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While
infections in the rest of the world accelerate, the coronavirus
epidemic is showing signs of easing at its center -- China -- with new
cases slowing dramatically and recoveries gathering pace. Still, doubt
remains over whether the government’s statistics show the full picture.
On Tuesday, China reported 119 new confirmed cases of the
coronavirus, the lowest number in almost six weeks and the fewest since
the national government started releasing data on Jan. 21. Of those, 115
cases were in Hubei province, where the virus first emerged in December
and which still accounts for the majority of infections and deaths
worldwide.
Plateauing Outbreak
Coronavirus statistics in China show steady improvement Source: Health commissions of China, Hubei and Wuhan
Eighty-four percent
of cases, 97% of critical cases and more than 96% of deaths are within
the province, which was placed under mass quarantine by the government
on Jan. 23 to slow the virus’ spread to the rest of the country. The
ongoing lockdown of the region of 60 million people has led to
widespread suffering and scores of preventable deaths as the local medical system collapsed under the strain.
The
lockdown also meant that China’s fatalities from the pathogen have been
confined almost entirely to the province. As of Tuesday, 4.3% of people
who were confirmed to have the virus in Hubei have died, while that
rate is 0.9% in China outside Hubei.
Tragedy in Hubei
China has almost totally contained the deaths from coronavirus to Hubei Source: National and Hubei health commissions
Over the past three weeks, China’s number of
recovered patients has surged both in Hubei and the rest of the country,
with the government sending in thousands of health-care workers to help
in Hubei. Sixty-two percent
of those who’ve been officially diagnosed with the disease are now
better and out of hospital, according to the data from the National
Health Commission on Wednesday.
Getting Better
More than 20 times as many people recover each day as get sick Source: National Health Commission
Still, mistrust lingers over China’s official
statistics, which have been repeatedly revised through the course of the
outbreak, including an extraordinary
addition of nearly 15,000 cases of infection on Feb. 13. It’s also
changed the definition of what is a confirmed case of infection multiple
times. What’s Going On With China’s Coronavirus Case and Death Numbers?
One area of confusion has been over how to account for people
who don’t have symptoms but test positive for the disease in a
phenomenon known as asymptomatic infection.
At a World Health
Organization briefing on Tuesday, infectious disease expert Maria Van
Kerkhove said that about 1% of cases in China are asymptomatic at first,
but 75% of those patients eventually develop symptoms.
This
means that provinces not counting asymptomatic cases in their official
tally are likely under-reporting their numbers. There’s some evidence of
that: Chinese media outlet Caixin reported
that Heilongjiang province in northern China had 104 asymptomatic
infections which it did not add to its total of 480 confirmed cases on
Feb. 25.
China does not release the number of asymptomatic
infections in its daily nationwide tally, underscoring the uncertainty
which remains over whether the outbreak is truly contained at its heart. — With assistance by James Mayger
Health authorities around the world are on high alert as an outbreak of Covid-19, a pneumonia-like illness, has spread from the Chinese city of Wuhan to 68 countries and territories—affecting every continent— in the course of a month. It has shuttered cities as far away as in Italy, shaken financial markets and caused airlines to cancel flights globally. On Feb. 27, the head of the World Health Organization said the outbreak has the potential to become a pandemic.
The new coronavirus that
causes Covid-19—renamed SARS-CoV-2—is thought to have spread from a
food market in the central China metropolis that’s home to more than 11
million people. The large majority of cases and deaths have been in
mainland China, but that trend is changing as new hot spots pop up in
South Korea, Italy and Iran. So far, there have been 144 deaths linked to the virus outside mainland China: in Iran, Italy, South Korea, Japan, France, Hong Kong, the U.S., Australia, the Philippines, Thailand and Taiwan.
89,555
Confirmed cases worldwide
3,056
Deaths worldwide
Jurisdictions with cases confirmed as of
1–9
10–99
100–999
1,000–9,999
10,000 or more
More Coverage From Bloomberg
China first reported the
outbreak on Dec. 30, and by Jan. 23 authorities had locked down Hubei
province, where Wuhan is the capital, and restricted travel in other
regions just before the country’s largest holiday, Lunar New Year.
Usually the busiest travel period in Asia, tens of millions of people
were forced to stay home as offices, schools and factories stayed
shuttered.
Confirmed Cases in Mainland China by Province
As of
1–9
10–99
100–999
1,000–9,999
10,000 or more
While the virus is deadly for some, many who have it experience mild
symptoms or no symptoms at all, making it much harder to detect and
contain. More than 70 governments have responded by banning entry to
travelers who have been to affected regions, barring flights to certain
countries and changing visa requirements, according to data compiled by
the International Air Transport Association. The restrictions and virus
fears have hit the airline industry particularly hard, with many
suspending multiple routes and thousands of employees being laid off or
placed on unpaid leave.
These Are the Places Restricting Travel Because of the Outbreak
As of
Bans travel from:
Various places with confirmed cases
Mainland China, Hong Kong or Macau, and Taiwan
Mainland China and Hong Kong or Macau
Mainland China only
Select provinces
Sources: IATA; Bloomberg News reporting
Much is still unknown about the virus, but about 2% of Chinese patients with
confirmed cases have died. Some researchers estimate the mortality rate
will be closer to 1% once all cases are counted. Covid-19 appears to be
deadlier than seasonal influenza, but far less deadly than SARS, MERS or Ebola.
Rise in Confirmed Cases in Mainland China Since Jan. 20
Data as of
On Feb. 12, Hubei officials began including patients who were
diagnosed with CT lung scans absent a nucleic acid test, resulting in a
jump of nearly 15,000 more cases. According to the WHO, most of those cases were days or weeks old. The methodology has been revised several times since then.
While the worst may be over for China, the rest of the world is
trying to prepare. New cases in other countries surpassed those reported
in China for the first time on Feb. 27. Shortages of
face masks, hand sanitizer and cleaning supplies are now spreading as
far as New York City, where there’s yet to be a single confirmed case,
as residents prepare for the worst.
A poster featuring people wearing protective masks is displayed near surveillance cameras in Shanghai. Photographer: Qilai Shen/Bloomberg
For decades, China has been building and refining the ability to
track its citizens’ whereabouts and interactions to contain dissent and
protest. The state’s effort to try to contain the rapid spread of the
new coronavirus is now testing the limits of that surveillance system.
To
slow down any virus, it’s important to interrupt person-to-person
transmission. Officials in China have used a mix of high- and low-tech
methods to find and monitor people who may have been exposed to the
virus, which has infected
more than 77,600 and killed upwards of 2,600 in the country as of Feb.
24. Authorities have sourced data from phone carriers and called on
private tech companies to set up virtual health hotlines in order to
trace everyone who’s been in or near Hubei province, home to Wuhan, the
epicenter of the outbreak. They’ve also activated an extensive network
of Communist Party members and community groups, encouraging citizens to
monitor neighbors’ vital signs and whereabouts.
A 25-year-old who
studies in Wuhan told Bloomberg News he was surprised when officials
found him about 300 miles (482 kilometers) north in his hometown of
Henan. The postgraduate student, who asked not to be named because he
feared police retaliation, left Wuhan in early January. Two weeks later,
a Henan police officer called, saying he suspected the student had
visited the seafood market where the virus is thought to have originated
and asked if the student was feeling all right. Soon, the student was
overwhelmed by calls and visits from health officials, police officers,
and other authorities; doctors came to take his temperature daily for
two weeks. He hadn’t contracted the virus. Overwhelmed, the student
turned off his phone.
The neighborhood committee visits residents in Beijing’s Xicheng district. Photographer: Peter Martin/Bloomberg
Mobile phones—which, like social media accounts, are linked
to Chinese citizens’ national identity numbers—are an integral part of
China’s surveillance. Now they’re a key part of its virus-containment
efforts. China’s big three state-owned phone carriers have responded to
the call last month by the Ministry of Industry and Information
Technology to contribute data to fight the outbreak. As of Feb. 12,
China Mobile Ltd.’s 300-strong big-data team had fulfilled more than 400
government requests for data on people’s movement. China Telecom Corp.
has helped 24 provinces install a system that lets officials and medical
staff record and monitor people’s personal, health, and travel
information. It’s also adding systems at office buildings that track
people’s identities and health through facial recognition and automatic
temperature gauges.
Tencent Holdings Ltd.’s WeChat and Alibaba Group Holding
Ltd.’s Alipay have helped the government develop a new, color-coded
health-rating system to identify people as high-, medium-, or low-risk
and monitor their movements. The system, in use at offices, malls,
and subways, scans people seeking to enter and allows or denies them
access based on their ratings. Provinces including Hubei are requiring
anyone selling cough or fever treatments to report the buyers’
identities to the government, and plan to use purchase data to find
people who might be ill.
A pedestrian wearing a protective mask walks past shuttered stores in Shanghai. Photographer: Qilai Shen/BloombergSome
of the new tools are intensifying the paranoia that’s setting in as
some of China’s 1.4 billion people isolate themselves at home, with
little to do but search the internet. Baidu Inc.’s map function now
shows how crowded a neighborhood is so people can avoid congested areas,
while WeChat has added functionality so users of its social network can
see if they’re in the proximity of confirmed virus cases. WeChat and
microblogging site Weibo have set up virtual hotlines on which people
can report friends, family members, and neighbors who might be sick or
who aren’t taking proper quarantine precautions.
Since late
January, spreadsheets and lists identifying people living in or
returning home from Wuhan have been circulating around social media,
including Weibo. A Wuhan resident included in one of the lists says he
recently received an influx of strange calls. The resident, who asks to
remain anonymous to prevent further harassment, says he quarantined
himself alone at home for 14 days because his parents both tested
positive for the virus. His mother recovered after spending four days in
the hospital, while his father remained at a local hospital.
A
security guard looks at a monitor showing a thermographic image of
passengers walking through a temperature screening point at an entrance
to a subway station in Shanghai. Photographer: Qilai Shen/Bloomberg
In
recent weeks, China has turned to low-tech tactics. Across the country,
scores of neighborhood committee members have been deployed to take
people’s temperatures each day and record their whereabouts. Earlier
this month, a group of young women in red down jackets and flimsy
surgical masks went door-to-door in Beijing’s Shichahai neighborhood
with clipboards to record residents’ temperatures, ID numbers, and
recent travel. One, a party member who said she oversees 500 households,
told a Bloomberg reporter that as a disease prevention measure, the
community would now restrict outsiders from entering—including grocery
deliverymen—on orders “from above.”
The panic and fear that
blanket surveillance creates could actually undermine efforts to contain
the epidemic. China had come under criticism for silencing doctors in
Wuhan who suspected the virus was serious early on, and the suspicion
facing people thought to be potentially ill could discourage the
transparency needed to engender trust and fight an epidemic, says Stuart
Hargreaves, a law professor at Chinese University of Hong Kong who
researches surveillance and privacy issues. “If you had an approach that
encouraged the reporting of ‘negative’ information, rather than
punishing it, then this outbreak might have been limited at a much
earlier point,” he says.
The
Baidu Inc. map application displays the locations visited by patients
who have been confirmed to have the coronavirus infection and crowded
neighborhoods on a smartphone in an arranged photograph taken in
Shanghai on Feb. 21. Photographer: Qilai Shen/Bloomberg
It’s
also not clear that the use of mass surveillance will be effective.
While it might seem useful to have full oversight of citizens’ movements
and vital signs, making use of data of that scale requires manpower and
training that China’s police force lacks, says Suzanne Scoggins, an
assistant professor at Clark University. Scoggins, who researches
policing and authoritarian control in China, says tracing the spread of a
virus is different from tracking the movements of dissidents or
criminals. “This is still relatively new technology that is likely being
used in a way that is different from its original design,” Scoggins
says. “It may help some, but we shouldn’t expect it to contain an
outbreak.”
Blanket surveillance is different from so-called
contact tracing, a practice that goes back centuries to map a disease’s
spread, most famously when Dr. John Snow used it to find the source of
the 1854 cholera outbreak in London—a water pump. The usefulness of
high-tech surveillance tools will be limited until officials identify
the incubation period of the new coronavirus and develop rapid
diagnostic tests and effective treatment, says Jessica Justman,
associate professor of medicine in epidemiology at Columbia University
and senior technical director of its global public health center, ICAP.
Without a better understanding, “it’s going to make it much harder to
effectively use the kind of cellphone and other data people are
imagining,” says Justman, who has gone door-to-door across Africa,
testing people for HIV to map its spread and provide them with treatment
options.
A
sign that says registration is required for everyone is displayed as a
volunteer takes the temperature of a resident at a checkpoint at the
entrance to a neighborhood in Shanghai. Photographer: Qilai Shen/BloombergPerson-to-person
transmission of this coronavirus may be particularly difficult to stop
because it may be highly infectious before symptoms are apparent, says
Keiji Fukuda, the director of University of Hong Kong’s School of Public
Health and a former adviser to the World Health Organization on
pandemic influenza. If patients don’t realize they’re sick, they’re less
likely to stay home or take other precautions.
Residents pick up parcels from delivery workers at the entrance to a neighborhood in Shanghai. Photographer: Qilai Shen/BloombergChina’s
surveillance system has long alarmed human rights advocates, who point
to the detention of about 1 million Uighur and other Muslims in the
western region of Xinjiang, restrictions on the open web, and tightening
social control. That’s led to concerns about how this new flood of
tracking and data collection might be used by the government, even after
the outbreak has passed. “We need to make it very clear what health
authorities are doing and why they are doing it,” says Fukuda, who is
advising Hong Kong's government on the coronavirus outbreak. “I think
people are inherently suspicious and distrustful. So it’s really
important—if you’re dealing with an outbreak—to explain there are good
reasons to conduct disease surveillance.” —With Sharon Chen and Peter Martin
(Updates with number of infections and deaths from virus in China as of Feb. 24, in second paragraph)
The
world’s rich and powerful are in Davos, Switzerland, for the World
Economic Forum’s 50th annual meeting, and the gathering will be closely
watched to see how the global elite aims to tackle issues they helped
create, above all climate change.
President Donald Trump’s
appearance, which comes on the same day his impeachment trial starts in
Washington, began with him calling the trial a “hoax” and “disgraceful.”
In his speech, he lauded his economic achievements and said the U.S. is
“thriving” and “winning again like never before.”
Donald Trump delivers a speech on the opening day of the World Economic Forum in Davos, on Jan. 21.
Photographer: Jason Alden/Bloomberg
Meanwhile, Swedish activist Greta Thunberg, who was in the
audience for Trump’s speech, stepped up her criticism of governments and
companies for not doing enough to tackle climate change.
For
in-depth coverage and analysis of Trump’s speech, check out our TOPLive
blog on the Bloomberg Terminal. To get all the daily highlights
delivered to your inbox, sign up for the Davos Diary newsletter.
Here’s the latest (time-stamps are local time in Davos):
Blackstone’s Schwarzman Reacts to Trump Speech (12:30 p.m.)
“It was for several different constituencies,” Blackstone Group Inc.
Chairman Steve Schwarzman said in an interview with Bloomberg TV. “This
was a speech to basically say ‘I think we need some perspective and
let’s look at what’s happened under this administration.’ That is not
just for domestic consumption, it’s meant to be heard in the broader
context.”
The billionaire co-founder of the New York-based private
equity firm has previously advised Trump and was present in the White
House when he announced the first part of the China-U.S. trade deal.
Trump Urges Nations to Join Together (12.15 p.m.)
Trump
concluded his speech by calling on world leaders to join together to
“make our nations stronger, our countries safer, our culture richer, our
people freer, and the world more beautiful than ever before.”
“Above all else, we will forever be loyal to our workers, our
citizens and our families, the men and women who are the backbone of
our economies, the heart of our communities and the soul of our
countries,” Trump said. “Let us bring light to their lives one by one
and empower them to light up the world.”
Trump Hails ‘Blue-Collar Boom’ (12 p.m.)
Trump
said the economic strength of the U.S. is benefiting ordinary people
and “the workers come first” under his administration.
“The U.S.
celebrating the dignity of work is a fundamental pillar of our agenda,”
he said. “This is a blue-collar boom. The American dream is back, bigger
better and stronger than ever before.”
Trump Attacks Fed for Interest-Rates Policy (11:55 a.m.)
Trump renewed his feud with the Federal Reserve, saying the central bank raised interest rates too quickly.
These
great numbers are “despite the fact the the Fed has raised rates too
fast and lowered them too slowly,” Trump said. “I see such tremendous
potential for the future. We have not even started, because the numbers
we’re talking about are massive. The time for skepticism is over.”
Trump Trumpets His Economic Achievements (11:50 a.m.)
In his speech, Trump said that the U.S. “is in the midst of economic boom the likes of which the world has never seen before.”
“We’ve regained our stride; we discovered our spirit and
reawakened the powerful machinery of American enterprise,” Trump said.
“America’s thriving; America is flourishing and, yes, America is winning
again like never before.”
Trump Says Impeachment is ‘Just a Hoax’ (11:40 a.m.)
Trump
told reporters on the way into his speech that the impeachment trial is
“just a hoax” and a “witchhunt that’s been going on for years.”
Donald Trump speaks to the media as he arrives to deliver a special address at the World Economic Forum in Davos, on Jan. 21.
Photographer: Simon Dawson/Bloomberg“Frankly
it’s disgraceful,” he added. “We look forward to being here. We’re
meeting with the biggest companies in the world, the biggest businesses
in the world and world leaders, all for the benefit of the United States.”
Immigrants Key to Growth, Microsoft CEO Says (11:40 a.m.)
Microsoft
Corp’s chief executive officer warned that countries that fail to
attract immigrants will lose out as the global tech industry continues
to grow.
“Every country is rethinking what is in their national
interest,” Microsoft’s CEO Satya Nadella said in an interview with
Bloomberg Editor-in-Chief John Micklethwait.
Governments need to
“maintain that modicum of enlightenment and not think about it very
narrowly,” Nadella added. “People will only come when people know you’re
an immigrant-friendly country.”
Nokia’s Suri Predicts Productivity Boom (11:35 a.m.)
The
next industrial revolution will bring about “massive productivity
growth” the likes of which hasn’t been seen in decades, according to
Nokia Oyj Chief Executive Officer Rajeev Suri.
Speaking on a panel
about manufacturing, Suri estimated that productivity should increase
by as much as 35% starting in about 2028. The gains will be seen first
in the U.S. and a few years later in China, India and the European
Union, he predicted.
Naspers CEO Sees Growth in Second-Hand Clothes (11:30 a.m.)
Naspers
Ltd., Africa’s biggest company by market value, expects second-hand
clothing sales online to pick up as companies around the world look to
cut production of new goods to help address climate change.
“We are big investors in trading in second-hand clothes -- we
think the world will need more recycling over time,” Chief Executive
Officer Bob van Dijk told Bloomberg TV. “In classifieds, we are helping
to reduce the production of new goods.”
Bremmer Says Delegates Like Trump’s Policies (11 a.m.)
Ian Bremmer, president of consulting firm Eurasia Group, said Davos delegates may not like Trump but “they like his policies.”
“They
like the regulatory rollback, they like his cabinet, they like his tax
policy,” Bremmer told Bloomberg TV, adding that an informal poll of
about 40 to 50 delegates he conducted showed there is “zero panic” about
Trump winning a second term.
“You can have Greta here, you can have a bunch of people
talking about climate and sustainability, but the reality is that Trump
doesn’t drive people crazy at Davos the way he does in the United States,” Bremmer said.
Trump
is likely to show his “triumphalist, unilateralist” side in his speech.
“This is going to be Trump saying victory lap, I’m the greatest ever,
my economy is doing well, my markets are taking off, look how much money
I’m making you guys.”
Huawei CEO Dismisses Threat of U.S. Escalation (10:50 a.m.)
Huawei Technologies Co.
founder Ren Zhengfei played down the threat that the U.S. will impose
even stricter sanctions against his company, saying he is confident
China’s largest tech company can survive further attacks.
WATCH: Huawei Founder and CEO Ren Zhengfei discusses the U.S. ban on the company from buying vital American components.
Source: Bloomberg“This year, the U.S. might further escalate its campaign against Huawei but I feel the impact on Huawei’s business would not be very significant,” he said during a panel discussion.
Chile’s Palacios Keen to Hear Trump on Trade (10:50 a.m.)
Lucas
Palacios, Chile’s economy minister, said he is eagerly awaiting Trump’s
speech for any clues on trade relationships. “We’re a big copper
exporter to China so the truce between the U.S. and China is very
important for us,” Palacios told Bloomberg.
Lajcak Expects ‘Global Message’ From Trump (10:35 a.m.)
Miroslav
Lajcak, foreign affairs minister of Slovakia, told Bloomberg: “I expect
to hear a global message from the president,” especially on his
strategy for the Middle East. “We will see whether he will use this
opportunity.”
On impeachment, Lajcak said: “It’s not an easy thing. Whatever one thinks of him, he must be under tremendous pressure.”
IBM Proposes Rules to Counter AI Bias (10 a.m.)
IBM
called for rules aimed at eliminating bias in artificial intelligence
to ease concerns that the technology relies on data that bakes in
discriminatory practices and could harm women, minorities, the disabled
and others.
“It seems pretty clear to us that government regulation of
artificial intelligence is the next frontier in tech policy regulation,”
Chris Padilla, vice president of government and regulatory affairs at International Business Machines Corp., said ahead of a Wednesday panel on AI to be led by Chief Executive Officer Ginni Rometty.
Bjorgolfsson Expects Trump to Address China, Iran (10 a.m.)
Icelandic investor Bjorgolfur Thor Bjorgolfsson has spoken about his expectations for Trump’s speech.
“He’s
going to come and talk about the deal with China, and how Iran is on
the back foot, the stock market at an all time high and present himself
as a statesman,” Bjorgolfsson told Bloomberg on the sidelines of the
forum. “All this while the impeachment stuff is going on. This is a PR
special.”
Mnuchin Says EU Car Tariffs Not Curently Planned (9:10 a.m.)
Car
tariffs on producers in the European Union are not currently planned to
enforce Iran sanctions, but they remain in President Trump’s toolbox,
U.S. Treasury Secretary Steven Mnuchin said in an interview with the
Wall Street Journal.
The U.S. will likely have $1 trillion
deficits for a couple more years and the next phase of the China trade
deal may not be a “big bang,” Mnuchin told the newspaper.
HKEX CEO Li Shrugs Off Virus Concerns (8:50 a.m.)
Charles Li gestures during an interview at World Economic Forum in Davos on Jan. 21.
Photographer: Simon Dawson/BloombergCharles Li, chief executive officer of Hong Kong Exchanges & Clearing Ltd., shrugged off concerns about the outbreak of a deadly virus originating in central China.
“There are a lot of things that impact investor sentiment but
you have to think that structurally the market is very resilient,” Li
said in an interview with Bloomberg TV.
Thunberg Says ‘Nothing Been Done’ on Climate (8:45 a.m.)
Speaking on a panel
about sustainability, Thunberg said people are more aware about
environmental issues now but that “pretty much nothing has been done” to
tackle climate change as emissions of carbon dioxide have not declined.
“Without
treating this as a real crisis we cannot solve it,” Thunberg said. “It
will require much more than this, this is just the very beginning.”
The panel didn’t attract leaders of the fossil fuels
companies attending the forum, with most senior oil and gas executives
absent.
Trump Wants ‘Hundreds of Billions’ for U.S. (8:30 a.m.)
Trump
arrived in Switzerland with ongoing impeachment proceedings on his
mind. He tweeted throughout much of the flight, largely about a Senate
trial due to get underway there Tuesday. But he said his Davos
appearance is all about the economy.
His aim is to “bring Good Policy and additional Hundreds of Billions of Dollars back to the United States of America,” he wrote on Twitter.
“We
are now NUMBER ONE in the Universe, by FAR!!,” Trump tweeted ahead of
his arrival in Davos just after 9:30 a.m. local time. He also took a
swipe at what he called “Fake News Media,” accusing it of hating to talk
about the economy and “how incredible it is.”
IEA’s Birol Worried About Situation in Iraq (8:15 a.m.)
Fatih
Birol, executive director at the International Energy Agency, told
Bloomberg TV’s Francine Lacqua that the situation in Iraq is currently
his main concern in the oil markets.
“Recent
developments in Iraq are not very comforting,” Birol said. “I see Iraq
as a major issue, which is very important for the oil markets but also
for the world economy, which is already very fragile. I really hope we all see an Iraq that has some stability and production can go ahead.”
Guggenheim Predicts Collapse to Central Bank-Driven ‘Ponzi Scheme’ (7:49 a.m.)
Scott
Minerd has a message for his fellows at Davos who are applauding
rallying markets: Things aren’t as good as they seem. The Guggenheim
Partners investment chief likened the inflation of asset prices caused
by the loose money policies of central banks to a “ponzi scheme” that eventually must collapse.
“We will reach a tipping point when investors will awake to
the rising tide of defaults and downgrades,” he wrote in a letter from
the World Economic Forum meeting.
German Greens Leader Sides With Trump on Spending Critique (7:40 a.m.)
Robert
Habeck, co-leader of Germany’s opposition Greens party, told Bloomberg
TV’s Francine Lacqua that the government needs to rethink its
balanced-budget policy and spend more in areas like climate-friendly
infrastructure.
WATCH: Habeck discusses climate awareness, Germany’s balanced budget policy and the need to increase government spending.
(Source: Bloomberg)Habeck attacked Chancellor Angela Merkel’s “fetishism”
about balancing the budget and said that although he’s not a fan of
U.S. President Donald Trump, the criticism in the U.S. about Germany not
spending enough is valid.
The Greens, who are currently Germany’s second-most popular
party behind Merkel’s bloc, have been out of government for too long and
are ready to take on the responsibility of running Europe’s biggest
economy, Habeck added.
Natixis Sees Funds Returning to H2O (7:39 a.m.)
Natixis SA
is seeing money returning to its H2O Asset Management affiliate after
concern over some of the boutique’s thinly traded bonds sent investors
fleeing. “There have been flows that have been coming back to H20 and
performance has been good,” Jean Raby, chief executive officer of
Natixis Investment Managers International SA, said in an interview in Davos.
What’s Happening on Tuesday (7:30 a.m.)
Aside from Trump’s set piece, here’s some other highlights on Tuesday:
1
p.m. - Swedish teen Thunberg, who told Davos attendees last year that
“our house is on fire,” is scheduled to speak on a panel.
2:15 p.m. - With the next phase of trade talks with the U.S. pending, China’s Zheng takes center stage with a special address
4
p.m. - Bank of England Governor Mark Carney, Saudi Aramco board member
Andrew Liveris and others discuss how economies can grow without
compromising the environment
6 p.m. - Bank of America Corp. CEO
Brian Moynihan, IBM Corp. CEO Ginni Rometty, Siemens AG Chairman Jim
Snabe and others discuss stakeholder capitalism
Tuesday Kickoff
Greta
Thunberg’s call in Davos last year that it’s time to panic about
climate change might be finally starting to hit home as attendees show
more alarm at the Swedish activist’s message. With the usual parade of
government chiefs, billionaires and corporate executives attending,
global warming is dominating the agenda more than ever. In the WEF’s
annual risk survey, environmental dangers elbowed out items such as
cyber attacks or terrorism.
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The
U.S. and China are taking baby steps to ease tensions in their trade
war, as negotiators prepare for the resumption of face-to-face talks in
Washington in the coming weeks.
On Wednesday, U.S. President Donald Trump said he was postponing
the imposition of 5% extra tariffs on Chinese goods by two weeks,
meaning Chinese officials can celebrate their Oct. 1 national day
without a fresh escalation.
Meanwhile, China is considering
whether to permit renewed imports of American farm goods including
soybeans and pork, according to people familiar with the situation,
potentially taking some pressure off U.S. states with large numbers of
Trump supporters. The Ministry of Commerce said Thursday Chinese
companies have started inquiring about prices for U.S. agricultural
products including soybeans and pork.
At
the request of the Vice Premier of China, Liu He, and due to the fact
that the People's Republic of China will be celebrating their 70th
Anniversary....
....on
October 1st, we have agreed, as a gesture of good will, to move the
increased Tariffs on 250 Billion Dollars worth of goods (25% to 30%),
from October 1st to October 15th.
Taken together, the measures pale in comparison to the
oncoming hit from U.S. tariff increases still in the pipeline for
October and December, the fruit of a rapid escalation in tensions between the two sides last month. At the same time, as evidence mounts in both nations of the economic damage that the trade war is doing, there’s more urgency for a deal.
Trump escalated
the U.S.-China trade war in August when he announced an increase in
levies on Chinese goods. That was in response to higher Chinese tariffs
which were a reaction to a previous increase by the U.S.
China
welcomes the postponement of U.S. tariffs as a goodwill gesture,
Ministry of Commerce spokesman Gao Feng said at Thursday’s regular
briefing. Mid-level teams will meet soon to prepare for higher level
talks, he said, reiterating that both sides are communicating without
giving a date for the meeting between the top negotiators.
Any further agricultural purchases are yet to be made and the volumes are still undecided, the people said. China had halted U.S. farm-product imports in August after negotiations deteriorated.
Earlier on Wednesday, China announced a range of U.S. goods would be exempted
from 25% tariffs put in place last year, as the government seeks to
ease the impact from the trade war. While that move may create some good
will in Washington, China didn’t exempt agricultural goods produced in
key Trump-supporting states.
Welcome
this decision. It should be seen as a goodwill gesture the US side made
for creating good vibes for the trade talks scheduled in early October.
Yesterday China announced to remove 16 categories of US products from
tariff list. Hope reciprocity of goodwill can continue. https://t.co/OWjGIQ4TPl
At home, China is facing factory-price deflation,
falling exports and an uncertain path for government stimulus policy
given the nation’s debt load and fragile property sector. In the U.S., factory activity
unexpectedly contracted in August for the first time in three years,
underscoring how slowing global growth and an escalating U.S. trade war
with China are taking an even bigger toll on domestic producers.
“Trump’s goodwill gesture suggests that the trade war is
starting to bite and the U.S. may be more eager to close a deal,” said
Chua Hak Bin, an economist at Maybank Kim Eng Research Pte. in
Singapore. “The clock is ticking and Trump’s approval ratings are
sliding, with manufacturing now in recession.”
Despite the goodwill gestures, the two sides remain far apart on fundamental issues, and officials continue to trade barbs.
China wants the U.S. to remove all extra tariffs, and the U.S. has long
sought concessions on intellectual property and state-subsidies for
industry that Beijing has been unwilling to give.
“The negotiators have had a year to come to an agreement, and
they remain structurally at odds on key issues,” said Andrew Polk,
co-founder of research firm Trivium China in Beijing. “Another two-week
reprieve doesn’t change those fundamentals.” — With assistance by Shuping Niu, Steven Yang, Isis Almeida, Kevin Hamlin, John Harney, Yinan Zhao, and Miao Han
China responded to Donald Trump’s tariff threat with another escalation of the trade war on Monday, letting the yuan tumble to the weakest level in more than a decade and asking state-owned companies to suspend imports of U.S. agricultural products.
The moves are likely to further antagonize Trump, who has criticized Beijing for managing its currency unfairly and failing to keep promises to buy more U.S. crops.
Stocks and emerging-market currencies sank on concern a
prolonged conflict between the superpowers will weigh on global economic
growth, while haven assets including the Japanese yen, U.S. Treasuries
and gold climbed. Investors increased bets on Federal Reserve interest-rate cuts.
"It’s among the worst-case scenarios," said Michael Every,
head of Asia financial markets research at Rabobank in Hong Kong. "First
markets sell off, then Trump wakes up and this all gets far, far
worse."
The White House didn’t immediately respond to a request for comment.
Trump last week proposed adding 10% tariffs on another $300
billion in Chinese imports from Sept. 1, abruptly ramping up the trade
war between the world’s largest economies shortly after the two sides
had restarted talks. Chinese bureaucrats were stunned by Trump’s
announcement, according to officials who’ve been involved in the
negotiations.
The threat of more tariffs came just as Chinese
President Xi Jinping and other senior members of the Communist Party
gathered for a secretive summer getaway in Beidaihe, a seaside town
about a three-hour drive from Beijing. Xi had already faced pressure for
weeks to take a harder stance on trade -- particularly after the U.S.
blacklisted telecom equipment giant Huawei Technologies Co.
Editorials in state-run newspapers
suggested Xi will reject any deal that either retains punitive tariffs
or forces China to make concessions on issues like state-run enterprises
that could weaken the party’s grip on power.
The harder line underlines a growing feeling in Beijing that
Trump can’t be trusted to cut a deal, and that China would be better off
waiting to see if a Democratic presidential candidate -- many of whom
have criticized the use of tariffs -- takes office. The halt in
agricultural purchases could hurt Trump in politically sensitive states
ahead of the 2020 election.
The MSCI Asia Pacific Index headed for
its biggest decline since March on Monday, with shares slumping more
than 2% in markets from Tokyo to Hong Kong and Seoul. Equities in
Shanghai saw a more modest drop amid speculation that state-linked funds
may act to prop up the market, while U.S. equity-index futures dropped
1.1%.
The yuan tumbled 1.3% to 7.0324 a dollar at 2:42 p.m. Hong
Kong time, after the People’s Bank of China set its daily reference rate
at a weaker level than 6.9 for the first time since December. The
offshore yuan sank as much as 1.9% to a record low.
"Breaking
seven is due to a mix of factors: an escalation of trade war, the
softening of China’s economy and a willingness for the PBOC to tolerate
higher volatility for the yuan," said Larry Hu, head of China economics
at Macquarie Securities Ltd. in Hong Kong. "The PBOC has entered
uncharted waters, so it has to manage expectations carefully."
The central bank attributed
the yuan move to protectionism and expectations of additional tariffs
on Chinese goods, while saying it can still maintain a steady currency.
By linking today’s devaluation with the renewed tariff
threat, the PBOC "has effectively weaponized the exchange rate," said
Julian Evans-Pritchard at Capital Economics in Singapore. "The fact that
they have now stopped defending 7 against the dollar suggests that they
have all but abandoned hopes for a trade deal."
What Bloomberg’s Economists Say...
"China
appears to be posturing for worse to come in the trade war. Letting the
yuan weaken past 7 against the dollar suggests it’s looking to buffer
the economy from a more severe trade shock." -- David Qu, Qian Wan and Ye Xie
Allowing
the yuan to weaken is not without risk for China. A mid-2015
devaluation spurred capital outflows and destabilized global markets,
though tighter capital controls this time around should help prevent
another exodus.
A cheaper currency also risks triggering yet more
reprisals from the U.S. president, who has frequently warned that
tariffs could go much higher. At a rally in Cincinnati last week he
boasted of "taxing the hell out of China" until there’s a deal.
Tariff Man Returns
President Donald Trump announced tariffs on additional $300 billion in Chinese imports
Source: Bloomberg
The biggest damage from the trade war is the hit to
business activity and confidence that comes from increased uncertainty,
rather than the tariffs themselves, according to Wang Tao, China
economist at UBS Group AG. For that reason, the weaker yuan may do
little to offset the blow, she said.
China’s crop imports from the U.S. are another weapon at
Beijing’s disposal. The country’s state-run agricultural firms have now
stopped buying American farm goods, and are waiting to see how trade
talks progress, people familiar with the situation said, declining to be
identified as they’re not authorized to speak to the media. Corn and
soybean futures fell on the news.
When he announced the trade
truce last month, Trump spoke at length about how China would be buying
more farm goods from “great patriots” in the Midwest -- even though no
details of any purchases have been announced by either side. Officials
in Beijing privately said afterward that China made no promises to buy
more agriculture goods before a final deal is struck.
China’s commerce ministry didn’t respond to a fax seeking comment.
"China
is giving up on its softer diplomatic strategy and is no longer willing
to be Trump’s punching bag," said Chua Hak Bin, an economist at Maybank
Kim Eng Research Pte. "Trump’s tariffs threats are backfiring and
triggering a full-scale trade war." — With assistance by Steven Yang, Isis Almeida, Shuping Niu, Yinan Zhao, Miao Han, and Daniel Ten Kate Source: Bloomberg
When it was commissioned in the 1870s, the
Renaissance-style building chosen to house a water treatment plant
in Buenos Aires was meant to project Argentina’s emergence on the world
stage.
By the time it finally opened two decades later, the Palace
of Running Water was a symbol of spent ambition. With its imported
European terracotta tiles and stained glass windows, the waterworks
illustrated the excesses that had wrecked the Argentine economy and
almost brought down the global financial system.
The story of what came to be known as the Barings Crisis of 1890
is studied by economic historians as the biggest sovereign debt meltdown
of the century. But for Argentines, the fallout reverberates outside
the pages of textbooks; for the same elements of boom and egregious bust
lie at the root of the country’s economic and political upheaval to the
present day.
Argentina has spent 33% of the time since 1950 in recession, according to a World Bank report
released in May. In global terms, that is second only to the Democratic
Republic of Congo, which endured two major wars, three military coups
and numerous regional conflicts over the same period. By comparison,
Argentina’s larger neighbor Brazil has seen recession for 12% of that
time.
Bust and Boom
Argentina has spent more time in recession than almost every other nation Source: The Conference Board; World Bank
Argentina’s perennial volatility is once more front
and center as President Mauricio Macri bids for re-election in the wake
of a currency rout and a massive $56 billion bailout from the
International Monetary Fund. With presidential primaries due on Aug. 11,
the vote is shaping up to be a dramatic contest over the country’s
economic future.
While polls suggest the race is too close to
call, investors clearly favor Macri to enact the reforms they see as
needed to steer the economy out of recession. They have concerns that
Macri’s main opponent, Alberto Fernandez, wouldn’t be the moderate
president he contends, fears magnified by his choice of running mate,
the populist former president, Cristina Fernandez de Kirchner. For his
part, Fernandez, 60, lambasts Macri’s economic stewardship and says he’s
happy to not be “Wall Street’s candidate.”
Julian Diaz at his restaurant Los Galgos in Buenos Aires. Photographer: Sarah Pabst/BloombergFernandez
has Julian Diaz’s vote. Diaz, 37, the owner of three restaurants in
Buenos Aires, says he’s backing “Fernandez-Fernandez,” not so much out
of political conviction as what he sees as economic and social
necessity.
Custom is down and Diaz says inflation means his
prices have risen “exponentially”: a cafe con leche costs 80 pesos
($1.80); a year ago it was 55 pesos. He’s reduced the number of staff on
the payroll through attrition and put on hold plans to expand, waiting
for the election outcome.
“We can’t think about developing the
country with poverty rising, violence rising, where the social gap is
widening, where there’s no consumer spending,” Diaz said at his Los
Galgos restaurant three blocks from the palace. Argentina’s crisis is
cyclical, making it “unbearable,” he said. “There’s always another
crisis coming.”
The turbulence can be traced back to the last decade of the 19th
century. At the time, Argentina was cashing in on farming of its
abundant plains, the Pampas, and a wave of European migrants relayed
home the opportunities to be had. Opulent mansions, Parisian boulevards
and Utopian plazas were sprouting up in the capital. As work was about
to begin on the Palace of Running Water, plans were drawn up for the
Teatro Colon, still one of the world’s best opera houses.
English
bank Baring Brothers and Co. was only too happy to join the rush, and
bet big on Argentina. But something had to give, and as the economy
slowed in 1889, Argentines sniffed a crisis and rapidly exchanged their
pesos for gold, causing the currency to tumble. Drought, a failed coup,
rising inflation and strikes drove foreign investors away, and by early
1890 government leaders couldn’t stop the tailspin.
The Plaza de Mayo district of Buenos Aires. Photographer: Sarah Pabst/BloombergThe
tipping point came when Barings failed to float a bond in the London
market for the Buenos Aires Water Supply and Drainage Company—contracted
to build the Palace of Running Water. Soon after, Barings notified the
Bank of England that it was on the verge of collapse due to its exposure
in Argentina, and it had to be bailed out. The following year, 1891,
Argentina’s economy shrank 11%.
Barings “simply lent too much money, they went too far,” said Eugene White, a professor at Rutgers University and author on the crisis. “The party got too raucous—they didn’t take the punch bowl away.”
Many
of the elements of the Barings Crisis—mounting debt, a currency rout,
bailout and even drought—have echoes in Argentina’s current recession.
Its economic woes follow a well-worn path: It spends more than it earns,
relying on dollars from grain sales and forcing the government to rack
up debts to cover the purchase of imports, and once investors sour on
fronting more money, a vicious domino effect ends in misery. Little
wonder it’s had 61 central bank chiefs in the 84 years of the
institution’s existence.
Natalia Perrotta stands in front of the Water Palace. Photographer: Sarah Pabst/BloombergYet
that cyclical nature of Argentine life means some voters are willing to
give Macri more time. Natalia Perrotta, 32, a doctor at a public
hospital, has cut back on spending and vacations, but she doesn’t blame
the president for her belt-tightening. “In Argentina we’ve always had
ups and downs in the economy,” she said. “And because of that I don’t
consider what’s happening now as new.”
The warning signs are
again flashing red: The IMF sees a 1.3% contraction for 2019, with
inflation ending the year at some 40%, and “significant downside risks”
to its outlook, notably political uncertainty.
The upshot is that many Argentines have little faith in politics,
policy or the peso. The proof? They have some $350 billion in savings
stashed abroad, more than at home, according to Miguel Kiguel, head of
consulting firm EconViews and author of a book on Argentina’s economic
crises.
“The lack of confidence comes from the fact that every
few years there’s a major devaluation or high inflation, and the way to
protect yourself is to go into dollars,” said Kiguel, a former chief of
advisers in the Economy Ministry in the 1990s.
Flight to Safety
Whether it’s the 1880s or 2010s, Argentines don’t save in pesos before a crisis Source: BCRA; della Paolera, Alan Taylor
When governments change, the policy whiplash is
often dramatic. Argentina went from seven presidencies in the early
1970s to a bloody, right-wing military dictatorship that ruled for
almost eight years until 1983 and sent the country into a war with the
U.K. Then came a pro-business government in the 1990s, populist
administrations from 2003 to 2015, and finally Macri’s market-friendly
presidency.
Macri, 60, a former civil engineer, put Argentina’s
global comeback at the heart of his program after his predecessor
Kirchner presided over currency and capital controls, tampered with
official statistics and refused to pay back debt holders. But lately
Macri’s been fighting populism with populism, freezing prices on food
items, mobile phone bills, electricity, gas and public transport.
Fernandez, an adherent of the populist Peronist movement founded in 1946
by then-President Juan Peron and his wife, Eva, accuses Macri of
mismanagement, and advocates for generous welfare spending. The first
round vote is on Oct. 27, with a runoff planned for the end of November
if necessary.
The Plaza Miserere subway station in Buenos Aires. Photographer: Erica Canepa/BloombergGerardo della Paolera, 60, an economic historian who co-wrote a book
about the Barings Crisis, believes more turmoil is inevitable
regardless of who wins: Argentina will need to restructure its debt once
the IMF cash dries up in 2021, he says. Like many Argentines, he’s
trying to prepare his family, knowing how this story ends. His adult
children love Argentina and don’t want to leave, but he doesn’t see a
future for them in their own country. “I push them to go abroad,” he
said.
Diaz, the restaurant owner, is left to lament his country’s lost opportunity.
“Always
when I pass the Palace or Teatro Colon, it symbolizes to me what
Argentina could have been,” he said, sipping a coffee. Argentina has “so
many wonderful things, but at the same time it has instability and a
lack of predictability,” he said. “Here, we don’t even know what’s going
to happen tomorrow.”
