A Federal Reserve president who came under fire for his 2020 trades will retire early.
China’s ability to blend top-down control of politics with market-based capitalism was for years seen as a source of strength. That balancing act, though, appears to be teetering. Economic growth is slowing and the country is facing a potential financial crisis in the collapse of Evergrande, a heavily indebted property developer.
Some have called Evergrande’s troubles China’s “Lehman moment,” referring to the investment bank whose collapse precipitated the 2008 global financial crisis. Others, like The New York Times’s Paul Krugman, have said that a better analogy is Japan, where years of overinvestment and an aging population led to a long period of sputtering growth, though far from an economic collapse.
Either way, China’s reaction to its challenges is to exert greater control over its largest companies, making it clear who calls the shots in the country, the world’s second-largest economy after the United States. This has significant implications for foreign investment, geopolitics and more, as a quick tour of some of Beijing’s recent crackdowns shows:
Cryptocurrency: On Friday, China bolstered its ban on all activity linked to digital currencies, which some saw as part of a broader effort to channel citizens away from private financial services providers, which include decentralized crypto services as well as popular apps like AliPay and WeChat. The move should also be seen in the context of the Chinese central bank’s advanced development of its own digital currency, which would allow the government to track and control financial transactions.
Technology: China has been turning the screws on its largest tech companies, citing unfair competition. Officials recently ordered Alibaba to divest a recently acquired stake in one of the country’s largest broadcasters and limited online game playing to just three hours a week for anyone under 18, denting companies like Tencent. Earlier this summer, Chinese officials stopped Didi from signing up new users days after China’s largest ride-sharing app listed its shares in the United States. The government said it had to do with data privacy, but the timing cast a chill over Chinese companies listing abroad.
Electric vehicle manufacturers: China is putting the brakes on its homegrown electric vehicle industry, which has been fueled by government subsidies. This month, a minister declared that the country had “too many” EV companies. The government said it would encourage consolidation and was looking to reduce aid for the industry.
For-profit education companies: In July, China banned tutoring companies from making profits and restricted foreign investment in the $100 billion sector. It is now estimated to be worth considerably less.
Energy usage: China has pledged to cut its carbon gases by 65 percent in the next decade. In September, after two-thirds of the nation missed it emission goals for the first half of 2021, Beijing imposed stricter limits on energy usage, particularly on manufactures. Numerous factories, many of them that produce parts for such U.S. companies as Apple and Tesla, say their power supply has been substantially cut, forcing some to operate by candle light.
Article source: https://www.nytimes.com/live/2021/09/27/business/economy-stock-market-news/