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Good evening.
As China’s leadership gathers for its quinquennial policy plenum, signs are flashing red over the country’s faltering economic growth and its impact on the population, piling pressure on policymakers to intervene.
New GDP data this morning showed growth slowing in the second quarter to a weaker than expected 4.7 per cent as the world’s second-largest economy struggles with poor consumer demand and a lingering property slowdown.
Separate data on Friday showed exports rising at their fastest rate in more than a year, even as trade partners in the US and Europe have responded to floods of cheap Chinese goods by strengthening trade restrictions. The latest was last week’s move by Washington to add tariffs on Chinese steel exports that come in via Mexico, partly in an attempt by the Biden administration to shore up support in former industrial heartlands ahead of November’s presidential election.
However, the boost from exports has been more than offset by tepid demand at home, a trend underscored by last week’s inflation data.
In the meantime, as we report in our new Big Read, social strains are becoming evident. Authorities are increasingly concerned about rises in unemployment, mental illness and crime linked to the economic slowdown. Protests have sprung up around unpaid wages in the property and construction sectors, job cuts in the service sectors hit by ecommerce and wage reductions in the gig economy.
Some hope a big policy intervention may yet come out of the five-day plenum, which in the past has been used to signal changes in economic direction, such as Deng Xiaoping’s post-Mao Zedong drive to “reform and open up”.
Policymakers, so far at least, have played down the chances of any “strong medicine”, although some are expecting an intervention of a different sort from the People’s Bank of China, which has voiced concern about a bubble forming in the country’s sovereign bond market.
“The mood in China is dismal,” writes economist Eswar Prasad. The government seems to have a clear set of objectives, he says, including rebalancing towards services and higher productivity manufacturing, moving away from real estate as the key driver of growth and boosting household consumption.
He adds that it now needs to “articulate a concrete plan for attaining those objectives, provide a downpayment with some specific reform measures, and lubricate the process with well-targeted stimulus”.
Need to know: UK and Europe economy
On Wednesday the UK government will introduce an AI bill in the King’s Speech — the agenda for its first parliamentary term. The bill will seek to enhance legal safeguards, focusing on the production of large language models, the technology underpinning products such as OpenAI’s ChatGPT.
UK housebuilders warned that it would take at least a year to start increasing housing supply, underlining the scale of the challenge facing the government’s mission to “get Britain building”.
UK investment bosses urged the government to overhaul the British savings market to channel money into domestic equities, which have suffered from record investor outflows. They are calling for a “radical” simplification of the Individual Savings Account market, as well as tax breaks for UK stocks.
Net migration drove the largest annual population growth in England and Wales in 75 years last year as births fell to a two-decade low, highlighting the changing demographic pressures facing the new government. The total rose by almost 610,000 to 60.9mn in the year to mid-2023.
European Central Bank policymakers fear that rising government spending in countries such as France could halt the fall in inflation, boosting their resolve not to overpromise more interest rate cuts. The ECB makes its next decision on Thursday but no more cuts are expected until September or beyond. France’s national auditor today expressed concerns about the country’s debt pile.
As Russia braces for a long war in Ukraine, state orders to arm, fuel, feed and clothe the army are injecting vast sums of money into the economy, which is expected to grow 3 per cent this year. The country’s rustbelt is benefiting directly as it pivots to military supplies.
Need to know: Global economy
The latest FT-Michigan Ross poll underscored Donald Trump’s edge over Joe Biden on the economy. Forty-five per cent of voters — including 40 per cent of independents — said they would be “much” or “somewhat” better off under Trump, while only 35 per cent said they would be “much” or “somewhat” worse off.
Have we reached the limits of monetary policy? Soumaya Keynes talks to Hyun Song Shin, head of research at the Bank for International Settlements, in the Economics Show podcast.
Need to know: business
Bitcoin surged following the assassination attempt on Donald Trump as investors speculated about his chances of winning the November election. Trump is seen as the more pro-crypto candidate. Shares in large US gun makers also shot up.
Wall Street second-quarter earnings season continues. Profits at Goldman Sachs more than doubled to $3bn as dealmaking rebounded, while assets under management at BlackRock hit a record high of $10.6tn.
Fashion group Burberry replaced its chief executive and warned that annual profits would fall short of expectations. The company has been struggling to engineer a recovery in the face of a wider downturn in the luxury sector.
European cannabis companies are planning to go public in the US to take advantage of a federal proposal to reclassify marijuana as a less dangerous drug, as well as decriminalisation in Germany.
Korean tech giant Samsung Electronics is in crisis. It risks losing disenchanted engineers to domestic rival SK Hynix as its AI ambitions are damaged by unprecedented worker unrest.
The World of Work
Minority attorneys at the largest US law firms are being used as “window dressing” in initial meetings with clients, only to be excluded from subsequent work, according to a new survey.
UK ministers are overhauling jobcentres to focus on career advice rather than policing the benefits system, as they attempt to tackle the huge numbers that have dropped out of the workforce.
Despair at the thought of a half-day “team bonding” session? How about being stuck in a dark space illuminated only by strip lighting with just three colleagues for company — for 378 days. That’s the “extreme colleaguing” experiment undertaken by astronauts to simulate life on Mars.
Some good news
Feel guilty about spending too much time watching the football over the past month? Don’t be: research has shown that people who watch sports, whether in person or on TV, experience greater wellbeing than those who don’t — as long as you’re sharing that experience with others.
![Spanish football fans](https://i0.wp.com/www.ft.com/__origami/service/image/v2/images/raw/https%3A%2F%2Fd1e00ek4ebabms.cloudfront.net%2Fproduction%2F71a64ea4-b3c2-43d3-97c3-13e12247ab31.jpg?resize=2290%2C1526&ssl=1)
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