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China’s exports plunged by 14.5% in July compared with a year earlier, adding to pressure on the ruling Communist Party to reverse an economic slump.

Imports tumbled 12.4%, customs data showed Tuesday, in a blow to global exporters that look to China as one of the biggest markets for industrial materials, food and consumer goods.

Exports fell to $281.8 billion as the decline accelerated from June’s 12.4% fall. Imports sank to $201.2 billion, widening from the previous month’s 6.8% contraction.

The country’s global trade surplus narrowed by 20.4% from a record high a year ago to $80.6 billion.

Chinese leaders are trying to shore up business and consumer activity after a rebound following the end of virus controls in December fizzled out earlier than expected.

Economic growth sank to 0.8% in the three months ending in June compared with the previous quarter, down from the January-March period’s 2.2%. That is the equivalent of 3.2% annual growth, which would be among China’s weakest in three decades.

Demand for Chinese exports cooled after the U.S. Federal Reserve and central banks in Europe and Asia started raising interest rates last year to cool inflation that was at multidecade highs.

The export contraction was the biggest since the start of the COVID-19 pandemic in 2020, according to Capital Economics. It said the decline was due mostly to lower prices, while volumes of goods were above pre-pandemic levels.

“We expect exports to decline further over the coming months before bottoming out toward the end of the year,” said Capital Economics in a report. “The near-term outlook for consumer spending in developed economies remains challenging.”

The ruling party has promised measures to support entrepreneurs and to encourage home purchases and consumer spending but hasn’t announced large-scale stimulus spending or tax cuts. Forecasters expect those steps to revive demand for imports but say that will be gradual.

“Domestic demand continues to deteriorate,” said David Chao of Invesco in a report. “Policymakers have pledged further policy support, which could buoy household spending and lead to an improvement in import growth for the coming few months.”

Exports to the United States fell 23% from a year earlier to $42.3 billion, while imports of American goods retreated 11.1% to $12 billion. China’s politically sensitive trade surplus with the United States narrowed by 27% to a still-robust $30.3 billion.

China’s imports from Russia, mostly oil and gas, narrowed by just under 0.1% from a year ago to $9.2 billion. Chinese purchases of Russian energy have swelled, helping to offset revenue lost to Western sanctions imposed to punish the Kremlin for its invasion of Ukraine.

China, which is friendly with Moscow but says it is neutral in the war, can buy Russian oil and gas without triggering Western sanctions. The United States and French officials cite evidence that China is delivering goods with possible military uses to Russia but haven’t said whether that might trigger penalties against Chinese companies.

Exports to the 27-nation European Union slumped 39.5% from a year earlier to $42.4 billion, while imports of European goods were off 44.1% at $23.3 billion. China’s trade surplus with the EU contracted by 32.7% to $19.1 billion.

For the first seven months of the year, Chinese exports were off 5% from the same period in 2022 at just over $1.9 trillion. Imports were down 7.6% at $1.4 trillion.
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Japan is due to start releasing wastewater used to cool the crippled reactors at the Fukushima nuclear plant as soon as the end of August. China has criticized the planned release and imposed restrictions on Japanese seafood — prompting accusations of hypocrisy, as Henry Ridgwell reports from Tokyo.
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Over the past year, inflation in the United States has tumbled from 9% all the way to 3%, softening most of the price pressures that have gripped the nation for more than two years.  

Now comes the hard part.  

Squeezing out the last bit of excess inflation and reducing it to the Federal Reserve’s 2% target rate is expected to be a much harder and slower grind.  

A measure called “core” inflation, which excludes volatile food and energy prices, is even higher than overall inflation. It, too, seems likely to slow only gradually. The Fed pays particular attention to core prices as a signal of where inflation might be headed. In June, core prices were up 4.1% from a year earlier, according to the Fed’s preferred gauge.  

“We see some challenges in getting that all the way back to 2% quickly,” said Michael Hanson, senior global economist at J.P. Morgan.  

The stickiness of inflation could endanger the possibility that the Fed will achieve a rare “soft landing” — a scenario in which it manages to slow inflation down to its target level through higher interest rates without derailing the economy. If inflation were to remain elevated for too long, the Fed might feel compelled to further raise its key rate from its current 5.4%, a 22-year high. Most economists say they think the central bank is done hiking, but only if inflation continues to cool.  

At the same time, the Fed has acknowledged that inflation pressures have eased significantly over the past year. Encouragingly, that slowdown has occurred even while the economy has continued to expand and employers have steadily hired at a healthy pace.  

On Thursday, when the government will issue inflation data for July, economists expect it to show a slight pickup in year-over-year inflation to 3.3%. It would be the first such increase after 12 months of declines.

In part, any rebound in annual inflation for July will reflect higher gas prices. Unless they ease, gas prices could keep overall inflation above 3% through the end of the year. The national average pump price has jumped about 30 cents, to $3.83, in the past month, partly because the cost of oil has risen.  

One obstacle in bringing inflation down to the Fed’s 2% target is that the price slowdown so far has reflected mainly relatively painless changes not likely to be repeated. Until last month, for example, gas prices had already plunged from a peak national average of $5. And supply-chain snarls that had swollen the prices of cars, furniture, appliances and other physical goods have mostly unwound. The cost of long-lasing manufactured goods actually declined slightly in June from a year ago.  

Another factor is that prices had soared in the first half of 2022 before slowing in the second half. So any increase in July would have the effect of boosting the year-over-year inflation rate.  

What’s now sending prices up is mostly the cost of services — everything from dental care and auto insurance to restaurant meals and summer concerts. Those costs mostly reflect healthy wage gains for workers, which are often passed on to customers in the form of higher prices.  

“Energy prices are off, commodity prices off, core goods fell,” said Kristin Forbes, an economist at MIT and a former member of the Bank of England’s interest-rate setting committee. “That’s the quick, easy stuff. What’s left is this underlying wage-service inflation. And that’s the part that’s harder to slow down and will take take longer.”  

Many employees, especially in the economy’s service sector, could push for further raises in the coming months. With labor shortages still a problem for service industries, workers have leverage to demand higher pay. For most Americans, pay gains have trailed inflation over the past two years.  

Higher pay is one key issue driving strikes among Hollywood writers and actors. It was also a focus of the Teamsters union in its negotiations with UPS, which led to large pay gains. The United Auto Workers is also pushing for robust raises in its talks with U.S. automakers.  

Hanson, of J.P. Morgan, notes that measures of health insurance costs will start to rise this fall because of quirks in how the government measures them. And auto insurance and repair costs have been surging. A key reason is that vehicle prices soared after parts shortages developed when the pandemic erupted; costlier cars are more expensive to fix and insure. Auto insurance prices have soared nearly 17% in the past year.  

As a result, economists generally expect core prices, under the Fed’s preferred measure, to still rise at a 3.5% annual pace by year’s end — far above its 2% target. The Fed’s latest forecasts show that its policymakers expect core inflation to still be 2.6% at the end of 2024.  

Still, there are some hopeful signs that hiring and wages are slowing, which would cool inflation over time. On Friday, the government reported that employers added 187,000 jobs in July, a solid total but still reflective of a slowdown: Job growth over the past three months has averaged only about half the pace of the same period in 2022. And wage growth slipped to 4.6% in the April-June quarter, the government said, the slowest pace in a year and a half.

“That trajectory tells us where things will go in the next 12 months,” said Skanda Amarnath, executive director of Employ America, an advocacy group.  

At his most recent news conference, Fed Chair Jerome Powell sounded some cautious but hopeful notes about the prospect of a soft landing.  

“I wouldn’t use the term optimism about this yet,” he said. “I would say though that there’s a pathway….We’ve seen so far the beginnings of disinflation without any real costs in the labor market. And that’s a really good thing.”  

Yet a defining characteristic of the post-pandemic economy has been resilience, with consumers in particular showing a surprisingly persistent willingness to spend. Some economists worry that it will take a sharp rise in unemployment to reverse that trend and finally conquer inflation.  

The Fed has already been coming under some criticism for sharply raising rates and potentially putting the job market at risk. Sen. Elizabeth Warren, a Massachusetts Democrat, wrote Powell before the Fed met last month and urged him to forgo another rate increase. The central bank, though, went ahead with its 11th rate hike since March 2022.  

“The Fed’s aggressive rate hikes disproportionately threaten Black workers and their families and risk fully reversing the extraordinary labor market gains we have seen,” Warren, a frequent Fed critic, wrote.  

With political pressure on the Fed rising, Powell and other officials may soon see the precipitous drop in inflation in the first half of this year as having been the easy part.  

“The Fed has got lucky so far in what it’s gotten,” said Steven Blitz, chief U.S. economist at GlobalData TS Lombard. “Most of the decline in inflation was going to happen anyway. They really own the part that’s to come.”
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The contours of the debate at the heart of the Federal Reserve’s policy decision next month came into clearer view on Monday as officials outlined the case for and against another interest rate hike.

“The debate is really about: Do we need to do another rate increase? Or not? … I think we’re pretty close to what a peak rate would be,” New York Fed President John Williams said in an interview with the New York Times in which he voiced some confidence that underlying inflation was on a downward path.

“I do think that we are moving to an environment already where the underlying inflation rate has come down quite a bit,” Williams said in the interview, conducted August 2 and released on Monday. Williams, the vice chair and a permanent voting member of the policy-setting Federal Open Market Committee, said that inflation measures developed by the New York Fed suggest the pace of price increases could slow to as little as 2.5% annually by the end of the year, within striking distance of the Fed’s 2% target.

In separate remarks to a “Fed Listens” community event in Atlanta, Fed Governor Michelle Bowman said the combination of still-elevated inflation and continued economic growth meant further rate increases are likely. 

“I supported raising the federal funds rate at our July meeting, and I expect that additional increases will likely be needed to lower inflation to the [Federal Open Market Committee’s] goal,” she said, referring to the central bank’s benchmark overnight interest rate, which is currently set in the 5.25%-5.50% range.

“I will be looking for evidence that inflation is on a consistent and meaningful downward path as I consider whether further increases in the federal funds rate will be needed, and how long the federal funds rate will need to remain at a sufficiently restrictive level,” Bowman said.

The Fed’s preferred headline measure of inflation, the personal consumption expenditures price index, was at 3% on an annual basis as of June, while the same measure stripped of volatile food and energy prices was at 4.1% and has shown slower progress in recent months back to the Fed’s target.

The Fed raised rates by a quarter of a percentage point at the end of its July 25-26 meeting, and the most recent projections by policymakers show most expect one more rate increase by the end of the year.

But recent data have shown inflation slowing faster than expected, with many analysts anticipating a “disinflationary” trend may be developing that will work in the Fed’s favor.

Investors in contracts tied to the Fed’s policy rate are currently betting against any further increases, and expect the central bank’s next move to be a rate cut in the first months of next year.

Williams said that if inflation does continue falling, rate reductions would be appropriate next year so that the inflation-adjusted “real” rate of interest doesn’t increase through inaction.

“Assuming inflation continues to come down … then if we don’t cut interest rates at some point next year, then real interest rates will go up, and up, and up. And that won’t be consistent with our goals,” Williams said. “From my perspective, to keep maintaining a restrictive stance may very well involve cutting the federal funds rate next year.” 
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The tidal wave of artificial intelligence (AI) barrelling toward many professions has generated deep anxiety among workers fearful that their jobs will be swept away — and the mental health impact is rising.

The launch in November 2022 of ChatGPT, the generative AI platform capable of handling complex tasks on command, marked a tech landmark as AI started to transform the workplace.

“Anything new and unknown is anxiety-producing,” Clare Gustavsson, a New York therapist whose patients have shared concerns about AI, told AFP.

“The technology is growing so fast, it is hard to gain sure footing.”

Legal assistants, programmers, accountants and financial advisors are among those professions feeling threatened by generative AI that can quickly create human-like prose, computer code, articles or expert insight.

Goldman Sachs analysts see generative AI impacting, if not eliminating, some 300 million jobs, according to a study published in March.

“I anticipate that my job will become obsolete within the next 10 years,” Eric, a bank teller, told AFP, declining to give his second name.

“I plan to change careers. The bank I work for is expanding AI research.”

Trying to ’embrace the unknown’

New York therapist Meris Powell told AFP of an entertainment professional worried about AI being used in film and television production — a threat to actors and screenwriters that is a flashpoint in strikes currently gripping Hollywood.

“It’s mainly people who are in creative fields who are at the forefront of that concern,” Gustavsson said.

AI is bringing with it a level of apprehension matched by climate change and the Covid-19 pandemic, she contended.

But she said that she tries to get patients to “embrace the unknown” and find ways to use new technology to their advantage.

For one graphic animator in New York, the career-threatening shock came from seeing images generated by AI-infused software such as Midjourney and Stable Diffusion that rivaled the quality of those created by humans.

“People started to realize that some of the skills they had developed and specialized in could possibly be replaced by AI,” she told AFP, adding she had honed her coding skills, but now feels even that has scant promise in an AI world.

“I’ll probably lean into more of a management-level role,” she said. “It’s just hard because there are a lot less of those positions.

“Before I would just pursue things that interested me and skills that I enjoy. Now I feel more inclined to think about what’s actually going to be useful and marketable in the future.”

Peter Vukovic, who has been chief technology officer at several startups, expects just one percent or less of the population to benefit from AI.

“For the rest, it’s a gray area,” Vukovic, who lives in Bosnia, said. “There is a lot of reason for 99 percent of people to be concerned.”

AI is focused on efficiency and making money, but it could be channeled to serve other purposes, Vukovic said.

“What’s the best way for us to use this?” he asked. “Is it really just to automate a bunch of jobs?”
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New Australian Bureau of Statistics data reveals a record number of people are working multiple jobs as households try to keep up with the surge in the cost of living. Inflation has been at record highs, and Australians are paying some of the world’s highest power prices.

Sharp increases in power prices are making a cost-of-living crisis even worse. In some parts of the country, prices have risen by up to 25%.

Power prices in Australia have been fueled by various factors, including high inflation. There have also been expensive upgrades to aging transmission lines and distribution networks. Then there’s volatility in global energy markets caused by Russia’s war in Ukraine.

In Sydney, Diana Olmos, a migrant from Colombia, told local media that rising costs have made electricity almost unaffordable.

“The power prices will increase by 20 to 25%,” Olmos said. “I cannot afford that. I don’t know how we are going to survive this time with a huge cost-of-living rise, the rise of energy bills and really extreme weather.”

Almost a million Australians — or about 7% of the workforce — have multiple jobs, according to official data released this week by the Bureau of Statistics.

Gary Mortimer, a professor of marketing and consumer behavior at the Queensland University of Technology, told the Australian Broadcasting Corp. that many people are struggling financially, while others are taking advantage of record low unemployment.

“The main reason … is that cost-of-living crisis and being forced to pick up a second job, or a side hustle, but there are other groups involved there, too,” Mortimer said. “I mean, there is obviously the group that are actually taking advantage of the fact that we have got 3.5% unemployment. There is lots of work available.”

Food prices in Australia have increased by more than 7% in the past year. The cost of insurance has soared. So have mortgages. The Reserve Bank has raised interest rates 12 times since May 2022 as it tries to tame inflation, which currently stands in Australia at 6%, the same as neighboring New Zealand. In the United States, inflation — the general increase in prices — is at 4%, its lowest level since 2021, a decline mainly driven by a fall in fuel prices.

Australia’s inflation is, however, below that of the United Kingdom, where inflation fell to 7.9% in June, down from 8.7% in May.
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Pakistan and China are marking a decade of economic cooperation with much fanfare these days as the China-Pakistan Economic Corridor, popularly known as CPEC, completes 10 years. Experts say while the mega-project helped Pakistan develop much-needed infrastructure, the less-than-generous loans from Beijing coupled with Islamabad’s mismanagement has kept the project from turning Pakistan’s economy around.

Estimated to be the largest partnership of Beijing’s Belt and Road Initiative (BRI), a global investment and infrastructure project, CPEC launched in 2013 with more than $45 billion in planned investments. Over time, it grew to more than $62 billion, of which at least $25 billion was invested in Pakistan, according to both governments.

Mustafa Hyder Sayed, executive director of the Islamabad-based, nongovernmental Pakistan-China Institute, told VOA that the project came at a critical time for Pakistan.

“At that time, we had a lot of terrorism, there was a lot of turmoil and it [Pakistan] wasn’t seen as one of the best places to invest in, particularly,” he said. “And China reposed its trust in Pakistan at that time and dove right in. All in.”

Pakistani government data indicates CPEC has so far created 200,000 jobs, built more than 1,400 kilometers (897 miles) of highways and roads and added 8,000 megawatts of electricity to the national grid. The country’s deep-sea southwestern port of Gwadar, the centerpiece of CPEC, handled 600,000 tons of cargo in the last 18 months, according to officials.

At an event in Islamabad this week celebrating a decade of CPEC, Pakistani Prime Minister Shehbaz Sharif called the project a game-changer.

“And this was the result of vision and commitment and friendship,” Sharif told an audience of Pakistani and Chinese dignitaries.

Visiting Chinese Vice Premier He Lifeng, who received Pakistan’s highest civilian honor for his services in promoting economic cooperation, called the project exemplary.

“It has set an example of common trust and mutual development,” Lifeng said.

While Pakistan is among the top recipients of China’s infrastructure and energy investments, Islamabad now owes nearly one-third of its overwhelming external debt to Beijing.

Research shows that Chinese investments, largely shrouded in secrecy, do not come cheap. A 2021 report by U.S.-based research lab AidData found that most Chinese development financing in Pakistan between 2000 and 2017 were loans, not grants, given at or near commercial rates.

Pakistan-based economist Ammar Habib Khan, a nonresident senior fellow with the Washington-based Atlantic Council, told VOA this financial burden is partly why Pakistan has struggled to stimulate its economy through CPEC.

“A lot of that infrastructure came at a fairly high cost, and a lot of that borrowing was essentially in dollar terms and fairly higher than market terms,” he said. “Because of that, Pakistan continues to make significant dollar payments for the Chinese debt. Because of that we continue to have a current account crisis and some serious debt issues.”

In 2018, complaining of unfavorable terms, then-Prime Minister Imran Khan’s government set out to review CPEC projects. By 2021, the government was promising to prioritize the projects, however, in a bid to revive cooling bilateral relations that observers believe stemmed from the Khan government’s unease with CPEC’s terms.

Economist Khan said Pakistan definitely has a debt problem but not a Chinese debt problem. He blamed Islamabad for mismanaging resources.

“We added a lot of generation capacity, but we did not make efficient the distribution channels, due to which whatever electricity is generated, a lot of it is wasted,” Khan said.

That wasted electricity is costing the government millions of dollars every year, and its debt to power plants built under CPEC is piling up.

Islamabad and Beijing reject Washington’s assertion that China’s development financing to Pakistan and other BRI recipients is a debt-trap.

Pakistan has plenty of say in CPEC projects, Sayed said, through the Joint Coordination Committee that includes Chinese and Pakistani officials.

“So, this perception of China coming in by predatory financing and weakening a host country and gaining political influence is unfounded,” he said.

A report last year by Taiwan-based anti-disinformation lab DoubleThink’s China in the World network placed Pakistan at the top of the list of countries most exposed to Chinese influence.

According to the AidData report, Chinese loan terms are less generous than what Western countries usually offer. Khan said a lack of Western funding for Pakistan left Islamabad with little choice.

“The choice was simply whether to have a power plant or whether to have 12 to 15 hours of electricity shutdown,” Khan said. “So, yes, CPEC did provide Pakistan with a base of necessary infrastructure required for industrial growth. Meanwhile, Western countries have not been able to provide the same over the last many years.”

Under the BRI, China is spending over eight times more in Pakistan than the United States is, according to AidData’s research. The U.S. spends on soft infrastructure in Pakistan such as education, governance, and law and order capacity building, while China spends on hard infrastructure there.

Pakistan is the biggest recipient of China’s energy investment in Asia, while its share of BRI’s transportation and storage projects is the highest in the world.

Along with being Pakistan’s biggest single creditor country, China also routinely rescues it from economic collapse. In the last few months, Beijing rolled over close to $8 billion in debt, according to the Pakistani government, preventing Islamabad from default.

Experts say that to lessen the debt burden stemming from CPEC, Pakistan must find ways to efficiently use the energy and infrastructure it acquired through the mega-project and strengthen domestic production and exports.
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President Joe Biden is expected to issue his long-awaited executive order to screen outbound investments in sensitive technologies to China early next week, according to people familiar with the matter.

A White House spokesperson declined to comment.

The goal of the order is to prevent U.S. capital and expertise from accelerating the development of technologies that would support China’s military modernization and threaten U.S. national security.

The order is expected to target U.S. private equity, venture capital and joint venture investments in China in semiconductors, quantum computing and artificial intelligence. Most investments captured by the order will require that the government be notified about them. Some transactions will be prohibited, sources have said.

“It fills a gap in our current regime,” said Cordell Hull, a former U.S. Commerce Department official. “We have prohibitions on exporting the technology. We have restrictions on in-bound investment. This will help to plug that gap on funding and know-how and give the government visibility into these capital flows.”

The regulations are not expected to take effect right away, and the administration will solicit comments on its proposals, according to sources. It has already conducted meetings with stakeholders and has been consulting with allies. The topic also came up during U.S Treasury Secretary Janet Yellen’s recent trip to China.

Yellen last month described the potential restrictions as “highly targeted, and clearly directed, narrowly, at a few sectors where we have specific national security concerns.”

Laura Black, a former policy director for the Committee on Foreign Investment in the United States (CFIUS), which reviews certain transactions in the United States, said the order was not expected to establish a “reverse CFIUS,” because it would not involve a case-by-case review in which a committee would clear, mitigate or block a transaction. However, it is expected to prohibit certain investments, she said.

Two sources said briefings were expected Monday, with the announcement Tuesday. But the timing has slipped many times before and could do so again.

Sources have told Reuters the investments that will be restricted are expected to track export control rules for China issued by the U.S. Department of Commerce in October.

Emily Kilcrease, a former U.S. official who has worked on China investment policy, said the U.S. also has been trying to define what counts as artificial intelligence, and aiming to control offshore investments by U.S. people and companies.

She described the order as a major step in setting up a U.S. system of oversight to screen transactions to countries of concern and said that it was expected to expand in time.

She also said the United States should be prepared for retaliation by China.
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