Monday, February 13, 2023

China Economic Forecast will Surpass The EuroZone

Despite the forecast upgrade, we expect the economic rebound in 2023 to be less vigorous than that in 2021, when China’s economy posted GDP growth of 8.4%. This reflects in part ongoing weakness in the property market, which showed little evidence of an improvement in sales or housing starts in late 2022, despite a build-up of incremental policy support. Residential floor space under construction was down by 46% yoy in December 2022, pointing to continued project delays.

We also expect net trade to be a drag on GDP growth in 2023, as a rebound in overseas travel by Chinese consumers will lift services imports, while export demand will be depressed by economic slowdowns in the US and Europe.

The lagged effects of policy support for growth are likely to be modest. There were only two small cuts to banks’ required reserve ratios and policy interest rates in 2022. In line with this, credit growth remains lacklustre, with Fitch-adjusted aggregate financing to the real economy slowing to 9.4% in December 2022, from 10.8% in June 2022.

The direction of fiscal policy remains uncertain ahead of the National People’s Congress in March. We do not expect large consolidation this year, given the authorities’ recent emphasis on growth and stability. On a Fitch-consolidated basis, we forecast a budget deficit of around 7% of GDP in 2023, down from an estimated 8% in 2022. This will still be well above its pre-pandemic trend.

Announcements at the Congress may also clarify the authorities’ other policy priorities as they move on from the urgent challenges posed by the pandemic. We believe stabilising the recovery will remain the key focus in the near term, but do not anticipate aggressive macro-policy easing.

Fitch affirmed China’s sovereign rating at ‘A+’ with a Stable Outlook in December 2022. At the time, we stated that the recurrence of abrupt policy shifts that undermine economic performance and keep growth volatility elevated could lead to downward rating pressure, as could a sustained upward trajectory in government debt/GDP."

Fitch Ratings-London/Hong Kong-08 February 2023: Fitch Ratings has revised its forecast for China’s economic growth in 2023 to 5.0%, from 4.1% previously, reflecting evidence that consumption and activity are recovering faster than initially anticipated after the authorities moved away from their “dynamic zero Covid-19” policy stance in late 2022. The large wave of Covid-19 infections that followed the authorities’ change of approach appears to be subsiding, based on public communications from health officials and improving mobility trends.

Many high-frequency indicators remain below pre-pandemic norms, but have recently rebounded in sequential terms. The services PMI jumped to 54.4 in January 2023 from 41.6 in December 2022, for example. The swift rebound from the Covid shock-wave means that activity in 1H23 will be stronger than we had forecast. Real GDP growth was also higher in 4Q22 than we had expected when our last forecast was published on 5 December 2022, so the recovery will come off a firmer base.

We believe the economic recovery will be primarily consumption-led, as households re-engage in activities previously hampered by health controls. Consumption contributed a mere 1pp to GDP growth last year, compared with a pre-pandemic average of around 4pp. The sharp acceleration in household deposit growth recorded over 2022 could support even faster “catch-up” consumption than we now anticipate. However, we believe abnormally high deposits from 2022 will not be deployed exclusively toward consumption, as they also reflect a reallocation of assets away from property and other investments that may revert in 2023."

RELATED -- EUROZONE

By Judy Hua and Kevin Yao

BEIJING, Feb 10 (Reuters) - New bank loans in China jumped more than expected to a record 4.9 trillion yuan ($720.21 billion) in January as the central bank looks to kickstart a recovery in the world's second-biggest economy after the lifting of harsh pandemic controls.

A strong rebound in credit demand will be essential for an economic revival this year after harsh COVID measures and a crisis in the property sector dragged China's growth down to 3% in 2022, one of its worst rates in nearly half a century.

January's new loans more than tripled December's tally and exceeded analysts' expectations, according to data released by the People's Bank of China (PBOC) on Friday.

Analysts polled by Reuters had predicted new yuan loans would jump to 4 trillion yuan in January, from 1.4 trillion yuan in December and above the previous monthly record of 3.98 trillion yuan in January 2022.

Chinese banks tend to issue more loans at the beginning of the year to gain higher-quality customers and win market share, but the size of the increase spurred hopes that business and consumer confidence is improving rapidly after the anti-COVID curbs were suddenly lifted in December.

"China's credit data came in stronger than expected, suggesting that the credit support remains strong at the beginning of the year," Zhou Hao, chief economist at Guotai Junan International, said in a note.

"Overall, this is a positive credit report, and is likely to help the economy to rebound significantly in the first quarter of 2023. The next focus for the markets will be property sales, which are highly correlated to bank credit."

Analysts believe improved credit conditions, along with robust infrastructure spending and supportive policy measures, could boost economic growth to about 5% this year, even with a weaker global backdrop.

But they warn the recovery momentum could be uneven, requiring policy to remain supportive for some time.

Other data released on Friday showed China's January factory gate prices fell more than expected, suggesting that manufacturers are not yet running at full speed even after the end of the zero-COVID policy, while a car industry association said vehicle sales slumped 35% from a year earlier.

"Banks were under pressure to gear up loan issuance from the fourth quarter last year under policy guidance to boost credit supply. But actual demand is weak," said one person at a state-owned bank, who declined to be identified.

Manufacturing firms' appetite for more credit remained soft since they took on so many loans last year, he added.

Household loans, mostly mortgages, rose to 257.2 billion yuan in January from 175.3 billion yuan in December, while corporate loans soared to 4.68 trillion yuan from 1.26 trillion yuan.

The divergence between corporate and household loans underlined a faster recovery in corporate credit while the high jobless rate weighed on household confidence, said Zhiwei Zhang, chief economist at Pinpoint Asset Management.

China's new household deposits rose to 6.2 trillion yuan in January from 2.88 trillion yuan in December. Analysts are closely watching that figure for signs that shell-shocked consumers are spending again after a year of lockdowns and job losses battered sentiment.

MORE MODEST EASING SEEN IN PIPELINE

Other key credit gauges also showed encouraging gains.

Broad M2 money supply in January grew 12.6% from a year earlier - the fastest pace since April 2016and above estimates of 11.6% forecast in the Reuters poll. It rose 11.8% in December.

Outstanding yuan loans grew 11.3% from a year earlier compared with 11.1% growth in December. Analysts had expected 11.0% growth.

The central bank has promised to make its policy "precise and forceful" this year to support the economy, keeping liquidity reasonably ample and lowering funding costs for businesses.

Analysts polled by Reuters expect the central bank to cut the benchmark lending rate - the one-year loan prime rate(LPR) - by another 5 basis points (bps) in the first quarter, and it is expected to offer more targeted support measures for sectors which are struggling the most.

Some analysts are also expecting more cuts in banks' reserve ratios (RRR) this year after two reductions last year, the latest in December.

Year-on-year growth of outstanding total social financing (TSF), a broad measure of credit and liquidity in the economy, eased to 9.4% in January -- the slowest pace since January 2017 -- from 9.6% in December.

TSF includes off-balance sheet forms of financing that exist outside the conventional bank lending system, such as initial public offerings, loans from trust companies and bond sales.

In January, TSF jumped to 5.98 trillion yuan from 1.31 trillion yuan in December. Analysts polled by Reuters had expected 5.40 trillion yuan.

($1 = 6.8036 Chinese yuan renminbi)

GRAPHIC - China's economic trendshttp://tmsnrt.rs/2iO9Q6a

GRAPHIC-China January bank lending hits record highhttps://tmsnrt.rs/3Ie9Jiv

(Additional reporting by Ziyi Tang; Editing by Kim Coghill and David Goodman)

((judy.hua@thomsonreuters.com; 8610-6627 1297; Reuters Messaging: judy.hua.thomsonreuters.com@reuters.net))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Forbes Daily Cover: Spy Balloons are Just The Start

Reports in 2017 of a Chinese breakthrough in quantum magnetometry raised speculation that it might be able to deploy an airborne network of devices to detect underwater submarines from miles away. Many experts are skeptical, but in the long term it’s expected that quantum gravimeters and magnetometers will be able to more accurately map underground features like oil and mineral deposits, water tables, bunkers and tunnels.

Cryptography

The threat of breakthroughs by China in quantum computing is already having an impact in cybersecurity. National security insiders say that China and other hostile countries are collecting encrypted communications and other sensitive data from the U.S. and storing it until the day when quantum computers are powerful enough to crack their encryption. . .

Companies like Vector Atomic and Infleqtion are helping the military harness quantum technologies to develop underground sensing, secure communications and alternatives to GPS.

_By_{Jeremy Bogaisky}

" If a spy balloon floating high above the U.S. is an example of a 19th century tech war, think of quantum as the near future.

The Pentagon has for years been searching for new ways to use quantum physics to wage war, whether it’s developing more powerful computers, backstopping GPS, strengthening the security of communications or creating means of surveillance that could better detect submerged submarines and underground bunkers. There’s urgency: China is investing heavily in furthering these capabilities, too.

Take GPS, for example. In the event of armed conflict between the U.S. and China, one of the first things both sides would target would be the other country’s global positioning system. Imagine the chaos on the ground and the confusion in the sky without it.

Researchers are developing quantum-enhanced navigation systems that would enable ships and aircraft to stay on course in the event of a GPS outage, as well as guide missiles to their targets more accurately. Part of that involves creating more accurate atomic clocks, since GPS is at heart a timing system — calculating the difference in time between satellites and receivers on the ground. The technology will be ready within five years, said Michael Hayduk, a deputy director of the Air Force Research Laboratory.

“This will change the world in rather remarkable ways, and you don’t have to wait too long for it,” William Clark, a physicist and vice president at Infleqtion, a startup that’s one of the leaders in the field, told Forbes.

READY OR NOT

The Department of Defense’s assessment of the readiness and expected military impact of a range of quantum technologies.

In its tech race with China, the Pentagon has ramped up research-and-development spending in many areas, including quantum sciences. Government agencies had $918 million to spend on quantum R&D in fiscal 2022, up from $449 million in 2019, with the Air Force Research Laboratory, the Defense Advanced Research Projects Agency and the Office of Naval Research among the chief funders.

✓ Their contributions have been supplemented by increasing amounts of venture capital. U.S. quantum startups soaked up $870 million in funding in 2022, according to Pitchbook, almost double 2020.

Most of the focus has been on developing quantum computers. While classical computing is based on “bits” that are either one or zero, quantum computing uses subatomic particles as “qubits.” Due to the quantum phenomenon of superposition, qubits can be one and zero at the same time, or proportions in between, which could allow them to be used to quickly solve complex problems that are beyond the reach of current machines.

Useful quantum computers may be a decade or more away, but some of the underlying research into controlling individual atoms and photons is on the cusp of being put to use to make more accurate sensors, including ones that track motion, like accelerometers and gyroscopes, as well as devices that detect small changes in the force of gravity and magnetic fields.

QUANTUM LEAP

The military is looking at a range of applications for quantum technology.

. . .

Last year, the Biden Administration and Congress took steps to push government agencies to transition to new “post-quantum” cryptographic methods that are believed to be impregnable to quantum computers.

China is taking a different and more expensive tack to the threat of quantum code cracking. The country has developed networks of thousands of miles of fiber-optic cables connecting major cities that distribute random quantum keys via photons to secure communications. Due to the nature of quantum mechanics, it’s believed any attempt to eavesdrop on such a network would alter the photons, alerting the users. China is also the first country to demonstrate quantum key distribution via satellite.

On the strength of those efforts, China has pulled ahead of the U.S. in quantum communications, a RAND study concluded last year. The U.S. leads in quantum computing, while it’s unclear whether either has an edge in sensing, the RAND researchers wrote.

Timing And Navigation

The current generation of satellite GPS can only estimate locations to within three meters. Quantum physics would allow for more precision.

In labs, scientists have developed more accurate, room-size atomic clocks based on optical lasers that would lose a second after billions of years. Vector Atomic is among a handful of companies working on developing smaller, more rugged clocks for everyday field use, trading the cutting-edge performance of lab breakthroughs for reliability and practicality.

Last summer at the multinational Rim of the Pacific (RIMPAC) naval exercises, the California-based startup said it demonstrated shipborne optical clocks in a relatively compact 40-liter package that drifted from accuracy by 10 trillionths of a second after roughly an hour. Current satellite GPS clocks drift that much after 20 seconds.

That kind of improvement could have a multitude of benefits. GPS would remain accurate with less frequent updates to satellite-based clocks from the ground. Paired with low-Earth-orbit satellites, which would bring GPS signals closer, more precise timing would improve accuracy to within centimeters. That would mean, for instance, that GPS could keep driverless vehicles in their lanes.

Better timing would also allow for more efficient use of cellular and other wireless networks, packing more users into spectrum that’s currently considered highly congested.

Portable atomic clocks could be put on aircraft or ground vehicles. It would allow American forces to erect temporary local GPS networks around battlefields with communication signals that would be too strong to disrupt, while the U.S. jammed enemy space-based navigation systems, said Vector Atomic CEO Jamil Abo-Shaeer, who managed quantum programs at DARPA from 2010 to 2014.

The company, which has taken no venture funding while racking up over $50 million of government research contracts, is working on projects with the Navy and DARPA to shrink its clocks so they’re smaller than carry-on luggage.

Also at RIMPAC, Vector Atomic demonstrated a compact quantum gravimeter paired with a standard inertial navigation system that promises to allow naval ships to navigate without GPS. The device measures tiny changes in the local strength of gravity due to variations in undersea terrain. By comparing the measurements with a gravitational map, the device was able to correct for drift in the ship’s inertial navigation system to accurately fix the vessel’s location over three weeks of use, Abo-Shaeer said.

The company believes that in two to three years it will be able to start commercializing an energy-efficient version small enough to fit in a car trunk.

Several other companies are working on quantum inertial sensors, including Australia-based Q-CTRL, which is planning a field demonstration in mid-2023 of a quantum-enabled navigation system with partner Advanced Navigation. Colorado-based Infleqtion is part of a U.K. project to develop a Quantum Positioning System for individual vehicles. A quantum gyroscope the company is building for the initiative will be flight-tested in 2024.

Communications

With DARPA funding, Infleqtion, which last year changed its name from ColdQuanta, is also developing quantum radio receivers to replace satellite dishes. They can be tuned to frequencies across the spectrum, from the HF and UHF bands used by military tactical radios to the K-band used by SpaceX’s Starlink satellite broadband network. The technology will enable one device to substitute for what ten different receiver sets do today, Clark said.

By 2025, the company plans to demonstrate a pocket-sized six-band receiver with lasers and back-end electronics shrunk down to the size of a small shoebox.

Further out, Clark said similar technology might be used to create a tunable multiband transmitter. “That would be the Holy Grail,” he told Forbes. “It would be like your Star Trek communicator, full transmit and receive in a little device.”

Competition

While the Soviet Union produced some of the greatest theoretical physicists of the 20th century, there aren’t many signs that Russia is developing significant quantum technologies today, RAND researcher Edward Parker told Forbes.

China’s work in quantum technology is concentrated in large national laboratories. That might put it at a disadvantage in commercializing quantum sensors compared with the U.S., with its array of private companies, Parker said.

“The real progress in quantum sensing to be made now is not necessarily laboratory work or academic work, but in getting it fieldable,” Parker said. “It’s unclear to me whether they have the private sector infrastructure to do that kind of nitty-gritty work.”

MORE FROM FORBES

JEFF FLAKE: America's Ambassador in Turkiye

A week after the massive earthquake, the former Arizona Senator have his read-out today on NPR

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How is the U.S. helping the victims of last week's quake in Turkey and Syria?

Published February 13, 2023 at 4:03 AM CST

NPR's A Martinez speaks to U.S. Ambassador to Turkey Jeff Flake about American aid for Turkey and Syria following the devastating earthquake that hit the region a week ago.

Biden names Arizona Republican Jeff Flake as his ambassador pick ...azcentral.com› story › news › politics › elections › 2021 › 07 › 13 › arizona-republican-jeff-flake-biden-ambassador-pick-turkey › 7954659002

Jeff Flake, who served a single term in the Senate, crossed party lines to back Joe Biden for president over Donald Trump.

Published: July 14, 2021

Brief Background Jeff Flake | The Institute of Politics at Harvard University

iop.harvard.edu› fellows › jeff-flake

Jeff Flake served as a United States Senator from Arizona from 2013 to 2019. A Republican, Flake previously served in the United States House of Representatives from 2001 to 2013. Born in Snowflake, Arizona, Flake attended Brigham Young University, from which he received his Bachelor of Arts ...

U.S. & WORLD POLITICS INDEPTH

Jeff Flake’s last stand

Democracy’s status is contested around the globe, and America’s man in Turkey is speaking out: freedom and stability hang in the balance

By Hal Boyd

Apr 26, 2022, 9:00pm MST

America’s foreign policy interests in Turkey.

What Jeff Flake told a Senate panel considering his nomination as U.S. ambassador to Turkey

Glance at a map of the region, as I did upon entering the U.S. Embassy in Ankara, and what immediately stands out is Turkey’s bruiser of a neighborhood. To the country’s east is nuclear aspirant Iran, and across the Black Sea are Ukraine and Russia. To Turkey’s south are war-torn Iraq and Syria.

Turkey is now home to some 3.6 million Syrian refugees.

As the rare NATO-allied democracy in the region, Turkey is of high importance to the United States. That’s why foreign policy pencil-chewers are flagging warning signs that Turkey’s little “d” democratic institutions are slipping.

When I ask Flake about this directly, he assures me Turkey’s elections and institutions “remain strong.” And yet, he’s not shy to point out that there are nearly as many journalists jailed in Turkey as there are in China. A failed coup attempt in 2016 led to a government crackdown against members of the press and judiciary in particular.

U.S. Ambassador to Turkey Jeff Flake and his wife Cheryl Flake walk with Executive Editor of Deseret Magazine Hal Boyd at the U.S. Ambassador’s Residence in Ankara, Turkey on March 30, 2022.

But it would be a mistake, Flake contends, to view Turkey as anything other than a vital ally to the United States. If you need evidence, he says, look no further than the two Turkish bases housing U.S. military personnel within their borders.

He also underscores how Turkey is handling the ongoing Russia-Ukraine war, facilitating peace talks and enforcing the little-known 1936 Montreux Convention, which empowers Turkey during war time to limit naval access to the Black Sea through the country’s Dardanelles and Bosporus straits.

This latter move may yet prove central in restricting certain Russian naval vessels from bringing reinforcements to the fight in Ukraine. Turkey’s foreign minister, Mevlut Cavusoglu, with whom Flake huddled during our visit, announced the implementation of the Montreux Convention in late February, at a time when many were still cautiously calling the war an “invasion” or “conflict.” He stated: “It is not a couple of air strikes now, the situation in Ukraine is officially a war.”

As we talk, I glance down at my notes. There’s a question I’ve starred: How will the U.S. persuade Turkey — a country with so many commercial and cultural ties in the East — to remain committed to democracy in the long run?

Flake believes there are answers. And as I shadowed him through the back boulevards of Ankara for the better part of two days, it became apparent that America’s man in Turkey also appreciates the high stakes: nothing less than regional and global stability hang in the balance.

The United States, Flake says, must start at home by exemplifying the best that representative government has to offer. The U.S. model has to work to remain persuasive.

Freedom and democracy, he says, are always hills worth dying on — from Bunker Hill in Boston to Mariupol in Ukraine — but the true test is sustaining the very causes which call forth our “last full measure of devotion.” . . READ MORE

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Monday, February 13, 2023

China Economic Forecast will Surpass The EuroZone

China 2023 Growth Forecast Revised Up to 5%

China Jan new bank loans jump more tha mmn expected to record 4.9 trln yuan

Forbes Daily Cover: Spy Balloons are Just The Start

Cryptography

The Spy Balloons Are Just The Start: Venture Capital Joins Pentagon In Spending Big To Thwart China In Quantum-Tech War