Bloomberg - Balance of Power - September 18, 2024 - Is Kamala Harris Better for American Business and more

 

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Welcome to Balance of Power, bringing you the latest in global politics. If you haven’t yet, sign up here. China’s most ambitious workers have found themselves cast adrift. That’s a problem-in-the-making for President Xi Jinping. Sweeping crackdowns on the private sector have left many wondering whether the long years of study to secure a high-stress job with grueling hours were worth the sacrifice. Industries like finance, consumer tech and property — once drivers of the country’s booming growth — have found themselves targeted by Beijing’s policymakers keen to clean up debt-ridden local governments and freewheeling sectors that promoted “disorderly” capital. After China created a professional class in record time, many of its members now face steep pay cuts and the looming threat of job losses. Bankers criticized for “hedonistic” lifestyles spend hours pouring over Xi’s speeches, while a sense of stasis pervades the sprawling government bureaucracy and state-owned companies, where workers see little benefit in taking the initiative. The professional classes aren’t the only ones suffering. Weak economic data suggest the government has a far more pervasive crisis of confidence on its hands. Last month, consumption and investment weakened more than expected while industrial output marked its longest slowing streak since 2021. Across large parts of the economy, consumer prices are barely rising and economists warn that the deflationary spiral is entering a dangerous new stage. The worry is that households — already hit by falling wages and slumping property valuations — may cut back on spending because they expect prices to fall further. That, in turn, hits company profits, leading to more salary cuts and layoffs, ultimately bankrupting families and firms. It’s unclear if central bank policymakers are willing to change their stance on stimulus — or whether missing the country’s 5% growth target is becoming a more tolerable reality. The doom and gloom is bad news for Xi. Even if he keeps a lid on social unrest — as people grapple with growing economic insecurity and wait longer to retire — it’s hard to argue he’s achieving common prosperity with so many people feeling poorer.— Rebecca Choong Wilkins WATCH: Xi is shifting away from once high-flying sectors as he looks to reshape the economy. Bloomberg’s Senior Finance Editor David Scanlan reports. Source: Bloomberg TV

Global Must Reads

Israel is deploying more military resources to its northern border with Lebanon as Defense Minister Yoav Gallant declared a “new phase” in the war with Palestinian militant groups and the Iran-backed Hezbollah movement. His comments came after waves of exploding telecommunications devices in Lebanon killed 26 people over two days and wounded more than 3,000. Iran threatened to retaliate after its ambassador was wounded in the blasts. A man holds a walkie-talkie after he removed the battery in Beirut yesterday. Photographer: Anwar Amro/AFP/Getty Images US authorities accused Iranian hackers of emailing stolen information from Donald Trump’s presidential campaign to Joe Biden’s team and journalists. It appeared to be an effort to dupe people working for the president to act on phishing emails, allowing the intruders to get into computer systems. Vice President Kamala Harris hailed the Federal Reserve’s move to slash interest rates as a boon for middle-class families, while Trump suggested the cut so close to the November election may have been politically motivated. Harris’ statement betrayed the extent to which high inflation, which has soured voter perceptions of Biden’s handling of the economy, is one of her top political liabilities. “There’s a general perception that Vice President Harris will be a bit more large-technology and corporate-business friendly,” Ralph Schlosstein, chairman emeritus at investment banking advisory firm Evercore, tells hosts Stephanie Flanders and Adrian Wooldridge. Japan may have its first woman leader before the US, with Economic Security Minister Sanae Takaichi among the frontrunners to become prime minister next month in a nation known for lagging on diversity. Still, there’s some doubt over whether the hard-line conservative Takaichi, who has cited former UK Prime Minister Margaret Thatcher as an inspiration, would seek to further the cause of women in leadership. Sri Lanka’s presidential election has turned into a referendum on a $3 billion International Monetary Fund loan program that has helped to pull the island nation out of its worst economic crisis since independence in 1948. The contest on Saturday pits the incumbent president who negotiated the bailout against the main opposition leader and a Marxist politician waging a populist campaign. Canadian Prime Minister Justin Trudeau will likely face a parliamentary vote of non-confidence next week, but it appears he’ll survive after an opposition party rejected the idea of forcing an early election. Indonesian President-elect Prabowo Subianto won sweeping powers to create new ministries and restructure existing ones, giving him more room to both pursue his agenda and reward allies. Apple is set to be warned by the European Union to open up its highly guarded iPhone and iPad operating system to rival technologies, or eventually risk significant fines, sources say. Germany plans to take a harder look at its weapons supplies to Israel to ensure they aren’t being used in violation of international law, according to Robert Habeck, the economy minister and vice chancellor.

Washington Dispatch

Part of Trump’s 2017 fiscal overhaul limited the deduction amount for state and local levies, angering people in states like New York who had long counted on the tax break. The former president yesterday promised to lift the cap — during a rally in New York. “I will cut taxes for families, small businesses and workers, including restoring the SALT deduction, saving thousands of dollars for residents of New York, Pennsylvania, New Jersey and other high-cost states,” Trump said on Long Island. Democrats scoffed at the timing of his comments. “Trump was the one who took away SALT. It hurt many New Yorkers, including lots on Long Island,” said Senate Majority Leader Chuck Schumer, a New York Democrat. “Now that he’s going back to Long Island for the first time he changes his mind? Give me a break.” One thing to watch today: The National Association of Realtors will publish data on sales of previously owned homes for August. They’re expected to decline, despite falling mortgage rates, after rising for the first time in five months in July. Sign up for the Washington Edition newsletter for more from the US capital and watch Balance of Power at 1 and 5 p.m. ET weekdays on Bloomberg Television.

Chart of the Day

The ruling Labour Party’s current policies would only get Britain halfway to becoming the fastest-growing economy in the Group of Seven, suggesting more is needed to fulfill Prime Minister Keir Starmer’s key promise to voters. According to a report published today by the Resolution Foundation, government plans to boost infrastructure investment and housebuilding do not go far enough to close the gap with the best-performing G-7 economy — the US.

And Finally

President Vladimir Putin has put a $21 billion Arctic liquefied natural gas facility at the center of a push to demonstrate that Western sanctions imposed after the invasion of Ukraine won’t halt Russian trade. The Kremlin is using a complex network stretching from Dubai to India and China to create a shadow fleet of LNG carriers to transport the fuel, mimicking a strategy deployed to ferry restricted oil. Some of the vessels have disguised their location as they play a high-stakes version of hide-and-seek with US authorities.

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