings;
- provincial and local governments incentivising investment in property as land sales form a large share of their revenue base; and
- being repeatedly targeted by the Chinese Communist Party for stimulus during economic slowdowns (on this point see Rogoff and Yang, 2021).
Klein offered the following chart that shows just how severe the downturn has been:
The decline in property transactions was started by "government restrictions on mortgage borrowing and developer leverage", but has since flowed through to new construction and "is being compounded by the government's Covid-related restrictions". The downturn will have "broader ramifications" that "may be just what the rest of the world needs":
"China's domestic weakness is crushing demand for goods from the rest of the world. In dollar terms, spending on imports has been flat since the end of last year. Factor in rising prices, and China's real import demand is down about 8 per cent since the lockdowns began... China's exports continue to rise, however, providing foreign consumers and businesses with the goods they need."
How Xi Jinping and the CCP respond to the current economic crisis will be telling. But until then, China has resumed its role as a positive supply shock for the rest of the world (largely at the expense of its own people!).
You can read Matt Klein's full FT article here (~3 minute read).
2—The sun has set on hatred of the UK
3—What does $10 billion buy you
If your company happens to be called Meta, not all that much:
"The image shows Mark's dead-eyed Avatar standing in an empty landscape populated only by a small version of the Eiffel Tower and Barcelona’s Tibidabo Cathedral. The image made "Second Life" trend on Twitter for a while yesterday, with people saying it somehow looked worse than the decades-old life sim."
That's from Paul Tassi in Forbes, who called Meta's much-hyped 'Horizon Worlds' universe (see image above) "one of the worst-looking offerings I have seen".
Early days, sure. But as it's currently shaping up, why would anyone want to jump into Facebook's 2008-esc "metaverse", where your every move will inevitably be tracked, "to do extremely boring things in VR like attend business meetings or play ping pong"?
We're not sure, and neither are investors – Meta's stock has halved in the past year, a huge drop compared to tech rivals such as Alphabet (Google's owner) which is only down around 10%.
To learn more be sure to check out Tassi's full article here (~3 minute read).
☢️ "Germany plans to postpone the closure of the country's last three nuclear power plants as it braces for a possible shortage of energy this winter."
💸 A master of wealth destruction: Adam Neumann raised $21.9 billion in funding for WeWork, a company that is now worth $4.6 billion.
👧 With teenagers and young adults abandoning it, Facebook is desperately trying to become more like TikTok.
🛢️ Norway's sovereign wealth fund, the world's largest of its kind, "returned a negative 14.4% during" the first half of 2022 as "equity investments slipped 17%, while fixed income investments and unlisted renewable energy infrastructure were down 9.3% and 13.3%, respectively... Energy was the only sector to not see negative returns".
📉 "Japan and Germany still have had no net economic growth during the pandemic — and even worse for Germany, they have had a healthy dose of inflation too."
🍻 Japan's government, desperate for revenue, launched "a contest to find new ways to encourage young people to drink more [alcohol]".