E-newsletter: China is catching up – real-time financial system

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Aug 25, 2020, 6:30 p.m. ET

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China closes the economic gap with the US, another round of Covid bans would be too costly, more US workers test positive for drugs and Canada wins in lumber. Jeff Sparshott here to take you through the latest business news.

Bridge the distance

China Economy is recovering– and gain a foothold in the USA Restaurants and gyms are full again across China. Subway cars and departure lounges at the airport are full. Children are preparing to return to classrooms, with few restrictions that US officials are calling hallmarks of life after the coronavirus. After the coronavirus was stifled for the time being thanks to draconian control measures, JP Morgan recently raised its growth forecast for China for 2020 from 1.3% in April to 2.5%. Economists from the World Bank and other countries have also revised their forecasts for China, the only major economy expected to grow this year, says Jonathan Cheng.

This rebound should help the world’s second largest economy catch up with the US fasterChina’s inflation-adjusted economic output is expected to reach $ 11.9 trillion this year, said Nicholas Lardy, an economist and China expert at the Peterson Institute for International Economics in Washington. That’s roughly 70% of the US’s expected production – a seven percentage point increase over the previous year and the greatest advance China has made over the US in a single year.

WHAT YOU NEED TO WATCH TODAY

The S & P / Case-Shiller The property price index for June appears at 9 a.m. CET.

The Conference Board The consumer confidence index for August is expected to decrease from 92.6 in the previous month to 92.5. (10 a.m. ET)

Sale of US new buildings an annual pace of 787,000 is expected for July compared with 776,000 in the previous month. (10 a.m. ET)

The Richmond Fed The August manufacturing survey is expected to drop to 7 from 10 in the previous month. (10 a.m. ET)

Thomas Barkin, President of the Richmond Fed speaks to the York County Regional Chamber of Commerce at 11:30 am ET Mary Daly, President of the San Francisco Fed will attend a Rotary Club of Oakland event at 3:25 p.m. ET.

TOP STORIES

Targeted restrictions, yes. Crippling Lockdowns, No.

Covid-19 lockdowns led to a deep recession. Five months later, the evidence points to it wide shutdown orders were too dull and economically expensive a tool. The evidence also suggests alternative strategies that could slow the spread of the epidemic at a much lower cost. James Stock, a Harvard University economist, Harvard epidemiologist Michael Mina, and others devised a “smart” reopening plan based on the contact frequency and vulnerability of five populations and 66 economic sectors. Most businesses are believed to reopen following industry guidelines on physical distancing, hygiene, and working from home. Reopen schools; Masks are required; Churches, indoor sports facilities and bars will remain closed. They estimated in June that it would result in 335,000 deaths in the U.S. by the end of this year, as if all restrictions were lifted immediately. However, they say the plan would also keep economic output 10% higher than if a second round of lockdowns were imposed, writes Greg Ip.

Models of support

In the Covid-19 recession, unemployment rose far more rapidly in the US than in Europe. However, this is not the result of a deeper recession or a less aggressive fiscal response in the US. Rather, it reflects something else Approaches to the labor market. European governments have paid companies tens of billions of dollars to keep idle workers on their payroll. In the US, most benefits went directly to the unemployed, report Tom Fairless and David Harrison.

Both approaches have advantages and risks. European companies retain valuable skills and relationships so they can quickly recover when the economy recovers. Workers receive paychecks and job security, which should help consumer spending. However, some economists fear that wage subsidies in Europe could delay adaptation to longer-term changes. Millions of employees on leave could end up being laid off anyway.

Because I got up

The number of working Americans who tested positive for drugs rose over the past year, suggesting that employee drug use was on the rise just as the coronavirus pandemic was causing new stress. Overall, the percentage of U.S. workers who tested positive for drugs in urine in 2019 rose to 4.5%, its highest level in 15 years, according to Quest Diagnostics, one of the largest drug testing laboratories in the U.S. The biggest jump was in workers testing positive for marijuana, reports Anne Steele.

Trade talks

US and Chinese officials said they were required to carry out the Phase 1 trade deal signed in January. A video conference late Monday brought US trade representative Robert Lighthizer, Treasury Secretary Steven Mnuchin and Chinese Vice Prime Minister Liu He together for a formal review of the deal. Trade tensions between the US and China rocked markets last year before the world’s two largest economies closed the phase 1 deal. As relations over Covid-19, the technology, and the national security law imposed by China against Hong Kong deteriorated, investors feared new frictions in trade and commerce would damage the global economy, report Bob Davis and Lingling Wei.

In the recent flare-up, the World Trade Organization sided with Canada in a decades-long battle with the United States Regarding timber imports, the Trump administration falsely claimed in 2017 that its northern neighbor was not properly subsidizing production. The setback for the US comes from a period of mounting trade tensions between Washington and Ottawa: This month the US introduced a 10% tariff on aluminum made in Canada, Paul Vieira reports.

At least one company welcomes the renewed aluminum tariffs for Canada: Chicago-based Century Aluminum campaigned for tariffs to be resumed to stimulate falling US aluminum prices. More than a dozen other aluminum companies, including Alcoa, Novelis and Arconic, have urged the Trump administration instead to put pressure on China to stop allegedly unfair government subsidies that encourage excessive aluminum production and lower prices, reports Bob Tita.

WHAT WE’LL READ

The coronavirus pandemic does not affect small businesses equally. “Approximately one in five (21%) small business owners say they will have to close their doors if current economic conditions do not improve in the next six months. Another 19% of owners believe they will no longer be able to operate than 7-12 months under current economic conditions. Over half (61%) are better off and do not expect any short-term problems, “noted the National Federation of Independent Business in a Questioning its members.

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