Welcome to your Sunday digest…my breakdown of the things we’re thinking about and talking about in the Global Intelligence world.
First up…the sudden collapse of Chinese stocks.
This week, Chinese stocks fell to multi-year lows in New York and Hong Kong.
On Thursday, Hong Kong’s benchmark Hang Seng Index closed at an 11-year low. This followed a big selloff in Chinese stocks on Wall Street the day before, with the Nasdaq Golden Dragon China Index down 7% to its lowest level since 2013 and Chinese e-commerce giants JD.com and Alibaba down 7.7% and 6.6%, respectively.
The reason for the fall was growing fears about the outlook for China’s economy.
This week, China was holding its National Congress, a meeting organized once every five years to name the Chinese Communist Party’s top leadership team. (In reality, the leadership is believed to be chosen in closed-door sessions before the event, but this is where it is made known to the public.)
At this congress, Xi Jinping was expected to remain as party general-secretary, and thus ruler of China, for an unprecedented third term.
Crucially, in his opening speech to the congress, he seemed to double-down on zero-COVID—the ruthless strategy of cracking down on any outbreak of coronavirus with mass, mandatory lockdowns.
These lockdowns, which the BBC has described as “hellish,” have caused food shortages and crippled healthcare access. They have also hit the economy hard by shuttering factories and other businesses.
Indeed, China’s third-quarter economic growth figures, initially due to be released this week, were delayed…likely to avoid embarrassing the country’s notoriously sensitive leaders during the high-profile pomposity of the National Congress.
China is now the only major economy on the planet to pursue this economically damaging, zero-COVID approach. Commentators speculate that this is over fears that the country’s domestically produced vaccines are less effective than their Western counterparts. And if COVID is allowed to spread through the population, it could lead to millions of deaths and deep social instability.
Still, if China holds fast on zero-COVID, social instability is likely to emerge anyway due to a collapse in economic growth, earnings, and employment.
And the reality is that COVID ultimately cannot be contained. Already, there are fresh COVID outbreaks in Beijing, Shanghai, and other locations…which could lead to new large-scale lockdowns in those cities.
China’s economy is teetering…and since it’s the second-largest economy on the planet, the effects of an economic collapse in China would be felt everywhere.
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Next up…inflation is destroying the middle class in America.
A new report from Salary Finance has found that 66% of U.S. workers are worse off than a year ago as inflation bites. Even more worrying, the report said that many workers are dipping into their cash reserves or going into debt to fund their daily lives.
Among the workers surveyed, almost 30% said they had already wiped out their savings entirely. And 32% of adults said they regularly run out of money before their next paycheck.
This crisis is not limited to low earners. Half of Americans earning over $100,000 report being worse off this year as well.
Given that the U.S. is a commercial economy driven primarily by consumer demand, these figures are very worrying indeed.
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Finally this week, unlimited flights to Tokyo.
A budget Japanese airline has come up with a novel, if bizarre product amid at Tokyo’s office workers.
Star Flyer airline plans to offer a monthly subscription plan that covers unlimited flights between Tokyo and Kitakyushu, the airline’s home city and a popular tourist destination renowned for its food culture. The subscription also includes accommodation in Kitakyushu.
The subscription is set to cost 200,000 yen to 400,000 yen ($1,320 to $2,640), though the airline has yet to specify what kind of accommodation it would include as part of the package.
Star Flyer is also reportedly planning to offer a separate subscription plan that includes just the flight service, which takes about an hour and 40 minutes.
Frankly, it all sounds a bit strange, but I suspect in a world where one or two days in the office is the norm for many workers, maybe it will take off (apologies for the pun). And I doubt Star Flyer will be the last airline to try this kind of package.
That brings us to the end of this week’s digest. Many thanks for being a subscriber. And if you have any feedback or questions, reach out through the contact form on the Global Intelligence website.
Enjoy the rest of your Sunday.
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