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Analysis – China’s grand reopening may come too late for many companies by Reuters

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© Reuters. Epidemic prevention workers wearing protective suits walk near a residential complex that has been locked down as the coronavirus disease (COVID-19) outbreak continues in Beijing, China November 12, 2022. REUTERS/Thomas Peter

Written by Casey Hall and Sophie Yu

SHANGHAI (Reuters) – Brian Bergey and his wife Ruixi Hu’s culinary tourism business has survived three years of harsh coronavirus restrictions in China.

But as excitement builds in global financial markets that the world’s second-largest economy may finally emerge from isolation next year, the two are packing their bags.

“I’m still a bit pessimistic about China reopening quote without quote,” Bergey said. Lost Plate, which has been hosting food tours in several Chinese cities since 2015, is moving to Southeast Asia instead.

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China, the last of the major countries not to treat Covid as a pandemic, this month unveiled 20 new steps that eased its strict anti-Covid policies.

This sent Chinese stocks, bonds and the yuan currency higher, and a wide range of assets from Asia to Europe and Latin America climbed.

If China reconnects with the world next year, according to the investor thesis, its economy will recover from its sharpest slowdown in decades, and with it, the prospects of a global recession in 2023 may also fade.

But this abundance belies the grim economic reality inside China.

Many businesses, especially customer-facing ones, fear it may not survive until next year: China is still grappling with some of its biggest outbreaks yet, while traumatized consumers — whose lives have been upended by government action The harsh anti-COVID – hmm. keep their money.

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“The most important thing would be to see in February and March who was actually able to withstand the winter,” said Shanghai-based American entrepreneur Camden Hauge, who owns a café, bar, several matcha kiosks and an event company in the city.

It predicts that the 25 million residents of Shanghai, traumatized by two months of confinement at home early this year, often without access to basic necessities, will continue to avoid crowded places for a long time regardless of the rules.

“People are not going to hit a switch and go back to the way life was before,” Hogg said.

severely traumatized consumers

China’s economy is expected to grow around 3% this year, falling short of its target of around 5.5%.

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October’s slate of economic data came in below already weak expectations: exports fell. Inflation has slowed. The new bank lending fancy. The downturn deepened in the real estate market. Retail sales fell for the first time since Shanghai closed in April and May.

As the COVID outbreak worsens, China’s economy is unlikely to turn heads in the near term.

JPMorgan (NYSE: ) estimated earlier this month that cities with more than 10 new COVID cases account for 780 million people and 62.2% of gross domestic product — nearly triple the levels seen at the end of September.

Vaccination and booster rates remain relatively low across China, especially among vulnerable groups such as the elderly, leaving authorities cautious about easing before the population is better prepared.

As a result, the new COVID rules were not implemented uniformly. Local authorities in some Chinese cities have eased restrictions, while others have tightened.

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In several cities, officials have come out to reassure residents that the amendments do not mean letting their guard down.

In the face of mixed messages, some stressed families have taken matters into their own hands. Posts on social media have shown that many parents, fearing their children might contract COVID, use pretexts such as toothaches or ear infections to pull them from school.

Economists warn that those families won’t be going out for dinner or shopping trips any time soon.

“New measures to ‘improve’ COVID containment appear to be creating chaos on the ground as local governments attempt to interpret policies,” said analysts at Gavekal Dragonomics.

“[This] It represents economic uncertainty that appears likely to further weaken consumption and property sales in the near term.”

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At its core, the problem reflects the authorities’ failure to prioritize the interests of consumers, who are often the punching bag of China’s investment-driven economy.

Take China traffic data: In the third quarter, freight turnover by road, rail and water was roughly the same as in the third quarter of 2019, pre-COVID, according to a Fitch Ratings analysis.

By comparison, the passenger turnover rate on the same modes of transportation was half or even a third of the levels of three years ago, indicating that people’s lives suffered much more disruption than industrial logistics.

This does not bode well for customer-facing companies.

Yao Lu’s Shanghai bar, Union Trading Company, was a stalwart on international “best bar” lists until this year, when it only ran 50 days between COVID shutdowns.

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“What this year has taught us is that whatever plan you have for the future doesn’t really matter,” Yao said. “We’re just trying to live day by day.”

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Serbian parliament adopts 2023 budget, sets growth at 2.5% and deficit at 3.3% By Reuters

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© Reuters.

BELGRADE (Reuters) – Serbia’s parliament on Friday approved next year’s budget, projecting growth of 2.5% of national output and a deficit of 3.3%, down from 3.9% set for 2022, as the country grapples with a crisis stemming from the war in Ukraine.

The spending plan sets revenues at 1,843.4 billion dinars ($16.61 billion) and expenditures at 2,107.4 billion dinars.

The deficit will be covered by borrowing at home and abroad, while the public debt is expected to reach 56.1% of GDP.

Prime Minister Ana Brnabic said the budget, approved by 156 deputies in the 250-seat parliament, was designed to protect financial stability and living standards.

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“We will continue to fight for continuous increases in (public sector) salaries and pensions,” Brnabic told parliament.

The spending plan also states that 6.8% of the total funds will be allocated to capital investments, mainly in infrastructure.

The budget projects economic growth for 2023 at 2.5%, the same as in 2022. Last month the International Monetary Fund said it expected Serbia’s economy to grow 2.25% next year.

Last month, Serbia and the International Monetary Fund agreed a 2.4 billion euro ($422.08 million) two-year loan deal to help it absorb the impact of the global economic slowdown caused by the war in Ukraine.

The government’s financial council’s advisory body has warned that financing expenditures for the loss-making state-run energy utility EPS and retail gas retailer Srbijagas at 1.8% of GDP are too high.

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“The flaming problems of Serbia’s public finances … catastrophically bad operations of EPS and losses of Serbiagas,” the board said in its report.

Serbia is completely dependent on Russian gas, and its oil monopoly in Israeli shekels is owned by Gazpromneft and Gazprom (MCX:).

EPS suffers from decades of mismanagement, particularly at the coal-fired power plants that generate about 70% of the country’s electricity.

($1 = 110.9800 Serbian dinars)

($1 = 0.9477 euros)

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Your wallet is drained by subscriptions. Wall Street thank you.

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Try to calculate the number of subscriptions you have. We’ll wait.

There’s your Amazon Prime and your Spotify — the ones you married. How about that Apple TV+ subscription you’ve been meaning to cancel since you watched Ted Lasso… last summer? Scroll through your cellphone (it’s the same as another subscription) and you might find a Calm app your doctor recommended that you haven’t actually used, or a dating app you’ve used and hated, but will likely use again. There is a Chewy subscription to feed your dog DoorDash Subscribe to Feed Yourself and sign up for Peloton to work on the food you just ate. And of course, there’s also a Wall Street Journal subscription necessary to read this article.

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Norway’s $1.3 trillion wealth fund encourages traders to bet against the market

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(Bloomberg) — Nikolai Tangen, head of Norway’s $1.3 trillion sovereign wealth fund, wants traders to bet against the market.

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The world’s largest single owner of publicly traded companies, with nearly 1.3% of all listed shares, on Thursday outlined a three-year plan to limit losses that have accumulated in turbulent markets for 2022, exacerbated by soaring inflation and rising interest rates. and war in Europe. For the first time in its history, the wealth fund is looking forward to a future in which investments are a fraction of what they used to see.

This means that “excessive returns are more important than ever,” said Tangen, who has repeatedly told his countrymen to prepare for “extremely low returns.”

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Speaking in an interview Thursday, Tangen said the key to beating the benchmark would be to “push the fund to become more long-term, more ambivalent, and more active in terms of passive selection.” That is, “there are a lot of things we don’t want to own,” he said, without elaborating.

Built from the wealth of the North Sea in oil and gas, the Oslo-based fund has warned of a prolonged downturn in the markets after posting an average return of 6% over a quarter century of its existence. It lost 4.4% in the third quarter, which is equivalent to about $43 billion.

The fund has only one owner, unlike other large asset managers, is largely affiliated with the index, and invests according to a strict mandate from the Ministry of Finance. She strives to make the most of her limited field to try and beat the standard against which she is measured, something she has been able to achieve in eight of the past ten years.

“In a volatile world, you need to be more long-term and more ambivalent,” Tangen said. This is “because there will be more opportunities when you can do the opposite with everyone else.”

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He said the strategy was “playing into heightened geopolitical uncertainty” and a partial reversal of globalization, while the wealth fund released its three-year strategy. The plan sets goals such as investing in companies before they go public, voting more actively at shareholder meetings, improving cooperation between traders and portfolio managers, and exploiting periods of turmoil in real estate markets.

The fund also needs to be “more robust operationally,” Tangen said, including being prepared to counter cyberattacks. He has already said that openness and transparency are priorities to ensure that Norwegians understand why their rain fund is not growing as quickly as before.

The fund scaled back its participation in initial public offerings last year. In hindsight, he dodged a bullet, Tangen said, having bought fewer IPOs in “really frothy” markets and seeing those IPOs perform “really badly.” But that is likely to change as conditions improve.

“Selectively exploring this opportunity in the next strategy period is something we will look at,” said Equity CEO Pedro Furtado Reis. “Doing this allows us to get into the life cycle of the company earlier and hopefully as the company grows it will have a greater share of that value.”

The fund said it would consider investments in renewable energy storage and transmission in the future, which would expand the range of renewable infrastructure it would like to keep. It spent about 1.4 billion euros ($1.5 billion) on a 50% stake in a Dutch offshore wind farm in 2021, but has not added anything else to its renewable energy infrastructure portfolio.

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“It’s competitive,” Tangen said of the wind and solar projects market. “There aren’t a lot of projects out there, they’re very competitive and the returns are very low. So we just want to increase the space. Generally in the investment world, the more options you have, the better.”

The broader scope in renewables also reflects an internal effort within the fund to improve collaboration between teams and identify new investment opportunities, said Daniel Baltazar, chief equity officer.

“We may have built a few more silos than we should have,” Balthazar said. “With the advent of Nikolai, there is a much greater effort to collaborate between teams. With this collaboration between teams, we can also search in a better way across value chains.”

(Updates in detail in sixth paragraph, comments with CEO in twelfth)

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