Here's our summary of key economic events overnight that affect New Zealand with news of rising tensions between China and India.
But first in the US, the Dallas Fed manufacturing survey expanded at a faster pace in June, driven by strong production and new order levels. Price and wage pressures accelerated further, both to new record high levels.
As part of the 100 year celebration of the founding of the Chinese Communist Party, China is claiming its per capita GDP now exceeds US$10,000. It seems an odd boast given that most observers had it higher than that a few years ago.
In China, their giant Baihetan hydroelectric dam, the second largest in the country after the Three Gorges Dams, began generating electricity yesterday. It is a piece of infrastructure abhorred by India because of its control over water flows to the Indian subcontinent.
On the Indian-China border that has been subject to dispute for decades, both the Chinese and Indians have amassing substantially larger forces recently. The Chinese effort is quite secret, while there is more visibility on the Indian moves. It is not a good sign.
In Australia, their Federal tax authority has been concentrating on the top 500 privately owned business groups to ensure they pay their fair share. It is paying off with 320 of them paying +40% more tax in the three years to the 2018 tax year. The ATO is now widening those investigations to the top 1,000 corporate taxpayers which covers large public and multinational companies, focusing on the income tax affairs of taxpayers with turnover above AU$250 mln.
Internationally, the Baltic Dry Index rose +2.1% in a day to 3,324 yesterday, its highest since June 2010. Shipping demand is high. And we should also note there are questions rising about the sustainability of water level in the Panama Canal as drought grips the region. Commodity prices for iron ore and steelmaking coal are staying high, but prices for thermal coal are falling due to Chinese regulatory actions.
Wall Street has opened lower, but down only -0.1% on the S&P500. The Dow30 is down -0.6% but the NASDAQ is up +0.6% and a new record high. Overnight European markets closed sharply lower with Paris and London down almost -1.0% although Frankfurt was down only -0.3%. Yesterday both Tokyo and Shanghai closed with minor -0.1% dips. Hong King was closed for a 'weather event'. The ASX200 closed flat and the NZX50 Capital Index was down -0.2%.
The UST 10yr yield starts today down -4 bps at 1.48%. The US 2-10 rate curve is flatter at +1.22 bps. Their 1-5 curve is also flatter at +82 bps, while their 3m-10 year curve is flatter as well at +143 bps. The Australian Govt ten year benchmark rate starts today at 1.56% and a -1 bps slip. The China Govt ten year bond is unchanged at 3.11%. And the New Zealand Govt ten year is now at 1.82% and that is unchanged too.
The price of gold starts at US$1780/oz which is down -US$2/oz from this time yesterday.
Oil prices are sharply lower today, down -US$1.50/bbl. In the US they are now at just over US$72.50/bbl, while the international Brent price is just over US$74/bbl.
The Kiwi dollar opens today a little softer at 70.4 USc. Against the Australian dollar we are unchanged at 93.1 AUc. Against the euro we are virtually unchanged too at 59.1 euro cents. That means our TWI-5 starts today softer at 72.9.
The bitcoin price is now at US$34,169 and up another +3.4% from this time yesterday. Volatility in the past 24 hours has remained very high at +/- 4.4%.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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24 Comments
Re the dangers of China as a state actor: I wonder how many kiwis realise how many partnerships (& how close) that NZ universities, research institutions, Polytechnics etc have with Chinese institutions. This gives the CCP access to our IP, helps and aids a country with whom we do not share values with.
It is one thing to sell products and services to customers in China, it’s quite another thing to enter into full partnerships with state institutions for them to gain access and leverage.
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https://www.mbie.govt.nz/science-and-technology/science-and-innovation/…
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This is just one example.
The developing world now accounts for almost two-thirds of the global economy compared with one-third by the West: in the 1970s, it was exactly the opposite, the West enjoying a two-third share and the developing world just one-third.
Dogs bark, but the Caravan goes on.
"Nike Is A Brand That Is Of China And For China" Says Company's CEO
“We’ve always taken a long term view. We’ve been in China for over 40 years,” Donahoe said, expressing his optimism that the brand will continue to grow quickly in the world’s most populous nation.
China is first out of the gate to Industry 4.0
The race towards the 5G-powered Fourth Industrial Revolution is on and China has a decisive head start
Tim, they report a 10 times return on investment, 14 times for warehouse. But we don't know their starting point - base case (this one would be low base).
Could be, especially if you deploy a bunch, 4 or more use cases off the one set up. If you put it on every thing as a service - a subscription, ROI goes to the moon.
Thing is, the IoT stuff can not bear the massive margins usually taken by IT. Meaning, fine for finance to massively over pay for finance system or ERP, but that waste of money doesn't work for IoT.
That's one of the reasons things are slow, the IT guys don't see the money margin for them, and don't understand electronics and signal processing either.
Imagine running any thing manufacturing on anything Microsoft, nothing would get made. And system would need rebuilding every 2 years.
From the opening paragraph: "...5G networks that run factories, warehouses, ports and urban transportation can increase productivity tenfold or more, industry ["]experts["] believe."
So the headline is just bad Journalism.
There only thing that could require that kind of bandwidth is live video and excessive amounts of 3D scan data and while this is very useful it can and would be transmitted without 5G in the vast majority of sites. I guess if a port installs high density 5G and charges for access it might get a 10x ROI (as other companies pay for the rest of the development) or being able to lay off some security staff because you have more cameras installed. Running copper/fibre is cheep it's hard to imagine it being common for a over-engineered wireless network to be a tenth of this.
I think it would be very rare that IT was involved in innovative improvements in industrial productivity. No equipment manufacturer or SI is going to want to want to use a network that's already been locked down by IT especially when they don't know what to do with it. IOT does not generally require bandwidth.
What IP do you think China would be interested in? "Go to NZ and see how they can execute ambitious public works projects like Kiwibuild. I want to know consent processes, procurements, environmental regulations, everything. How do they just keep exceeding expectations."
"Sir they build like 400 homes, then dropped their targets, then gave up... No! Pivoted!"
"Ah, how many government officials were executed?"
"Actually Twyword was redeployed to Minister of Infrastructure or something"
"Haha I suppose as a way of publicly humiliating him and his family"
"No, he even was consulted on Auckland Light Rail"
"Such strategic incompetence. Surely it's a trick. The people are smart. They must have punished him at the next erections [sic]"
"No they got back in with full "mandate""
"Mandate? That's our word."
"Yea and they're going for scanning and tracer app to maximise digital surveillance of the people"
"But, we do that. Were awesome at it."
"Yea I think the Kiwis are spying in OUR universities."
"Mother******"
May be one should take a more balance view when it comes to collaboration with China without tinted glasses. Does it ever occur to you that collaboration can benefit both/all parties. China now are a leader in many technologies(i.e. 5G). Many of their universities are in the very top rankings by many agents around the world. How do ours compare?
The Baihetan Dam cannot have any effect on the Indian sub-continent. It is nothing to do with India. It is on the Jinsha River which is the name for the upper reaches of the Yangtze River, and the waters flow out into Yunnan and Sichuan provinces and eventually into the China Sea just north of Shanghai.
KeithW
Wrong river but not the wrong end of the stick as a serious geopolitical issue. India is deeply concerned about China damming rivers with their source there but which flow into India. Specifically the Brahmaputra across which China is intending to erect a monster dam which will deliver enormous leverage against India and create a potential military conflict flashpoint between these two nuclear armed neighbours.
Not quite there yet, China still needs to spend dollars to purchase raw materials for their manufacturing. The Chinese authority has forced their factories to absorb the increasing costs. They know it is temporary, and they can't let CNY keep going up. So they are devaluing Yuan carefully. Everything is back down to COVID management; international capitals and investors see China as a safe place in this Covid season. PBOC has an interesting problem to deal with. Though the Feds are definitely running into some "surprises" after noticing the PBOC didn't weak the Yuan as they expected, like what they did in 2008.
Can you explain how is China creating hyper-inflation for other countries. With my very little knowledge of economics and a quick search on the internet. The two main causes of hyper-inflation are:
1. an increase in money supply. Which most countries had been doing (US, EU, NZ to name a few) since the GFC and gone nuts with trying to deal with the "negative impacts" of CV-19 by way of massive QEs (i.e. creating trillions of dollars out of thin air). May be we can blame China for creating CVs in the lab and releasing them to the world including there own citizens, without any evidences. No wonder there are so many bitcoin fans out there.
2. a demand-pull inflation in which demand outstrips supply. Demands natural will spike with so much easy money generated by the QEs and ultra low interest rates.
He is suggesting that China could stop exporting its cheap (and nasty) manufactured goods to the West. It wouldn't cause hyper-inflation, but there would be some "transitory" inflation as the cost of goods re-balanced.
And I suppose theoretically they could... but it would be an own-goal, resulting in massive damage to their own economy and a rapid (and permanent) shift of manufacturing back to the West.
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