IFF Newsletter | China's Consumer Prices Rise in October

TIME：2024-11-16

From the Editor

China's top legislature approved a proposal to lift the debt ceiling by CNY6 trillion on Nov. 8 to replace existing implicit local government debts. And the Ministry of Finance said that CNY800 billion will be allocated from newly added local government special bonds each year for five consecutive years specifically for debt resolution, starting this year, cumulatively reaching CNY10 trillion (USD1.39 trillion).

The U.S. Federal Reserve on November 8 decided to lower the target range for the federal funds rate by 0.25 percentage point to 4.5 percent to 4.75 percent amid cooling inflation and a weakening labor market, marking the second rate cut in this easing cycle.

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Latest from the IFF

The IFF to host its annual forum from November 22 - 23

The IFF is hosting its annual forum from November 22 - 23, 2024 with a focus on finding solutions to the challenges that economic globalization faces. Topics to be discussed include the development of global financial markets, green finance, digital finance, and Chinese enterprises going global.

Political and financial leaders from around the world, economic and legal experts, authorities on international affairs, as well as representatives of financial institutes and leading enterprises will convene for a series of carefully curated impact-driven leaders' dialogues that will help shape international finance policies.

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China News

China's Top Legislature Approves Bill to Raise Local Gov't Debt Ceiling

Xu Hongcai, deputy head of the financial and economic affairs committee of the National People's Congress (NPC), China's top legislature, revealed at a press conference on November 8 that the Standing Committee of the 14th NPC had approved a State Council bill on raising the ceiling on local government debt by CNY6 trillion (USD840 billion) to replace existing hidden debts at its 12th session in Beijing.

Under the new arrangement, the debt ceiling for special local government debt will be increased to CNY35.52 trillion from CNY29.52 trillion by the end of 2024.

Also starting from 2024, China will set aside CNY800 billion from each year's new special-purpose bonds for local governments for five consecutive years, thereby providing debt relief to replace CNY4 trillion of hidden debts, according to Minister of Finance Lan Fo'an.

China to Intensify Counter-Cyclical Adjustments, Governor Says

China will intensify counter-cyclical adjustment of its monetary policy and create a sound monetary and financial environment for stable economic growth and high-quality development, according to Pan Gongsheng, governor of the People's Bank of China, said last week while presenting a report on financial work to the 12th session of the Standing Committee of the 14th National People's Congress for deliberation.

"We will adhere to a supportive monetary policy, intensify and improve the precision of monetary policy regulation, effectively implement existing policies, and make greater efforts to materialize incremental policies," the governor of China's central bank said.

Pan said it is necessary to keep liquidity adequate and at a reasonable level, and to lower financing costs for enterprises and households, while continuing to properly utilize structural monetary policy tools to strengthen support for major strategies, key areas and weak links.

China's Import Expo Sees Over 80-billion-USD Tentative Deals

The seventh China International Import Expo, the world's first national-level exposition dedicated to imports, concluded in Shanghai on November 10, with a record level of provisional deals agreed.

Tentative deals worth USD80.01 billion were pencilled in, a 2 percent increase on last year’s CIIE, according to the CIIE Bureau, the annual event’s organizer.

The six-day trade fair drew 3,496 businesses from 129 countries and regions, including 1,585 firms from 104 countries involved in the Belt and Road Initiative. There were 1,106 companies from 13 member countries of the Regional Comprehensive Economic Partnership, and 132 from 35 less developed countries.

China's Consumer Prices See Stable Growth in October

China's consumer price index (CPI), a main inflation gauge, was up 0.3 percent year on year in October, slightly lower than the 0.4 percent rise in September, as the domestic demand continued to improve amid a sustained economic recovery, the National Bureau of Statistics (NBS) said on November 9.

The core CPI, which excludes food and energy prices, rose 0.2 percent from a year ago in October, up from 0.1 percent in September.

The NBS data also showed the country's producer price index (PPI), which measures costs for goods at the factory gate, went down 2.9 percent year on year in October, slightly widening from the 2.8 percent decline in September.

China Local Governments Encouraged to Use Funds From Special-purpose Bonds to Acquire Idle Land

Chins local governments are encouraged to use funds from special-purpose bonds to reclaim and acquire idle land to promote the stable and healthy development of the property market, according to a statement published on November 11 on the website of the Ministry of Natural Resources.

Using such funds to reclaim and acquire idle land is also a key measure to reduce the scale of market land stock and enhance the liquidity of local governments and enterprises, the statement said.

Local governments should prioritize the reclamation and acquisition of residential and commercial land that enterprises are unable or unwilling to continue developing, as well as land allocated for construction that has not yet commenced, it said.

Chinese SOEs Spent Over USD138 Billion Annually on R&D in Past Two Years

Firms controlled by China's central government have invested over CNY1 trillion (USD138.3 billion) annually in research and development over the past two years, advancing "new quality productive forces," stated Tan Zuojun, deputy director of the State-owned Assets Supervision and Administration Commission, during the 7th China Enterprise Forum.

From January to September, central state-owned enterprises raised their investments in strategic emerging industries by nearly 18 percent year-on-year, comprising almost 40 percent of their total investments, according to Tan.

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International News

U.S. Fed Slashes Interest Rates by 25 Basis Points Amid Weakening Labor Market

The U.S. Federal Reserve on November 8 slashed interest rates by 25 basis points amid cooling inflation and a weakening labor market, marking the second rate cut in this easing cycle.

"Since earlier in the year, labor market conditions have generally eased, and the unemployment rate has moved up but remains low. Inflation has made progress toward the Committee's 2 percent objective but remains somewhat elevated," the Federal Open Market Committee (FOMC), the central bank's policy-setting body, said in a statement.

In support of its goals, the Committee decided to lower the target range for the federal funds rate by 0.25 percentage point to 4.5 percent to 4.75 percent, the statement said.

Canada's Employment Holds Steady in October

Canada's employment was little changed in October, following an increase in September and up by 303,000, or 1.5 percent, on a year-over-year basis, Statistics Canada said on November 8.

According to the national statistical agency, the employment rate decreased by 0.1 percentage points to 60.6 percent in October, the sixth consecutive monthly decline. It fell 1.3 percentage points on a year-over-year basis and has been on a downward trend from a recent peak of 62.4 percent in February 2023.

The unemployment rate was unchanged at 6.5 percent in October, following a decline of 0.1 percentage points in September. On a year-over-year basis, the unemployment rate was up 0.8 percentage points in October, as 193,000, or 15.6 percent, more people searched for work or were on temporary layoff, the agency said.

OPEC Further Cuts Global Oil Demand Forecast For Next 2 Years

The Organization of the Petroleum Exporting Countries (OPEC) on November 12 further trimmed its forecasts for global oil demand growth this year and next, marking the organization's downward revision for the fourth consecutive month.

In its monthly oil market report for November, OPEC expected a "healthy" global oil demand growth of 1.82 million barrels per day (bpd) for 2024, but down about 107,000 bpd from the growth of 1.93 million bpd projected last month.

Meanwhile, OPEC estimates its 2025 global oil demand growth at 1.54 million bpd from last month's assessment of 1.64 million bpd, saying the figure is "still marking a very healthy increase compared with pre-pandemic norms."

Japan Mulls 65 Bln USD in Public Support For AI, Chips

Japanese Prime Minister Shigeru Ishiba had unveiled a plan at a press conference on November 11 to introduce a new framework for providing over 10 trillion yen (about 65 billion U.S. dollars) in public support over the coming years to bolster AI and semiconductor industries through 2030.

The initiative seeks to stimulate private sector investment, aiming to spur over 50 trillion yen in public and private investment combined over the next decade.

To support the initiative, the government was considering issuing bonds backed by shares in NTT and other government-owned assets.

Japan's Current Account Surplus Hits Record High For April-September

Japan's current account surplus reached a record 15.82 trillion yen (about 103.3 billion U.S. dollars) for the first half of fiscal 2024 (April to September), preliminary data from the Ministry of Finance showed on November 11.

The figure marked a 12.3-percent increase over the same period last year, marking the largest surplus recorded for a fiscal half-year.

EU Leaders Unveil Budapest Declaration to Boost European Competitiveness

The Budapest Declaration on the New European Competitiveness Deal was adopted on November 8 at an informal European Council meeting in Budapest, outlining a strategic framework aimed at enhancing the European Union(EU)'s global economic standing via targeted reforms and initiatives.

One of the top priorities agreed by EU leaders is to ensure a fully functioning Single Market, unlocking its full potential as a "key driver for innovation, investment, convergence, growth, connectivity and economic resilience."

Another central component of the declaration is its commitment to a "simplification revolution" to reduce administrative burdens on businesses. By mid-2025, the EU plans to decrease reporting obligations by at least 25 percent, fostering a more conducive environment for enterprise and innovation.