The Times - UK (2020-10-14)

(Antfer) #1

the times | Wednesday October 14 2020 1GM 41


Business


Chinese imports unexpectedly entered
recovery mode last month, rising
rapidly as the country’s post-corona-
virus convalescence increased domes-
tic demand.
Exports from the world’s second
largest economy also continued to rise
steadily in September as other trading
powers sought to patch up their econo-
mies and loosen Covid-19 restrictions.
Imports from overseas jumped by
13.2 per cent, according to official cus-
toms data released by Beijing, far ahead
of forecasts of a 0.3 per cent rise and
August’s 2.1 per cent drop.
China’s exporters have started to
recover the months of overseas orders
lost after the virus emerged earlier in
the year. Exports were up by 9.9 per
cent in September, having increased by
9.5 per cent in August.
Analysts said that the surge in
imports suggested that Beijing’s
attempts to shore up the Chinese eco-
nomy had borne some fruit. Wang Jun,
chief economist at Zhongyuan Bank,
said that economic support measures
had “boosted domestic demand, espe-

introducing better corporate govern-
ance, GFG has created multiple
advisory boards for its businesses,
which employ 30,000 people in ten
countries.
Of the five new advisory directors for
the UK, none is a woman. In Britain the
board includes Mark Elborne, former
UK head of General Electric, the
American conglomerate, and a long-
time proponent of the industrial
regeneration; Carwyn Jones, the
former first minister of Wales and
present member of the Welsh parlia-
ment; and Lord Lancaster of Kimbol-
ton, the former Tory minister. The
wider EU board of nine has only one
woman: Anne Lange, a French techno-
logy executive.
One industry source said that the
advisory boards were a good initiative.
“Having people around to advise him
and perhaps rein him in will be good for
Sanjeev Gupta because this is a private
company, privately run and which has
not thought about corporate govern-
ance in the past,” the source said.

China is exporting more as rivals
overseas struggle with coronavirus

Financial markets are at risk of a sharp
snap-back because unfettered policy
support in the coronavirus pandemic
has left them overvalued, the Inter-
national Monetary Fund has warned.
A market correction triggered by
new virus outbreaks or “policy mis-
steps” would not hit investors alone but
create a “headwind to the recovery” by
driving up borrowing costs and cutting
access to credit in the real economy, the
multilateral lender said.
A second wave of infections, a deeper
recession or policy mistakes could
cause a market sell-off that creates
mass bankruptcies and stretches banks
to the limits of their loss-absorbing
capital buffers as it spreads “through
the entire financial system”.
“Renewed liquidity pressures could
easily morph into insolvencies, espe-
cially if the recovery is delayed,” the IMF
warned in its twice-yearly Global Finan-
cial Stability report. “The resilience of
the banking sector is likely to be tested.”
So far, it said, interventions by central
banks and governments through low
interest rates, quantitative easing,
liquidity and debt guarantee schemes
had been “a game changer”. They “less-
ened risks to financial stability and
bought time to address the health crisis
and contain its economic fallout”.
Companies raised cash to survive
lockdown thanks to policy interven-
tions, without which “in all likelihood
non-financial firms would have seen a
sharp rise in bankruptcies”. However,
the IMF said that “stretched asset valu-
ations” and “financial vulnerabilities”
were the “unintended consequences
[of] unprecedented policy support”
because markets were taking more
risky gambles in the expectation of a
bailout at the first sign of instability.
“A disconnect persists between finan-
cial markets, where there have been
rising stock market valuations, and the
weak performance of the real economy,”

Sell-off is danger


for ‘overvalued’


financial markets


Philip Aldrick Tobias Adrian, the IMF’s financial
counsellor, said. “[That] does raise con-
cerns about the possibility of a market
correction, as witnessed for example,
with tech stocks in September.”
He added: “Current market valua-
tions may be sustained for some time, as
long as there is a perception in markets
that policy support will be maintained
or scaled up in response to deteriora-
tion in economic conditions. However,
the risk of a sharp adjustment in asset
prices or periodic bouts of volatility
remains and may rise should investors
reassess the extent or duration of policy
support.” Among the vulnerabilities

that could pose headwinds to growth,
the IMF pointed to the risk of “wide-
spread bankruptcies” owing to the
higher debt taken on during the pan-
demic; “capital shortfalls in... the weak
tails of banks”; and hedge fund and
money market fund fragilities if they
gambled on the assumption that “cen-
tral banks will extend policy support in
response to adverse shocks”.
“Policymakers face a trade-off in
their decision-making — a trade-off
between the support that is needed
today and the implications of rising vul-
nerabilities for growth in the medium
term,” the IMF said.
Mr Adrian said that “policymakers
should sequence their response to build
a bridge to a sustainable recovery. As
economies reopen, monetary policy
should remain accommodative.”

unemployment rise


Women in short supply on


new Gupta advisory boards


Robert Lea Industrial Editor


Imports surge points to China recovery


cially investment-led demand, which
buoyed imports. The other factor is the
yuan’s recent appreciation, which is
good for imports and people’s spending
power.”
Chinese manufacturers also are step-

ping up their production as the pan-
demic continues to stymie rivals in
other markets.
“A jump in imports suggests that
domestic investment spending remains
strong,” Julian Evans-Pritchard, senior
China economist at Capital Economics,
the consultancy, said. “Meanwhile,
exports remained strong, most likely
thanks to the recent strength of retail
sales among China’s major trading
partners.”
Some commentators have ques-
tioned whether the country’s exports
can continue on their present trajec-
tory. The World Trade Organisation
recently downgraded its forecast for
next year’s rebound in global com-
merce by two thirds.
China’s overall trade surplus with the
world — the gap between its imports
and exports — narrowed from
$58.9 billion in August to $37 billion in
September as it bought more overseas.
It had been expected to be about
$58 billion. The country’s vast trade
surplus over the United States, which
the Trump administration has sought
to eradicate over the past four years, fell
from $34.2 billion to $30.8 billion.

Callum Jones Trade Correspondent


A group of industrialists and former
politicians have signed up to join the
inaugural advisory board of GFG Alli-
ance, the Liberty Steel group whose
corporate governance and trans-
parency have attracted criticism.
In contradiction of best practice, the
new board is light on female repre-
sentation and GFG refuses to disclose
how much it is paying the adviser
directors.
Sanjeev Gupta, 49, its founder, owner
and executive chairman, is a big player
in the ailing UK steel industry. The
owner of the Rotherham steelworks,
Mr Gupta grew Liberty Steel by cut-
price acquisitions from fire sales at Tata
Steel and Caparo Industries and has
been linked with rescue deals for plants
at Port Talbot and Scunthorpe.
However, Mr Gupta’s group has
remained opaque and its unorthodox
borrowings at high rates have left many
doubting its strength or sustainability.
In its latest attempt to prove that it is

Regional unemployment is uneven


Change in rate between May and August


UK 0.4%
Great Britain 0.4%

England 0.4%


North East 1.4%


North West 0.3%
Yorkshire and
The Humber

0.3%


East Midlands 0.3%


West Midlands-0.4%


East 0.4%


London 0%
South East 1%

South West 0.6%


Wales 1%


Scotland 0%


Northern
Ireland

1.2%


Jul-
Sep
2019

Source: ONS

27


26


28


28


29


29m


2015 16 17 18 19 2020


Flash
estimate

Payrolls have stabilised


Payrolled employees,
seasonally adjusted, UK

0


50,000


100,000


150,000


200,000


250,000


300,000


350,000
South West 0 .6%

Wales 1 %


Scotland 0 %


Northern
Ireland

1 .2%


Jul-
Sep
2019

SSSSSSSSSouSSSSSourSSSSSSSSSSSSSSSSourSSSSSSSSSSSSSSSSoSSSSSSSSSSSSSourSSSSSSoSSSSouSSoSSSSoouroourooourooouoooouroouououoouroouoouououooooooououououruururuuururururururuuuuuuuurrrrcececececce:cccce: cce:ce:cececece:ceccccce:ce:ce:ce:ce:cecece:ceeee:ee:e:eeeee:::: :::OONONSOONONSONSOONONONSOOOOOOOONSONOONONONSOONOOONSOOOONSONSOONSOOONSONSOONSONSONSOONONONNNSNSNNNNNSNSNSNSNSNSNNNNNNSNNSNNSNNSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSS

0


50, 000


100,000


15 0,000


200,000


250 ,00 0


300,000


350 , 000


Q&A


Are the latest jobs data a
reason for optimism or
cause for concern?
There is much to worry
about. In the three months
to August, there were
482,000 fewer people in
employment than in the
three months to February,
the biggest six-month fall
since 2009. Redundancies
in the three months to
August jumped to 227,000,
also equalling 2009 levels.
Pay growth is flat. Official
unemployment has risen
to a three-year high of
4.5 per cent.
Yet if you look at labour
market flows, there was
some improvement in
September. Employer
payrolls increased by
20,000, the first positive
move since the pandemic.

Are we all in it together?
The young, self-employed
and particular areas have
suffered more. Of the
482,000 fall in people in
employment since
February, 239,000 are
aged 18 to 24. The jobless
rate for that group has
risen from 10.5 per cent to
13.1 per cent.
There also has been a
big fall in the number of
self-employed: 472,000.
The ONS says that may be
explained by people
changing their status to
“employee”. The number
of part-time workers has
dropped by 418,000, while
there has been a 284,000
increase in full-time
workers. It is not entirely
clear what is going on, but
a common theme is that
precarious work seems to
be particularly affected.

-12%-10 -8 -6 -4 -2 0 2


World’s leading economies
Change in GDP (%)

Italy
France
UK
Canada
US
Germany
Japan
China

Source: IMF
Free download pdf