Bloomberg reports, according to people familiar with the matter, that the Treasury Department and the Internal Revenue Service are likely to push off a January 2023 date for the firms to begin tracking data such as customers’ capital gains and losses.
Once rules are in place, exchanges and brokerages will have to send the detailed transaction data to the IRS and their clients who made the trades, who could then use the information to file their taxes. The data would include customer names and addresses, gross proceeds from sales, and any capital gains or losses.
As CoinTelegraph reports, the potential delay could reportedly affect billions of dollars related to capital gains taxes – the Biden administration’s budget for the government for the 2023 fiscal year previously estimated modifying the crypto tax rules could reduce the deficit by roughly $11 billion.
Remember, it’s all for your own good:
“It could be very helpful just to standardize the reporting and put it in a way that makes it easier to digest and put on a tax return,” said Michael Desmond, former chief counsel for the IRS
In other words, helping the IRS find tax cheats… and simplifying reporting for all the honest crypto players.
For now, according to Jake Chervinsky, head of policy at the Blockchain Association,“delaying is smart.”
“We’re getting closer & closer to the effective date of the infrastructure bill’s tax provisions & we’re still waiting for guidance or rulemaking on implementation,” he added.
If true, this is good news.
We’re getting closer & closer to the effective date of the infrastructure bill’s tax provisions & we’re still waiting for guidance or rulemaking on implementation. We’ve also seen legislative proposals that could make big changes. Delaying is smart. https://t.co/m7bMDiVFFU
Bloomberg notes that in addition to the rules, Treasury and the IRS are working on a new form for crypto firms to use called the 1099-DA, which will be different than the 1099-B used by stock and bond brokers.
There is no escaping the inevitable though as the Biden administration is adamant that crypto tax evasion remains a major issue for Washington policy makers.
The prevalence of digital fakery is an underrated contributor to the breakdown of respect in every online setting. It leads to a toxic environment where the worst behaviors are rewarded. To see why, we must first recognize that online influence is valuable. Having a lot of likes, retweets, positive reviews, and followers is an asset, one that increasingly impacts the offline economy. A restaurant that has a lot of five-star reviews is more likely to get new customers and a pundit who has a lot of Twitter subscribers is more likely to get a book deal.
The digital attestations of likes and followers and so on are a form of social capital, and everyone is motivated to acquire as much as they can. The question is how.
Some people try to acquire their social capital by doing something useful, like running a quality restaurant or putting out valuable content.
They hustle, put in long hours, and work to earn every like, retweet, positive review, and follower. This is the social capital equivalent of proof of work: do the work, earn the reward.
Other people cheat.
They don’t put in the hours or hustle, they instead buy enough fake followers and reviews on the black market to make it look like they did. This is the social capital version of a Sybil attack. On any centralized platform such as Seamless or Twitter, the second group is guaranteed to win.
As the comedian Groucho Marx once said, “the secret of life is honesty and fair dealing. If you can fake that, you’ve got it made.”
To understand why, recall that the target audience — the consumers who order food from an app, watch TikTok videos, and subscribe to Instagram feeds — have no idea what’s real and what’s fake. Facebook doesn’t tell them what percentage of an Instagram influencer’s likes were generated by a click farm (if it did, advertising revenues would plummet). This lack of information puts every would-be influencer in a bind. If viewers can’t tell the difference between what’s real and what’s fake, then what’s the best strategy for becoming popular? Should they work hard to earn real users or pay up to acquire fake ones? The answer is both. After all, those who decide to both build and buy will always be more popular than those who only do one. In game theory, this is known as the Nash equilibrium. In real life, it’s a race to the bottom.
But now we have a new problem because Instagram users aren’t that gullible. They understand that some chicanery is going on. There are too many content creators who are suspiciously popular, and the numbers only ever go up, sometimes too quickly. There are also academic studies and media reports that confirm their suspicions. But there is no obvious tell, so the most reasonable response from the users perspective is to assume that everything is a little fake, and to discount every number — every like, retweet, five-star review, and follower count — accordingly. Since tomorrow will bring more fakery, then discount a little more with each passing day. It helps that the human brain is uniquely adept at performing this invisible calculus. People have been doing it for millennia. Not with social capital of course, but with money.
Online social capital in any centralized setting is an inflationary currency. It does not enjoy scarcity of any kind and is easy to counterfeit so its purchasing power falls on a daily basis. That’s why it takes much higher numbers to impress users today than it used to. Here the world’s centralized platform operators are even more irresponsible than central banks. The Federal Reserve might be profligate with its printing, but it at least tries to preserve the integrity of its currency after it’s been issued. That’s why $100 bills are difficult to counterfeit. One hundred (or one hundred thousand) likes on any social media platform, on the other hand, are easy to counterfeit.
In economics, Gresham’s Law is the phenomenon by which “bad money eventually drives out good.” It’s more of a principle than a law but explains why lower quality representations of the same currency, like diluted coins with less gold that still have the same face value, tend to force higher quality money out of circulation. It’s best understood from the perspective of ordinary people making sensible decisions. In any economy where legal tender laws force citizens to treat coins of different metal content as having the same value, people are going to try to spend the diluted coins (to get rid of them) and save the denser ones. Maybe the laws will be changed, or the currency will fail, and all coins will have to be melted down to capture their pure metallic value. A similar phenomenon also explains why Bitcoin is increasingly viewed as a store of value, not the medium of exchange it was invented to be. The more fiat money that is printed by the world’s central banks, the greater the perception that fiat is a form of bad money, leading people to want to spend their dollars and hoard their bitcoins.
Kabessa’s Law is the social capital equivalent of this dynamic, named after a popular crypto pundit who first postulated the dilemma that every would-be influencer faces in a centralized setting — to build or to buy. This law states that counterfeit online social capital eventually drives out the quality kind, taking over.
The higher the percentage of fake activity on any platform, the lower the incentive to bother trying to create the real deal. Put differently, the easier it is to buy one thousand Twitter followers, the lower the incentive to try to earn one.
* * *
About the book: Re-Architecting Trust is a thought-provoking exploration of how decentralized blockchain networks and the digital assets that they enable can reinvent our most important trust frameworks by creating new types of money, reinvigorating how we transact the old kind, disintermediating the least trustworthy financial institutions, and enabling meaningful business models for artists and influencers. You can order a copy here
… and with consensus now expecting Fed rate hikes to peak in Q4 and rate cuts to begin in Q1 2023…
… the only question is of timing: just when does the recession begin?
To answer that question, we go to the latest survey of Wall Street professionals conducted by DB’s Jim Reid whose preliminary results were released today, and which finds that “the risk of a US recession by the end of 2023 has only been building in recent months with 88% of you now thinking it happens by the end of 2023 up from 78% last month.” Interestingly still only 17% believe the recession starts this year, but this is up from 13% last month and virtually 0 in February, so as Reid notes, “the market narrative of a more imminent recession has moved quicker than the responses.” Also worth noting: just 8% now expect no recession until 2024, down from a near majority (45%) in February.
That said, of these respondents, over a third (~6% of the total responses) believe the recession has already started. And while Reid still thinks 2023 is more likely than 2022 (“but it’s clear the risks are building”), we have claimed since last December that the recession is a 2022 calendar event and a few more catastrophic data points such as the latest guidance cut by RH, just three weeks after its last guidance cut, will make a 2022 recession consensus, which in turn will only accelerate the timeline on the Fed’s rate cuts and QE.
A South Carolina state representative on the ballot for the Democratic primary runoff on June 28 for the U.S. Senate has been heard in leaked audio strategizing on how to utilize Democrat “sleepers” to run as Republicans in local elections, as well as requesting drug money from a state prison inmate.
Project Veritas, the watchdog organization that obtained the recording, confirmed to The Epoch Times that it verified state Rep. Krystle Matthews as the person speaking with Perry Correctional Institution inmate David Solomon Ballard.
“When we get enough of us in there, we can wreak havoc for real from the inside out,” Matthews is heard saying in the recording dated Feb. 15.
Inmate phone calls are recorded and those making the call are notified by an operator that calls are recorded.
It is unclear what the relationship is between Matthews and Ballard, who was incarcerated in 2018 with a four-year sentence for threatening the life and family of a public official, and a ten-year sentence for resisting arrest and assaulting an officer, with multiple disciplinary actions taken against him while incarcerated. He also has an extensive arrest record.
Ballard had been jailed for threatening the life of Aiken County Sheriff Mike Hunt and his family, according to The State.
While in custody at the Aiken County Department of Public Safety, Ballard then assaulted a State Law Enforcement Division agent.
‘Secret Sleepers’
Matthews assumed state office in 2018 as a representative of District 117.
“We need some secret sleepers,” she is heard saying. “Like, you need, we need them to run as the other side, even though they for our side, and we need them to win,” the Senate primary candidate said. “We need people to run as Republicans in these local elections.”
Ballard agrees, stating, “Right, right.”
Watch:
BREAKING: Leaked Call With Prison Inmate Reveals SC Democrat State Rep & Senate Candidate @kmforsenate Calling For “#SecretSleepers” to Infiltrate @SCGOP; Advocates For ILLEGALLY Funding Campaign with “Dope Money”
India’s Largest Cement Maker “Circumventing The Dollar” In Russian-Coal-For-Yuan Deal
The Russian economy is currently experiencing unprecedented pressure from a group of countries led by the United States, with more than 10,000 sanctions imposed on the country, its citizens, and companies.
Despite all the amplification of sanctions threats by the media, and vilification of anything Russian by western leaders, many of the world’s largest nations (by population and economy), are continuing to adjust to current conditions, ignoring the virtue-signaling, and sending Russia’s currency and current account balance soaring.
But, in yet another example of the far-less-unified-than-Biden-claims new world order, it appears Indian industrialists have no problem dealing with Putin for their key materials.
The latest example comes from India as Reuters reports that UltraTech Cement – India’s biggest cement producer – is importing a cargo of Russian coal and paying for it using Chinese Yuan.
UltraTech is bringing in 157,000 tonnes of coal from Russian producer SUEK that loaded on the bulk carrier MV Mangas from the Russian Far East port of Vanino, the document showed. It cites an invoice dated June 5 that values the cargo at 172,652,900 yuan ($25.81 million).
The increasing use of the yuan to settle payments could help insulate Moscow from the effects of western sanctions imposed on Russia over its invasion of Ukraine and bolster Beijing’s push to further internationalise the currency and chip away at the dominance of the U.S. dollar in global trade.
“This move is significant. I have never heard any Indian entity paying in yuan for international trade in the last 25 years of my career. This is basically circumventing the USD (U.S. dollar),“ a Singapore-based currency trader said.
India has explored setting up a rupee payment mechanism for trade with Russia, but that has not materialized. Chinese businesses have used the yuan in trade settlements with Russia for years.
“If the rupee-yuan-rouble route turns out to be favourable, the businesses have every reason and incentive to switch over. This is likely to happen more,” said Subash Chandra Garg, a former economic affairs secretary at India’s finance ministry.
An Indian government official familiar with the matter said the government was aware of payments in yuan.
“The use of the yuan to settle payments for imports from countries other than China was rare until now, and could increase due to sanctions on Russia,” the official said.
Finally, we are reminded of what First Deputy Managing Director Gita Gopinath of the International Monetary Fund (IMF) told The Financial Times earlier in the year: that the recent financial sanctions imposed on Russia for its invasion of Ukraine are threatening to weaken the dominance of the U.S. Dollar as the world currency,
Russia had been planning for years to reduce its dependence on the petrodollar since the United States imposed sanctions in retaliation for its annexation of Crimea in 2014.
The current crisis in Ukraine has only accelerated those plans… and it now seems the entire BRICS group may be ready to cross the chasm as Bretton Woods III begins to form.
Empires fall and rise. Currencies fall and rise. Wars have winners and losers.
When Wellington beat Napoleon, the trade was to buy gilts. I am no expert on geopolitics, but I am an interest rate strategist and I think the level of inflation and interest rates and the size of the Fed’s balance sheet will depend on the steady state that emerges after this conflict is over. Three is a magic number:
The four prices of money are managed via Basel III and central banks as DoLR.
The four pillars of commodity trading are shaped by war, hopefully not WWIII.
The new world order will bring a new monetary system – Bretton Woods III.
A BRICS-based payment system would be the ultimate challenge to the dollar-hegemon-based system in place today.
At a BRICS summit earlier this month, Russian President Vladimir Putin said that the bloc, consisting of Brazil, Russia, India, China, and South Africa, is currently working on setting up a new global reserve currency that would be based on the currency basket of the five nations. Earlier, the bloc said it was working on establishing a joint payment network to abate the reliance on the Western financial system.
Even if this is nothing but talk, it underscores the fact that the dollar is on shaky ground. US policymakers would be wise to consider future dollar weaponization carefully.
The Biden administration announced it will expand access to monkeypox vaccines in a new “enhanced” national strategy to combat the outbreak, which includes the deployment of 296,000 vaccine doses over the coming weeks, and potentially 1.6 million vaccine doses over the coming months.
Xavier Becerra, secretary of Health and Human Services, speaks at the HHS headquarters in Washington, on June 28, 2022. (Nicholas Kamm/AFP via Getty Images)
The plan seeks to “expand vaccination for individuals at risk and make testing more convenient for healthcare providers and patients across the country,” the White House said in a statement on June 28.
Under the strategy, the Department of Health and Human Services (HHS) will immediately allocate 56,000 doses of the two-dose Jynneos vaccine, which are currently in the national stockpile, to states and territories across the United States.
“States will be offered an equitable allotment based on cases and proportion of the population at risk for severe disease from monkeypox, and the federal government will partner with state, local, and territorial governments in deploying the vaccines,” the White House announced.
The move is a major step up from the 9,000 doses of the Jynneos vaccine that HHS has so far deployed from the national stockpile to the 32 states and jurisdictions that requested the vaccine.
HHS will also allocate another 240,000 doses in the coming weeks “to a broader population of individuals at risk,” as more doses are received from the manufacturer. This would bring the total number of vaccines to be distributed over the coming weeks to 296,000.
The White House said HHS will hold another 60,000 vaccines in reserve.
HHS Secretary Xavier Becerra said in a statement that the new strategy allows the government to “maximize the supply of currently available vaccines and reach those who are most vulnerable to the current outbreak.”
…
Up until now, monkeypox vaccines have been provided only to people who have had confirmed exposure to a monkeypox case. The Advisory Committee on Immunization Practices (ACIP) from the CDC now recommends that vaccines will be made available to people with “confirmed monkeypox exposures and presumed exposures.”
“This includes those who had close physical contact with someone diagnosed with monkeypox, those who know their sexual partner was diagnosed with monkeypox, and men who have sex with men who have recently had multiple sex partners in a venue where there was known to be monkeypox or in an area where monkeypox is spreading,”HHS said in a statement.
…
The White House noted that the ACAM2000 vaccine “cannot be provided to individuals who are immunocompromised or who have heart disease.”
It wasn’t long ago that the American Israel Public Affairs Committee had an overwhelming grip on both major parties in the United States. However, in the most striking indication yet that Democrats are slipping from AIPAC’s grasp, former New York mayor and current congressional candidate Bill de Blasio has publicly disowned the group.
In a virtual candidate forum, NY Jewish Week asked de Blasio if he supported AIPAC. “No, I don’t,” he responded, adding that the group has changed in a manner he called “unacceptable.” Hammering home his stance, he said, “I am not seeking their endorsement and would not accept it even if it were offered.”
Such an utterance from a prominent member of either party was unthinkable just a year ago—to say nothing of the fact that de Blasio is running in New York City…which, in 2019, de Blasio called “the largest urban Jewish community on Earth.”
In May, House speaker Nancy Pelosi accepted the endorsement of AIPAC’s pro-Israel rival lobby group J Street. Israeli newspaper Haaretz called it “a political development that signals the shifting attitudes on Israel inside the Democratic Party.” Walking a political tightrope, Pelosi—a longtime AIPAC ally and recurring attendee at its conferences—hasn’t touted the endorsement.
AIPAC and J Street have gone head to head in many Democratic primary races. Earlier this month, Pelosi recorded a video message to counter AIPAC-sponsored attack ads against a Maryland congressional candidate that has the backing of both Pelosi and J Street.
Where AIPAC is a relentless defender of seemingly every action of the Israeli government and encourages a hard-line U.S. foreign policy against Israel’s rivals, J Street bills itself as “the political home of pro-Israel, pro-peace Americans,” and has decried “the injustice of Israel’s occupation” and “the ongoing denial of fundamental rights and freedoms to millions of Palestinians in occupied territory.”
The difference between AIPAC and J Street came into sharp relief last week:
J Street officially “welcomed’ the letter as pursuing “the only just and sensible solution” to resolving the controversy over a death that various investigations—other than Israel’s—have concluded was an intentional, murderous act by an Israeli soldier.
De Blasio spoke to AIPAC’s national conference in March 2019—two months for before declaring his candidacy for president. He laid out what he called a “progressive case for the state of Israel,” but condemned the Boycott, Divest and Sanction (BDS) movement that many progressives embrace as a means of opposing Israel’s treatment of the Palestinians.
Also that month, de Blasio scolded progressive congresswoman Ilhan Omar for tweeting “It’s all about the Benjamins baby” in response to a Glenn Greenwald tweet marveling at “how much time US political leaders spend defending a foreign nation [Israel] even if it means attacking free speech rights of Americans.” De Blasio said “there’s a long antisemitic tradition associated with that kind of comment.”
In distancing himself from the group, de Blasio cited an AIPAC-affiliated PAC’s sponsorship of a successful primary challenger to progressive House candidate Nina Turner in Ohio. “I thought the attack on her was not only horribly unjustified, it deprived our nation of someone who could have been a huge difference maker in terms of our progressive movement,” said de Blasio.
That race pitted two black women against each other in a district with a substantial Jewish vote. In her victory speech, challenger AIPAC-backed Shontel Brown reminisced about her visit to Israel, which helped her “appreciate the vulnerability of a state, and that has given me the understanding of the U.S.-Israel relationship and I thank my Jewish brethren.”
Turner’s sin that provoked AIPAC: A tweeted message of solidarity with “If Not Now,” a group that describes itself as “American Jews organizing our community to end U.S. support for Israel’s apartheid system and demand equality, justice, and a thriving future for all.”
At last week’s candidate forum, De Blasio said “the only path forward to peace in the region for both Israeli and Palestinian people to have their own states. I would fight for that, and I would certainly fight against any organization that attacks my fellow progressives.”
De Blasio, who served as New York’s mayor from 2014 to 2021, is running to represent the newly-redrawn New York 10th congressional district, which covers all of southern Manhattan and a big swath of Brooklyn.
As previously reported in an exclusive June 20 report,evidence proves that “plainclothes” members of a special Electronic Surveillance Unit (ESU) were embedded among Jan. 6, 2021, protesters for the purposes of conducting video surveillance. According to experts, one believes the activity itself may have been against the law. The other contends it was done for the purpose of entrapment.
Speaking as a former prosecutor and three-term District Judge, Rep. Louie Gohmert (R-Texas) told The Epoch Times, “if you’re going to have electronic surveillance of people there has to be warrants.”
As Gohmert explained, “FISA courts have granted warrants,” with “no particular clarity” and “no probable cause that a crime’s been committed or that this person engaged in a crime.”
The Foreign Intelligence Surveillance Court (FISC) was established under the 1978 Foreign Intelligence Surveillance Act (FISA). “Pursuant to FISA,” the FISC website explains, “the Court entertains applications submitted by the United States Government for approval of electronic surveillance, physical search, and other investigative actions for foreign intelligence purposes.”
Regarding domestic electronic surveillance, the Department of Justice (DOJ) website, “Because of the well-recognized intrusive nature of many types of electronic surveillance, especially wiretaps and ‘bugs,’ and the Fourth Amendment implications of the government’s use of these devices in the course of its investigations, the relevant statutes (and related Department of Justice guidelines) provide restrictions on the use of most electronic surveillance, including the requirement that a high-level Department official specifically approve the use of many of these types of electronic surveillance prior to an Assistant United States Attorney obtaining a court order authorizing interception.”
Furthermore, “when court authorization for video surveillance is deemed necessary, it should be obtained by way of an application and order predicated on Fed. R. Crim. P. 41(b) and the All Writs Act (28 U.S.C. § 1651). The application and order should be based on an affidavit that establishes probable cause to believe that evidence of a Federal crime will be obtained by the surveillance. In addition, the affidavit should comply with certain provisions of the Federal electronic surveillance statutes.”
Gohmert surmised: “When you see confirmed judges are just willing to completely abrogate the U.S. Constitution because they’re the star chamber of the secret court, and they figure nobody will ever find out what they’re doing, then you know when you see there’s an Electronic Surveillance Unit, well, something’s not right.”
Gohmert’s concerns with the ESU surveillance are two-fold:
Were the legally required warrants obtained?
If so, how could a judge approve a warrant for surveillance before a crime has been committed and with no probable cause?
“We can’t have secret units doing secret surveillance of people that have committed no crime, no probable cause of a crime. Just getting blanket surveillance,” Gohmert asserted. “We don’t know what kind of warrant they had or even if they had warrants. But to deploy Electronic Surveillance Units tells us there’s a lot more here that we need to find out about and obviously it’s not going to be uncovered at least for another six months.”
But Gohmert added that “there is also more information we haven’t gotten and information that continues to leak out drip by drip.”
“Like this in [article] The Epoch Times,” Gohmert noted, “pointing out how until the deployment of munitions, the crowd was peaceful. I had heard from people and seen people interviewed saying there wasn’t any violence out there. ‘We were just mulling around, chanting stuff from time to time, then they started firing on us with tear gas and provoked the crowd.’ They created chaos, and you just wonder what was going on.”
The Evidence
Evidence of the embedded ESU members was discovered in a Jan. 3, 2021, First Amendment Demonstrations report, issued by Chief of Police Robert Contee of the Metropolitan Police Department (MPD), Homeland Security Bureau, Special Operations Division, obtained exclusively by The Epoch Times. While it is unclear who the MPD ESU “members” were, the report stated they wore a specific “bracelet on their left wrist identifying them as MPD personnel” among the protesters. Of the 37 “Specialized Units” listed as part of the MPD, an ESU is not among them.
Also in the report, revealed now for the first time, was the advisory that the Special Operations Division “will have personnel to assist with this detail and will assist with any demonstration.” Among them were Domestic Security Officers, or DSOs.
Under the heading of “Special Operations Division — Deployment Requirements,” the report said “the Incident Commander” shall ensure that specific objectives were “adhered to.” Among those is the order that “Long Range Acoustical Device (LRAD) – The LRAD along with the warning sheets shall be deployed by the DSO members along with the munitions load out and arrest kits.”
Domestic Security Officers (pdf) are also part of Homeland Security’s Special Operations Division.
According to The Focus, the DSO “can be heard shouted on audio recordings of the Capitol siege, when law enforcement officers needed additional support against the oncoming masses.”
“DSOs are primarily used as riot police, to dole out such crowd control measures as tear gas, pepper spray, batons and rubber bullets intended to disperse rioters. Their weapons can be lethal and are only to be used in the most extreme circumstances.”
Video evidence shows an unidentified individual handing weapons to people through a window from inside the Capitol building.
Joseph McBride, an attorney for multiple January 6 prisoners and defendants identified a man tagged by “Sedition Hunters” as “Red-Faced 45.” The man McBride says is “clearly law enforcement,” was dressed in red from head to toe—with even his face painted red. He appears in a video engaging in continuous dialogue with others whom McBride also insists are agents embedded in the crowd.
“He passes out weapons, sledgehammers, poles, mace. Some of those things come in contact with some of the other protesters who have subsequently been charged with possessing dangerous weapons and are using dangerous weapons at the Capitol. That is clearly entrapment.
That is clearly the government creating conditions of dangerousness and entrapping members of the crowd to possess weapons and possibly use them for reasons that we cannot comprehend.”
According to a 140-page report issued by then-Capitol Police Inspector General Michael Bolton—”Review of the Events Surrounding the Jan. 6, 2021, Takeover of the U.S. Capitol”—Capitol Police’s Civil Disturbance Unit was ordered by supervisors not to use the department’s most powerful tools, like stun guns. Also, “heavier, less-lethal weapons,” including stun grenades, “were not used that day because of orders from leadership.”
China’s Productive Capacity Is Starting To Slip Away To India And Southeast Asia
Continued lockdowns in China aren’t helping the country’s ongoing, decade-long, production exodus, a new report from Caixin notes.
The accelerating exodus from Asian production powerhouse has been helped along by Covid policy disruptions, rising labor costs and worsening trade tensions between the U.S. and China, the report notes.
Southeast Asia and India are looking to take China’s place thanks to low labor costs and rising domestic demand. This falls in line with India’s political objectives, where Prime Minister Narendra Modi is pushing a “Made in India” campaign.
As an example, Apple said earlier this year that it had started making its iPhone 13 at a factory in India instead of Taiwanese contract manufacturer Foxconn. Like other smartphone makers, it has an incentive not only for exports, but for domestic sales, the report notes:
In India, Chinese smartphone makers set up factories aiming at the huge domestic market. With 1.4 billion people — almost as many as in China — and a high proportion of young people, India has attracted Chinese brands including Xiaomi, Meizu, Vivo and Oppo to build factories. Many Chinese phone part makers have also set up factories there. Now Chinese brands account for nearly two-thirds of India’s smartphone market.
But that doesn’t mean China doesn’t have advantages: it has an enormous domestic market and decades of manufacturing infrastructure and experience, the Caixin report notes. And while no major aftershocks have been felt in China’s economy, the trend is heading in the wrong direction for the country.
Li Xingqian, director general of the Ministry of Commerce’s Foreign Trade Department said the exodus from China was “in line with the law of economics.”
Exports in the country were up 16.9% in May, the report says, accelerating from April’s 3.9%. The country’s trade surplus was $78.76 billion in May.
However, thanks to weak demand in developed countries, “export orders for delivery in June and July, usually the peak season for booking goods for the back-to-school and holiday seasons, didn’t come in as expected,” the report said. This weak demand was seen in falling shipping rates.
Americans may take until the end of this year to work through inventories that were pulled forward over the last year.
At the same time, President Joe Biden has said that he is considering lifting tariffs on $350 billion a year in Chinese goods. His administration, however, still seems to be divided on the matter and no decision is expected quickly.
The report noted clearly that, to this day, China remains “the world’s factory”, which is unlikely to change anytime soon:
Neither Southeast Asia nor India can replace China as the global manufacturing hub in the near future as they are mainly engaged in labor-intensive and low value-added manufacturing, several foreign trade participants told Caixin. They also face problems such as incomplete industrial chains and low labor efficiency to varying degrees, experts said.
To foreign companies, China is not only a manufacturing base but also a huge market, said He Xiaoqing, president of consulting firm Kearney Greater China. In 2020, global companies had $1.4 trillion of domestic sales, far more than their exports of $900 billion, showing the attractiveness of China’s local market, He said.
In addition to India, Vietnam has also been a beneficiary of factories leaving China. Imports for the country were up 16.7% for the first five months of this year, data shows.
Most of the production moving to Southeast Asia involves textiles, furniture and low-end assembly of consumer electronics, the report said.
U.S. gross domestic product contracted by 1.6% on an annualized basis during the first quarter, according to the Bureau of Economic Analysis’s final estimate, as consumer spending was weaker than originally forecast. The sense we’re heading for recession was heightened when Federal Reserve Chair Jerome Powell said today at a European Central Bank forum that policymakers won’t let the economy slip into a “higher inflation regime” even if it means raising interest rates to levels that put growth at risk. He maintains U.S. household finances remain strong. “The Fed needs you to capitulate on summer travel in order for inflation to get under control,” says 42 Macro founder and CEO Darius Dale. Darius joins Real Vision’s Andreas Steno Larsen to talk about receding inflation fear and rising recession risk. We also hear from Francis Gannon about how higher interest rates are driving a shift in market focus. And we share a segment from today’s Crypto Unwrapped episode on continuing upheaval in the crypto market. Want to submit questions? Drop them right here on the Exchange: https://rvtv.io/3Ntyqa7. Watch the full conversation featuring Francis Gannon here: https://rvtv.io/3QUWOnV. Watch the full Crypto Unwrapped episode featuring Tascha Che, Katie Talati, and Ash Bennington here: https://rvtv.io/3NufQyO.
