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Xi warms up China’s economy, but virus narrows options



Beijing has announced support for real estate and an infrastructure push to buoy economic and social development but analysts warn rigid virus controls are hampering growth
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President Xi Jinping has offered state backing for tech, infrastructure and jobs to revive China’s economy, but analysts warn growth will continue to wilt until Beijing drops its rigid virus controls.

Two and a half years since the coronavirus first emerged in Wuhan, China is the last major economy still closed off to the world, despite its relatively low death toll.

Lockdowns across dozens of cities — from the manufacturing hubs of Shenzhen and Shanghai to the breadbasket of Jilin — have wreaked havoc on supply chains over recent months, crushing small businesses and trapping consumers at home.

That has imperilled Beijing’s full-year growth target of about 5.5 percent, with forecasters anticipating that around one percentage point may be shaved off that figure.

“We remain deeply concerned about growth,” Nomura analysts said this week. “We believe the Omicron variant and zero-Covid strategy represent the dominant challenges to growth stability.” 

Yet China’s Communist leadership insisted Thursday that the country will stick “unswervingly” to zero-Covid, with a meeting chaired by Xi declaring that “persistence is victory”.

To curtail the growing economic damage, Beijing has offered words of respite to the tech sector from rolling regulatory crackdowns and promised to pump prime the economy with an “all-out” infrastructure campaign.

But observers say rallies may be temporary as long as the state’s reflex remains to hammer down the virus caseload at all costs.

“(The measures are) all very welcome… but how many more bridges and how many more sports stadiums are going to help us in creating an environment of predictable growth?” European Chamber president Joerg Wuttke told reporters on Thursday.

While many cities have bounced back after short, targeted lockdowns, other areas such as agricultural base Jilin province have been slow to recover from waves of restrictions. 

“That precedent (Jilin) could mean a longer-lasting impact from Shanghai’s highly disruptive lockdown,” said Ernan Cui of Gavekal Dragonomics in a report Friday.

– Devil in the detail –

Analysts are waiting for details of the delivery behind sweeping promises of support from Beijing’s policymakers.

China’s tech firms have been under the state’s microscope on concerns over data misuse and monopoly.

But shares of major tech firms soared as the government called for “healthy development” of the sector and shifted its language on completing its “rectification”.

It is unclear if that signals an end to a punishing round of regulatory scrutiny.  

Markets also cheered on as the government announced support for real estate and an infrastructure push to buoy economic and social development.

But China “does not have much room for further infrastructure building, (or) government borrowing on the local level,” said Dan Wang, chief economist at Hang Seng Bank China.

“In reality, there’s not much room to grow.”

While it harks back to Beijing’s four trillion yuan ($600 billion at today’s rates) stimulus package after the 2008 financial crisis — which included massive infrastructure investment — Zhaopeng Xing of ANZ Research said “we doubt the authorities will carry it forward at the cost of rising debts”.

– Fading confidence –

China’s State Council has also said it would give cash handouts to jobless migrant workers and urged stronger support for small firms harried by lockdowns and shrivelling consumer demand.

But re-inflating the economy is a big task made more complicated by each new level of virus control, experts say.

“Those easing measures, even on a large scale, may not achieve their intended impact due to lockdowns and logistics disruptions,” Nomura added in its note.

A path of regular mass testing — which China appears to be embarking on — may also come with a hefty bill.

It would cost between 0.9 percent and 2.3 percent of GDP for a regular testing mandate to expand across China, according to Nomura.

With the economy flagging, an effective bounce could be given by lowering the interest rate, while authorities could also turn up the spending to drive the infrastructure push.

But optimism is fading five months into a year already defined by the battle with the pandemic, with business activity collapsing and consumers afraid of what is to come.

“People had high hopes for this year,” Wang said.

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English-language students swerve UK post Brexit




Not all the students from France made it to Scotland because of the extra cost and restrictions non-EU nationals
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At the top of Calton Hill overlooking Edinburgh and the North Sea, a visiting English language student from France is in no doubt about the view: “Amazing!” he exclaims.

Covid has meant that the number of foreign students on such visits to the UK has fallen sharply.

But Britain’s departure from the European Union is not helping the recovery, as post-Brexit administrative requirements have raised travel costs.

About 50 college students from France’s Alsace region have taken advantage of the lifting of UK Covid restrictions. Others, however, have opted to learn English in EU nations such as Ireland or Malta — or simply sign up for language courses at home.

Teacher Sarah Lepioufle, accompanying her college’s Edinburgh trip, said the changes introduced since Brexit — the extra paperwork involved — had made applying for courses an “obstacle course”.

Non-EU students living in France are suddenly facing visa costs of £100 (118 euros, $126), whereas before Brexit they could travel on a collective travel document.

“I had to give up because I am Russian,” said Elisabeth Shpak, left out of the Scotland trip because of the fees involved.

– Major financial losses –

The British Educational Travel Association, whose members help organise such visits, estimates that Brexit could cost the sector up to £3 billion annually. 

Having spoken to stakeholders in the sector, they felt voyages would be 60 to 70 percent down compared to before Brexit and the pandemic, said Steve Lowy at BETA.

Before Britain’s EU exit, Britain welcomed “well over one million” such students per year, he said.

Now “there is a perception of us not being welcoming, and not open to people from Europe. And that is a harder thing to overcome”.

While a BETA poll showed Britons favoured relaxing the post-Brexit travel rules, Lowy argued that overcoming the new negative perception was “potentially a long-term issue”.

For those students who have managed to travel to Scotland, the experience is celebrated, especially coming out of Covid restrictions.

“There have been no trips, everything has been cancelled because of lockdowns,” said 13-year-old Aaron Schaetzel.

– Collective travel –

The UK authorities say they can already offer students a so-called “collective passport”.

But this document — the product of a 1961 European treaty — has not been signed by all current EU members.

As for the French travel sector, it is waiting on its own government’s guidance regarding use of the collective passport for the first time.

The UK government, meanwhile, cites security risks for some students now needing individual visas, something Lowy finds hard to accept.

“Youth travel is low risk,” he insisted.

“These students and their teachers are here for cultural and educational purposes, and that is only good for the UK — not just the initial revenue they bring but for the long-term impact.” 

On Calton Hill, tour guide Marilyn Hunter passionately tells the French students about Scotland’s landscape, its history and major exports whisky and salmon.

But Brexit seems to have spoiled the opportunity for some EU-based students to visit the UK.

The previous week, a group visiting from Germany had been forced to leave behind four students who had not obtained their visas in time.

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Australian KFC patrons clucking mad over lettuce-cabbage switch




Australians are up in arms about local KFC outlets' decision to use a cabbage mix on some menu items due to a lettuce shortage
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Fried chicken chain KFC said Tuesday that high lettuce prices in Australia have forced it to switch to a cabbage mix in burgers and other products, prompting customers to complain the result is less than “finger lickin’ good”.

The local price of the verdant leaf has soared by as much as 300 percent in recent months, forcing the fast-food chain to tweak the Colonel’s recipe in some stores.

“We’re currently experiencing a lettuce shortage. So, we’re using a lettuce and cabbage blend on all products containing lettuce until further notice,” the company told customers.

The company blamed widespread flooding in the country’s east for the problem.

But supply chain expert Flavio Macau of Edith Cowan University said Russia’s invasion of Ukraine was also a factor, pushing up diesel and fertiliser prices.

A single head of iceberg lettuce in Sydney or Melbourne that once sold for about $2 now goes for close to $8.

The company told customers: “If that’s not your bag, simply click ‘customise’ on your chosen product and remove lettuce from the recipe :)”

The change was certainly not the “bag” of some social media users.

“The fact that you are replacing lettuce with cabbage makes me rethink my whole meal at KFC. There’s 4 or 5 other things I would eat before cabbage Its such a weird choice,” said one disgruntled tweeter.

“Feels like a sign of the apocalypse,” said another.

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Asian markets mixed as rate hike woes offset China tech hopes




Traders were cheered by reports that China was close to ending a crackdown on ride-hailing app Didi, lifting hopes of a similar move for the rest of the tech sector
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Asian markets struggled Tuesday on long-running worries over surging inflation and rising interest rates, which overshadowed hopes that China would ease off its regulatory drive against the country’s beleaguered tech giants.

A spike in US Treasury yields took the wind out of the sales for Wall Street, with focus now on the release of inflation data from the United States and China at the end of the week.

Analysts are tipping the Federal Reserve to lift borrowing costs by half a point at its next three meetings as officials try to get a grip on runaway prices.

But that is causing discomfort on trading floors as investors fret over the impact on economic growth and firms’ bottom lines.

“Inflation concerns are not going anywhere fast,” Fiona Cincotta, at City Index, said. “Rising crude oil prices and a strong labour report have lifted bets that the Fed may need to act aggressively to rein in inflation.”

And SPI Asset Management’s Stephen Innes added: “Investors are hyper-focused on inflation, economic growth, and future Fed policy.

“Most assume the worst and think a financial tsunami will hit the US and global markets thanks to the quorum of US-based bank CEOs that have given the gloomy growth narrative their imprimatur. Anything less than that outcome is going to surprise a lot of folks.”

Equity markets were mixed in early trade.

Tokyo rose, helped by a softening of the yen to a two-year low owing to expectations the Bank of Japan will not tighten monetary policy just as US rates climb.

Manila and Jakarta also edged up but there were losses in Sydney, Seoul, Singapore, Wellington and Taipei.

Hong Kong dipped and Shanghai was flat, even as heavyweights Alibaba and led gains among tech firms following a report that China was close to ending a painful crackdown on ride-hailing app Didi Global and restore its main apps this week. Didi’s US-listed notes soared more than 20 percent.

The Wall Street Journal added that probes into two other firms — Full Truck Alliance and recruitment platform Kanzhun — fanning optimism for the sector’s outlook after a long period of hefty selling pressure.

“This was seen as a signal that the regulatory crackdown on Chinese tech firms was starting to end… as China focuses on stabilising the economy following Covid restrictions,” said National Australia Bank’s Tapas Strickland.

Markets have seen some levelling out in recent weeks as the easing of lockdown measures in China helps to offset some of the worries about higher rates and the impact of the Ukraine war.

But market-watcher Louis Navellier warned there was still plenty more volatility to come.

“If history repeats, we could be down tomorrow, then up on Wednesday, then down on Thursday, and possibly up on Friday,” he said in a commentary. “So just get used to these up-down, up-down oscillations because they are going to continue.

“I want to remind investors to not get too excited when the market rallies because it is going to continue to oscillate. There is just too much uncertainty out there.”

– Key figures at around 0230 GMT –

Tokyo – Nikkei 225: UP 0.4 percent at 28,031.15 (break)

Hong Kong – Hang Seng Index: DOWN 0.2 percent at 21,609.25

Shanghai – Composite: FLAT at 3,237.14

Brent North Sea crude: UP 0.6 percent at $120.28 per barrel

West Texas Intermediate: UP 0.7 percent at $119.29 per barrel

Euro/dollar: DOWN at $1.0675 from $1.0699 

Pound/dollar: DOWN at $1.2500 from $1.2528

Euro/pound: UP at 85.42 pence from 85.37 pence

Dollar/yen: UP at 132.60 yen from 131.88 yen

New York – Dow: UP 0.1 percent to 32,915.78 (close)

London – FTSE 100: UP 1.0 percent at 7,608.22 (close)

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