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<ul class="summary-list"><li>Russian imports of goods from China surged in September.</li><li>A new trade agreement between Russia and China was finalized in late August.</li></ul>Russia's imports of goods from China increased sharply last month, a sign that Moscow is leaning more heavily on Beijing after the two countries affirmed their economic ties.China exported around 80 billion yuan worth of goods to Russia in the month of <a target="_blank" href="http://english.customs.gov.cn/Statics/2c024a8b-3aea-4f87-a405-046557ad558f.html">September</a>, a 9% increase from the 73 billion yuan worth of goods it exported the prior month, according to Chinese customs data published on Tuesday. That's larger than the increase recorded over the last several months, with Chinese exports to Russia rising 3% in <a target="_blank" class="" href="http://english.customs.gov.cn/Statics/21dcbdc9-a5c7-4ce5-8884-d45f6ab35488.html">August</a> and 1% in <a target="_blank" class="" href="http://english.customs.gov.cn/Statics/672cd557-3c4e-48bb-8e7c-40cc02a20c7e.html">July</a>.The surge of trading activity follows a fresh <a target="_blank" href="https://www.cnn.com/2024/08/21/europe/china-li-qiang-russia-belarus-trip-intl-hnk/index.html">cooperation agreement</a> Russia and China finalized in late August, which vowed, among other things, to deepen trade ties. The deal reaffirmed the "<a target="_blank" class="" href="https://www.businessinsider.com/russia-ukraine-war-putin-china-trade-partnership-economy-moscow-beijing-2024-4">no limits</a>" <a target="_blank" class="" href="https://www.reuters.com/world/china/moscow-beijing-partnership-has-no-limits-2022-02-04/">partnership</a> Moscow and Bejing have sought to expand since 2022, which took both country's <a target="_blank" class="" href="https://www.businessinsider.com/china-russia-trade-record-ukraine-war-xi-jinping-vladimir-putin-2024-1">trade with one another to a fresh record</a> last year."Our trade relations are not only developing but flourishing, thanks in part to the efforts of our Chinese friends," Russian President Vladimir Putin said in a meeting with China's premier, Li Qiang, per a Kremlin <a target="_blank" href="http://en.kremlin.ru/events/president/news/74910">transcript</a> of the event. "The attention and commitment shown by both governments towards the development of trade and economic relations have yielded positive results."Total trade between Russia and China notched 1.28 trillion yuan from the start of the year through September, up 3.5% from the same period last year, customs data shows.Moscow has grown more reliant on Beijing as an economic partner since being targeted by Western sanctions in 2022. Trade restrictions from the West have pushed Russia into an increasingly <a target="_blank" class="" href="https://www.businessinsider.com/russia-economy-ukraine-war-putin-moscow-budget-isolation-west-sanctions-2023-12">isolated position</a> in global markets, economists say, with countries like <a target="_blank" class="" href="https://www.businessinsider.com/russia-economy-russia-china-barter-trade-us-secondary-sanctions-payments-2024-8">China</a> and India among the nation's small circle of major trading partners.Russia's trade with China has stumbled recently, however, due to payment issues abroad. In August, most Chinese banks were reportedly <a target="_blank" href="https://www.businessinsider.com/russia-economy-all-china-banks-refuse-yuan-ruble-transfers-sanctions-2024-8">refusing to process payments from Russia</a> after the US threatened to impose secondary sanctions on institutions helping Russia continue to do business and fund its war in Ukraine.

Russia's imports from China surged in September as Moscow and Beijing deepen economic ties  

<ul class="summary-list"><li>Senate Democrats are about to spend millions in a bid to defeat Sens. Ted Cruz and Rick Scott.</li><li>It may be their last, best hope at maintaining Democratic control of the upper chamber.</li></ul>Vice President Kamala Harris has made a number of promises as part of her proposed domestic agenda.Consider Harris' <a target="_blank" class="" href="https://www.businessinsider.com/what-you-need-to-know-about-kamala-harris-opportunity-economy-2024-9">"opportunity economy" plan</a>, which includes, among other things, a $6,000 child tax credit, a <a target="_blank" class="" href="https://www.businessinsider.com/kamala-harris-small-businesses-tax-breaks-cut-red-tape-2024-9">$50,000 tax deduction</a> for small businesses, and a <a target="_blank" class="" href="https://www.businessinsider.com/what-us-economy-would-look-like-with-trump-biden-presidency-2024-5#housing-4">$25,000 tax credit</a> for first-time home buyers.She's also pledged to sign a bill to restore abortion rights and supports <a target="_blank" class="" href="https://www.businessinsider.com/manchin-harris-senate-filibuster-roe-v-wade-abortion-rights-2024-9">eliminating</a> the Senate's 60-vote "filibuster" rule to do so.But all of that depends not just on Harris defeating former President Donald Trump, but also on her party winning control of the House and Senate. And the battle for the upper chamber is looking <a target="_blank" class="" href="https://www.businessinsider.com/us-senate-races-2024-election-landscape-democrats-republicans-2023-1">especially tough</a> for Democrats.With Sen. Joe Manchin's retirement, Republicans are essentially guaranteed to win at least one seat. But Democrats would be able to maintain at least a 50-50 balance of power — with Gov. Tim Walz serving as a tie-breaking vote as vice president — if two of their incumbents were to hold on: Sen. Sherrod Brown in Ohio, and Sen. Jon Tester in Montana.Brown has generally led <a target="_blank" class="" href="https://www.businessinsider.com/bernie-moreno-wins-ohio-senate-primary-trump-democrats-2024-3">his opponent</a> in polling, but in recent weeks, Tester has fallen behind <a target="_blank" class="" href="https://www.businessinsider.com/tim-sheehy-montana-gop-senate-gunshot-wound-ranger-afghanistan-2024-4">Republican candidate Tim Sheehy</a>.That's left Democrats with little choice than to go on offense and try to beat <a target="_blank" class="" href="https://www.businessinsider.com/ted-cruz-collin-allred-podcast-verdict-3-times-week-2023-5">Sen. Ted Cruz in Texas</a> and Sen. Rick Scott in Florida.On Thursday, the Democratic Senatorial Campaign Committee (DSCC) announced a "multi-million dollar" investment in TV ads in those two states. Sen. Gary Peters of Michigan, the chairman of the DSCC, said his party was "expanding the map and going on offense.""Democrats have strong candidates running effective campaigns in both states, and as we escalate our communications against Sens. Cruz and Scott we will crystallize the case against them," Peters said.In Texas, Cruz faces Democratic Rep. Colin Allred, who was <a target="_blank" class="" href="https://www.businessinsider.com/dick-cheney-vote-kamala-harris-liz-2024-9">recently endorsed</a> by former Republican Rep. Liz Cheney. In Florida, Scott's facing former <a target="_blank" class="" href="https://www.businessinsider.com/debbie-mucarsel-powell-rick-scott-florida-senate-2024-latino-voters-2023-8">Democratic Rep. Debbie Mucarsel-Powell.</a>Both races are seen as competitive but leaning toward Republicans. A source close to Scott signaled that the Florida senator isn't sweating it, telling Business Insider that "if national Democrats decide to spend in Florida, Rick Scott will spend more."One of the <a target="_blank" class="" href="https://www.businessinsider.com/wealthiest-members-congress-house-senate-finances-2021-12">richest members of Congress</a>, Scott spent more than $60 million on his own race in 2018.A Cruz campaign spokesperson hit Democrats for "coming in from their ivory towers in New York, DC, and California" to aid Allred.It remains unclear exactly how much money Senate Democrats plan to spend in either state. Peters declined to get into specifics on Thursday, <a target="_blank" class="" href="https://x.com/PatrickSvitek/status/1839294850937794840">telling reporters</a> that they're "not sharing that info right now for strategic purposes."Harris, whose campaign has raised hundreds of millions of dollars since she entered the race, recently <a target="_blank" class="" href="https://www.businessinsider.com/kamala-harris-giving-25-million-other-campaigns-2024-9">gave $10 million</a> to the DSCC.

Kamala Harris' economic agenda may now depend on beating Ted Cruz or Rick Scott

<ul class="summary-list"><li>Russian President Vladimir Putin is meeting leaders from China, India, Vietnam, and Indonesia amid heavy sanctions.</li><li>Russia seeks to end diplomatic isolation by engaging with "swing nations" beyond autocratic allies.</li></ul>Russian President Vladimir Putin is having a very social year as his country continues to wage war in Ukraine.So far, Putin has met top leaders from Asian countries including <a target="_blank" class="" href="https://www.businessinsider.com/putin-bromance-xi-jinping-display-china-remains-wary-russia-2024-5">China,</a> <a target="_blank" class="" href="https://www.businessinsider.com/russia-economy-india-modi-putin-hug-west-isolation-big-blow-2024-7">India,</a> <a target="_blank" class="" href="https://www.businessinsider.com/vietnam-russia-putin-visit-us-wary-manufacturing-supply-chain-diplomacy-2024-6">Vietnam,</a> and <a target="_blank" class="" href="http://en.kremlin.ru/events/president/news/74678">Indonesia.</a> That's plenty of publicity for a heavily sanctioned individual from a country facing sweeping trade restrictions.And there's a strategic reason for all those meetings, Sean McFate, an adjunct professor at the Syracuse University Maxwell School of Citizenship and Public Affairs, told Business Insider.Russia is trying to emerge from diplomatic isolation and is looking to forge strategic relationships beyond autocratic partners like China, North Korea, and Iran, McFate said."Putin is eyeing strategic swing nations like India, which opposes China and trades with Russia," he added. "That gives Russia some advantage over China, as their relationship has chilled somewhat."On Wednesday, Putin rubbed shoulders with <a target="_blank" class="" href="https://www.bernama.com/en/news.php?id=2336886">Malaysian Prime Minister</a> Anwar Ibrahim in Russia. The two countries were set to discuss a range of issues, including trade and investment.This meeting came on the heels of Putin's trip to <a target="_blank" class="" href="https://www.businessinsider.com/mongolia-explained-oil-why-didnt-arrest-putin-2024-9">Mongolia,</a> where he met President Ukhnaagiin Khürelsükh.Mongolia, as a member of the International Criminal Court, should have <a target="_blank" class="" href="https://www.businessinsider.com/putin-visiting-mongolia-icc-arrest-warrant-could-arrest-unlikely-expert-2024-8">arrested Putin,</a> who has an ICC arrest warrant against him.But the East Asian nation said it couldn't throw Putin in jail because it depends on Russia — an oil and gas giant — for its energy security."This supply is critical to ensure our existence and that of our people," a Mongolian government spokesperson told <a target="_blank" class="" href="https://www.politico.eu/article/mongolia-failure-arrest-vladimir-putin-international-warrant-international-criminal-court/">Politico.</a><h2 id="f0d1f4e5-36a9-4e82-ba4c-d30ab06a9d6a">It's about neutrality — and the economy</h2>Mongolia's explanation underscores the scale of Russia's economy. It's the 11th largest in the world and has an annual GDP of about $2 trillion, according to the <a target="_blank" class="" href="https://data.worldbank.org/indicator/NY.GDP.MKTP.CD?most_recent_value_desc=true">World Bank.</a>While Russia's economy pales in comparison to the US' $27.4 trillion GDP, Russia is still an important partner for many developing economies.In particular, <a target="_blank" class="" href="https://www.eia.gov/tools/faqs/faq.php?id=709&amp;t=6.">Russia</a> accounts for about one-tenth of the world's oil production, making it an important resource supplier.Before its full-scale invasion of Ukraine, Russia's single largest trading partner was the European Union.In the last two years, Russia has managed to pivot to supplying <a target="_blank" class="" href="https://www.businessinsider.com/russia-economy-divert-oil-exports-europe-india-china-circumvent-sanctions-2023-12">China and India,</a> as well as nearly anyone who wants to buy discounted energy, be it <a target="_blank" class="" href="https://markets.businessinsider.com/news/commodities/sri-lanka-source-crude-oil-imports-russia-sanctions-fuel-shortage-2022-10">Sri Lanka</a> when it was in an economic meltdown just two years ago or <a target="_blank" class="" href="https://www.reuters.com/business/energy/turkey-saves-2-bln-russian-oil-imports-soar-despite-sanctions-2023-12-18/">Turkey</a> — a NATO member and aspiring EU member.While some countries, like China and Vietnam, have historical ties with Russia, others, like India and Sri Lanka, have also cited economic self-interest for their ongoing relationship with Russia — particularly if they're in difficult conditions themselves. Most, if not all of them, have also taken a neutral position on the war in Ukraine.Serik Zhumangarin, Kazakhstan's deputy prime minister, told <a target="_blank" class="" href="https://www.bloomberg.com/news/articles/2024-08-16/kazakhstan-will-not-blindly-follow-sanctions-on-russia-official-says">Bloomberg</a> last month that the country would no longer "blindly follow the sanctions" if the restrictions impact the country's key companies. Russia was Kazakhstan's largest trade partner before the war started.He told the media outlet that some of the sanctions against Moscow had hurt Kazakhstan more than Russia, and the West has done nothing to compensate the Central Asian nation.Using the economy to explain cozy diplomatic relationships with Russia appears to be gaining favor now that the Ukraine war is in its 31st month.After all, Russia is a <a target="_blank" class="" href="https://www.businessinsider.com/russia-resilience-sanctions-costly-unattainable-isolate-large-globally-integrated-economy-2024-2">large and globally integrated economy</a> that even the <a target="_blank" class="" href="https://www.businessinsider.com/russia-economy-lng-natural-gas-exports-europe-price-asia-2024-8">European Union</a> is still trying to decouple from.Even China, which in 2022 declared its friendship with Russia as a partnership with "no limits," now appears to be more keen on presenting the relationship in more pragmatic, businesslike terms.Just last month, <a target="_blank" class="" href="https://www.fmprc.gov.cn/chn/gxh/tyb/zyxw/202408/t20240821_11477597.html">China framed</a> Vice Premier Li Qiang's visit to Russia as one that seeks "complementary advantages and huge potential for practical cooperation" between Moscow and Beijing.<h2 id="1d83462f-51a7-4e76-82db-0f7f3244cb44">Russia is wooing the Global South</h2>Partnering with Russia on economic terms is unlikely to alarm the US and Europe, even if there are <a target="_blank" class="" href="https://www.state.gov/briefings/department-press-briefing-july-8-2024/">concerns</a> and <a target="_blank" class="" href="https://www.reuters.com/world/asia-pacific/us-rebukes-vietnam-ahead-expected-visit-by-russias-putin-2024-06-17/">strong criticism.</a>"Russia's foreign policy blitz is unlikely to be a threat to the EU and NATO," Syracuse University's McFate said.That's because Moscow is not making military alliances with partner countries to attack Europe, which views Russia as its top threat, he said. For the US, Russia is a distant second after China.Even so, there still may be changes afoot.Moscow is pushing a narrative of the Global South as a force in shaping an alternative world order, with the emerging nations of <a target="_blank" class="" href="https://www.businessinsider.com/brics-summit-countries-interested-brazil-russia-india-china-south-africa-2023-8">BRICS</a> — anchored by Brazil, Russia, India, China, and South Africa — forming an economic bloc.Russia is the BRICS chair this year, and Putin has invited Mongolia to join the group's summit in October. Malaysia applied to join the group, and <a target="_blank" class="" href="https://en.antaranews.com/amp/news/324871/joining-brics-based-on-president-elect-prabowos-decision-minister">Indonesia</a> is also considering an invitation to join the bloc. <a target="_blank" class="" href="https://www.reuters.com/world/middle-east/no-concrete-step-turkey-brics-membership-erdogans-party-says-2024-09-03/">Turkey</a> has also said it's interested in joining the group. "Indonesia, Malaysia, and Mongolia are an interesting test of those nations' 'neutrality' toward China, the US, international law (e.g., ICC), and the authority of the United Nations system," McFate said.Russia's push for a multipolar world order resonates with countries who desire a more equitable international order. And Moscow has shown it does have influence over lower- and middle-income countries, as evidenced by the non-participation or low-level participation of some Asian countries in June's Ukraine peace summit in Switzerland, Derek Grossman, a senior defense analyst at RAND, a think tank, wrote in a July <a target="_blank" class="" href="https://www.rand.org/pubs/commentary/2024/07/russia-is-a-strategic-spoiler-in-the-indo-pacific.html">commentary</a> for Foreign Policy."While Russia's sway is not at the level of China's or the United States', it is certainly enough to promote its anti-Western interests and disrupt the already precarious regional order," wrote Grossman.Countries around the world are weighing the dynamics."Regional allies will watch with interest to see if great powers can be played off each other," McFate said.

More countries are openly flaunting their ties with Putin. They say it's just business. 

Boost in domestic <keyword id="19914449" type="General" weightage="20" keywordseo="manufacturing" source="keywords">manufacturing</keyword> due to PLI (production linked incentive) schemes and increase in <keyword id="19916774" type="General" weightage="20" keywordseo="exports" source="keywords">exports</keyword> on account of free trade agreements are expected to bridge the country's <keyword id="20201391" type="General" weightage="20" keywordseo="trade-deficit" source="keywords">trade deficit</keyword> further, <keyword id="20613906" type="General" weightage="100" keywordseo="Economic-Survey" source="keywords">Economic Survey</keyword> said on Monday. However, it said that fluctuations in <keyword id="19936629" type="General" weightage="20" keywordseo="commodity-prices" source="keywords">commodity prices</keyword>, especially for critical imports like oil, metals, and agricultural products, can impact India's trade balance and inflation levels. The Survey said that though ongoing geopolitical headwinds impacted India's merchandise exports, lowering international commodity prices ensured a lower trade deficit in FY24 than in FY23. The country's merchandise trade deficit narrowed to USD 240 billion in 2023-24 from USD 265 billion in 2022-23. It added that changes in trade policies by major trading partners or geopolitical developments can affect India's export opportunities and market access. "In the coming years, India's trade deficit is expected to decline further as the <keyword id="19981334" type="General" weightage="20" keywordseo="PLI-scheme" source="keywords">PLI scheme</keyword> is expanded and India creates a globally competitive manufacturing base in several product categories," the Survey said. It added that the recently signed FTAs (free trade agreements) are expected to increase the <keyword id="22374533" type="General" weightage="20" keywordseo="global-market-share" source="keywords">global market share</keyword> of the country's exports. The PLI scheme for sectors like mobile manufacturing, information technology (IT) hardware, pharmaceutical, telecommunications, and food product are helping to increase manufacturing and cut imports. India has implemented <keyword id="20000557" type="General" weightage="20" keywordseo="FTA" source="keywords">FTA</keyword> with Mauritius, Australia and the UAE. It added that a narrowing merchandise trade deficit and rising service exports have improved the CAD (<keyword id="20054874" type="General" weightage="20" keywordseo="current-account-deficit" source="keywords">current account deficit</keyword>), ending with a surplus of 0.6 per cent of GDP in Q4 of FY24. However, the risks to the performance of India's external sector are on the downside due to the persistence of current <keyword id="19955176" type="General" weightage="20" keywordseo="geopolitical-tensions" source="keywords">geopolitical tensions</keyword> and policy uncertainty, it said. Some of the challenges listed by the survey includes fall in demand from major trading partners like the US, rise in trade cost, and volatility in commodity prices. Attacks on shipping in the Red Sea and drought in the Panama Canal have resulted in trade flows being re-routed, increasing journey time and costs. India's merchandise trade relies heavily on maritime trade, so disturbances in major shipping routes can impact its economy. "It is critical to explore what these changing paradigms mean for India. Policies need to be a mix that straddles security concerns with economic considerations," the survey said, adding India's push towards manufacturing in complex and niche sectors through schemes such as PLI and Make in India aims to balance these goals. Further, the survey emphasised on the need to focus on improving India's competitiveness in many product areas. For example, it said, India has tremendous potential in becoming a large global exporter in agricultural commodities. Fostering stronger regional trade ties and adding more markets for Indian goods will help mitigate global demand fluctuations. "In an era when global economic growth is likely to be buffeted by geopolitical tensions and protectionism, growing India's exports of goods and services will be a stiffer challenge than before," it cautioned. Commenting on this, Rumki Majumdar, Economist, Deloitte India, said that despite global uncertainties, India's exports are recording positive growth rates. "That shows the resilience of our exports amidst global uncertainties," she said, adding, "by transforming our export basket and focusing on higher margins and value addition across various sectors, India will easily achieve its ambition of USD 2 trillion in exports by 2030-31."

India's trade deficit expected to decline further: Economic Survey

<ul class="summary-list"><li>Indian billionaire Karan Adani announced plans to challenge Chinese dominance in global seaports.</li><li>Adani Ports has received "in-principle" approval for a $2 billion project in Da Nang, Vietnam.</li></ul>Karan Adani, the <a target="_blank" class="" href="https://www.businessinsider.com/gautam-adani-succession-planning-sons-nephews-take-over-retirement-handover-2024-8">son of one of Asia's richest men</a>, wants to loosen China's grip on seaports and transform India into a major trading hub."We are working on making India the center point of the overall supply chain from east to west," said Karan in an interview with <a target="_blank" class="" href="https://www.bloomberg.com/news/articles/2024-08-05/adani-ports-aims-to-grow-india-into-global-trading-hub-in-challenge-to-china">Bloomberg</a> for their "Inside Adani" series.Karan, who is the CEO of Adani Ports, said that the company had received an "in-principle" from the Vietnamese government for a potential $2 billion greenfield project in Da Nang.This would be the latest addition to the Adani Ports' portfolio. In 2022, it <a target="_blank" class="" href="https://www.thehindubusinessline.com/economy/logistics/with-haifa-port-acquisition-adani-sets-its-eyes-on-opportunities-in-europe/article65643118.ece">won a joint bid</a> on the Israel government's tender to buy the Haifa Port for $1.2 billion.It also owns port assets in Colombo in Sri Lanka and the Port of Dar es Salaam in Tanzania.<h2 id="b168f51e-af17-4dfd-93ff-9422bbccd00f">Loosening China's grip</h2>India has long feared that China is surrounding its country with ports. The trade infrastructure in the Indian Ocean is often referred to as China's "string of pearls".China's <a target="_blank" class="" href="https://www.businessinsider.com/china-spends-twice-us-but-belt-road-initiative-losing-steam-2021-9">Belt and Road initiative</a> (also referred to as the New Silk Road) involves buying up multiple ports across the world to build a sea route running from the coast of China through the major transit route of the Indian Ocean and the busiest maritime points of the Middle East, and ending in Europe.<a target="_blank" class="" href="https://www.washingtonpost.com/world/interactive/2023/china-ports-trade-military-navy/">According to the Washington Post</a>, the majority of investments in Chinese-owned ports have been made by companies owned by the Chinese government, which would make the Chinese Communist Party the biggest operator of the ports that fuel global supply chains.The <a target="_blank" class="" href="https://www.cfr.org/tracker/china-overseas-ports">Council on Foreign Relations states</a> that China operates or has ownership stakes in at least one port in every continent except Antarctica. 92 out of the 101 ports were active as of 2023.The <a target="_blank" class="" href="https://www.ft.com/content/a7c2b2f6-e106-436d-a599-cfcc69d18b05">Financial Times</a> cited a report by the Qianzhan Industrial Research Institute stating that China invested at least $40bn in coastal port infrastructure between 2016 and 2021.It also showed that China has 76 port terminals able to support large ships carrying more than 14,000 20ft containers, while south and south-east Asian countries have just 31 between them.<a target="_blank" class="" href="https://www.fortuneindia.com/enterprise/adani-kerala-to-fast-track-vizhinjam-port-completion-with-rs-20000-crore-investment/117536">Fortune India reported</a> that so far, 75% of India's transshipped cargo is handled by ports outside the country.The Adani Group wants to change that.<h2 id="f5591fc4-d44e-43a5-90bb-81fe08ef0678">Making India the world's factory</h2>The company has openly aligned its business interests with Indian Prime Minister Narendra Modi's development agenda of making India the world's factory.Earlier this month, it welcomed the first mother ship in the first phase of its port in Vizhinjam harbor, a project undertaken with the state government of Kerala in India.Expected to reach completion in 2028, the seaport aims to handle up to half of India's container transshipment needs.According to the Bloomberg Billionaires Index, Adani Enterprises, the group's main company, reported revenue of $11.6 billion in 2024, and Karan Adani's father, Gautam Adani, owns a 75% stake.The 62-year-old is worth over $80 billion and <a target="_blank" class="" href="https://www.businessinsider.com/gautam-adani-succession-planning-sons-nephews-take-over-retirement-handover-2024-8">announced his succession plan</a> on Monday — naming his sons Karan and Jeet and nephews Pranav and Sagar as heirs to the Adani Group.The Adani family have previously faced scrutiny for their close ties to Modi, and allegations of preferential treatment from the Modi government.The Adanis frame the association as a desire to improve the country, with the Chairman's Message on the Adani Group website promising to "foray into sectors where the country needs to establish a foothold," and affirming that they will "look at these opportunities as part of our national duty."

An Indian billionaire has an audacious plan to take down part of China's economic masterplan

<ul class="summary-list"><li>The dollar's dominance is sticky, political scientist Carla Norrlöf wrote in Project Syndicate.</li><li>To de-dollarize, enough economies would have to coordinate to pull down the greenback's hegemony. </li></ul>In order to de-dollarize the world economy, governments would have to collectively cut off political and economic ties with the US, political scientist Carla Norrlöf wrote in <a href="https://www.project-syndicate.org/commentary/why-us-dollar-hegemony-will-survive-by-carla-norrlof-2023-09" target="_blank" rel="noopener">Project Syndicate</a>. But that's unlikely to happen, as global economies benefit from the dollar's supremacy, which infiltrates everything from global finance, trade, and monetary policy, she said. During financial crises, it also offers economies a liquidity lifeline. "So long as self-reinforcing synergies and forms of opportunism continue to prevail, narrowing the yawning chasm between the dollar and other currencies will remain difficult," Norrlöf, who is a political science professor at the University of Toronto and a scholar at the Atlantic Council, wrote.Threats to the dollar's dominance do exist, and de-dollarization isn't impossible, she acknowledged. The idea has seen more momentum amid growing tensions between China, Russia, and the West, as well as global discontent over the <a href="https://markets.businessinsider.com/news/currencies/dollar-weaponization-obliterate-global-economic-integration-dedollarization-2023-7">dollar's use</a> in sanctions. Meanwhile, the BRICS bloc of emerging markets has voiced plans to create an alternative world currency.But coordination is an essential requirement for de-dollarization to occur, whether led by a few major economies or an assemblage of smaller ones.On its own, one economy could not overthrow the greenback, and it's unlikely major economies — except China — would join, while smaller economies would also be reluctant to abandon the dollar, she added."To bring about a dollar collapse and forge a new world order in which the greenback plays a diminished role would require all users to break these network effects and suffer the consequences," she said. "Governments would need to sever economic and political ties to the US. To fulfill the BRICS' pledge to create an alternative reserve currency and payment system, for example, many of its members would have to stop relying on US liquidity and consumer demand."Major markets would be more eager to shed the greenback if a strong enough alternative existed that could provide it with the same benefits. But despite efforts to <a href="https://finance.yahoo.com/news/yuan-overtakes-dollar-become-most-111305072.html" target="_blank" rel="noopener">promote currencies </a>such as the Chinese yuan, currently no other tender can take on the dollar's role. Compared to its largest rival, the euro, the greenback outperforms it in nearly every aspect, from its share of reserve currencies to use in cross-border lending.A de-dollarization collective is also unlikely as countries would lose access to the US security guarantee, Norrlöf said. Even governments who are not direct beneficiaries of American defense would hesitate to worsen relations with the US, a leading military power. "For governments, unplugging from the dollar system also means disconnecting from all that the US has to offer, including liquidity provision, consumer demand, dollar-swap lines, and a security umbrella," she wrote. "Currency dominance is sticky."

De-dollarization would require governments to sever political and economic ties with US

<ul class="summary-list"><li>Baby boomers' wealth is an "underappreciated" risk to the economy, a portfolio manager told BI.</li><li>That's because they could be heavily impacted by swings in stock and home prices.</li></ul>One of the economy's most powerful engines may be at risk. That's because baby boomers, America's second-largest and <a target="_blank" class="" href="https://www.businessinsider.com/us-economy-baby-boomers-are-driving-economic-strength-ed-yardeni-2024-4">richest generation</a>, could abruptly dial back their spending at the first sign of economic or market turmoil, according to Brij Khurana, a fixed income portfolio manager at Wellington Management.Khurana thinks what has made boomers the wealthiest generation — stocks and housing — also makes them a risk to economic stability. Even a mild correction to asset prices could spook older Americans enough to rein in their spending and kick out a key support from under the economy, he told Business Insider.Such a scenario is an '"underappreciated risk," he said, given how much boomers' spending habits have fueled economic growth in recent years.The generation is already flashing early signs that their spending power is starting to wane. Despite shelling out on travel in recent years, just 19% of baby boomers said they planned to splurge in 2024, according to a <a target="_blank" href="https://www.mckinsey.com/industries/consumer-packaged-goods/our-insights/the-state-of-the-us-consumer">McKinsey &amp; Company</a> survey, lower than the average 38% recorded across all generations.Boomers are also signaling that they're beginning to rotate out of stocks and into longer-duration fixed income, Khurana says, pointing to the rally in long-dated US Treasuries. The iShares 7-10 year Treasury bond ETF is up 6% over the last year."I do think that's partly due to some asset allocation shifts that have been taking place," Khurana said.The shift to bonds from stocks is a normal occurrence as people get older and move to protect their wealth after years of accumulation. However, other commentators have noted that as boomers reposition en masse, they risk shocking the market and prompting bouts of volatility as they sell down their stock holdings. Also, given that they don't have as long of a time horizon as younger investors, boomers <a target="_blank" class="" href="https://markets.businessinsider.com/news/stocks/recession-economy-outlook-us-stock-market-ownership-old-americans-retirement-2024-1?utm_source=twitter&amp;utm_medium=social&amp;utm_campaign=markets-sf">may be prone to panic selling</a> in a downturn, exacerbating market losses as they look to minimize their own downside. Khurana said he pegs the odds of a recession in the next two to three years as higher than 50%. That's in line with the outlook from New York Fed economists, with <a target="_blank" class="" href="https://www.newyorkfed.org/medialibrary/media/research/capital_markets/Prob_Rec.pdf">central bankers pricing in a 61% chance the economy could tip into recession</a> within the next 12 months, per their latest projection."If asset prices, even if they fall from very high levels — even if they fall, call it 10% — then I think that psychologically really matters," he said. "And you can see them cut back on their spending and [if] the savings rate rises, which would push the economy into recession in that world."<h2 id="1f4f9b0a-8c69-484f-bba5-c8635495ad04">The biggest spenders</h2>What's bad news for boomers is bad news for the economy, given how much economic growth has <a target="_blank" class="" href="https://www.businessinsider.com/baby-boomers-spending-net-worth-us-economy-recession-2023-10">relied on their spending down their $75 trillion nest egg </a>in recent years. The demographic spends <a target="_blank" class="" href="https://www.epsilon.com/us/insights/resources/cross-generational-marketing">around $548 billion a year</a>, more than any other generation, according to a report from marketing research firm Epsilon. Meanwhile, they tucked away the least savings among any generation last year, with the average boomer putting away just $4,059 in 2023, according to a <a target="_blank" href="https://www.notion.so/the-new-inflationary-era-is-here-105f0f4b6661808b9a01e833849e5366?pvs=21">report</a> from the insurance firm New York Life.Their spending is fueled by the tremendous amount of wealth the generation is holding on to, Khurana says. Boomers were sitting on $78.5 trillion in the first quarter of this year, or the equivalent of 52% of the entire net worth of the US, according to <a target="_blank" class="" href="https://www.federalreserve.gov/releases/z1/dataviz/dfa/distribute/chart/">Federal Reserve</a> data.<div type="image" title="US wealth by generation graph" height="800" width="1200" msid="113552817" hostid="261" sizebytes="27562"></div>The generation has become exceedingly wealthy because it's holding onto the largest share of all real estate and stocks in the country, which have ballooned in value over the last five years. Broken down by each generation's holdings of property and stocks, boomers accounted for 42% of all real estate ownership and 54% of all corporate equity and mutual fund ownership. <div type="image" title="Real estate ownership by generation" height="800" width="1200" msid="113552819" hostid="261" sizebytes="28306"></div><div type="image" title="Corporate equities and mutual fund shares by generation" height="800" width="1200" msid="113552820" hostid="261" sizebytes="32312"></div>"What I think is happening is that, because asset prices are up, they feel very comfortable spending very aggressively," Khurana said. "There's no question that I think they have certainly fared better in this environment than other generations have."Yet, the gains they've enjoyed in the stock and housing market have also put boomers in a precarious position, with the group most at risk of wealth destruction if home or stock prices were to drop.Housing and equity prices marched to record highs in the years since the pandemic, but commentators, including Khurana, think a <a target="_blank" class="" href="https://markets.businessinsider.com/news/stocks/yen-carry-trade-stock-market-crash-jobs-report-recession-yardeni-2024-9?_gl=1*34ds0l*_ga*OTI1ODIwOTQ2LjE3MTYzOTg2NjU.*_ga_E21CV80ZCZ*MTcyNjc2Mzc2My4zNTkuMS4xNzI2NzY0NjU1LjM3LjAuMA..">correction</a> in <a target="_blank" class="" href="https://www.businessinsider.com/real-estate-home-prices-correction-housing-market-buying-a-house-2024-7">both markets</a> could be imminent. <a target="_blank" class="" href="https://www.businessinsider.com/stock-market-crash-recession-indicators-labor-market-rate-cuts-hussman-2024-8">John Hussman</a>, one of the market's most bearish forecasters, estimated that stocks could have as much as 70% downside. According to one indicator tracked by his firm, the market looks to be the <a target="_blank" class="" href="https://markets.businessinsider.com/news/stocks/stock-market-crash-1929-prediction-sp500-outlook-overvalued-john-hussman-2024-3">most overvalued since 1929</a>, he said in a recent note. <a target="_blank" class="" href="https://www.businessinsider.com/us-cities-where-home-prices-are-falling-the-most-2024-6">Home prices, meanwhile, are already starting to drop</a> in key metros that boomed during the pandemic, like cities in Florida and Texas. <a target="_blank" class="" href="https://www.businessinsider.com/housing-market-home-prices-falling-buying-a-home-outlook-supply-2024-9">Home price cuts jumped</a> to their highest level in over 5 years in August, according to a Realtor.com report.That's not to say boomers will cause the next recession, but the risk during a recession is dialed up under the current paradigm, Khurana said."I think it's an increase in the savings rate caused by a decline in asset prices is a risk that is not on people's radar and is definitely something that could cause the recession. And I think the probability of that is certainly higher than many people think in the next five years, or two to three years, to be honest."

Baby boomers have a ton of their wealth tied up in stocks and housing. Here's why that's a risk to the economy. 

<ul class="summary-list"><li>Russia is expanding its economic and trade ties with Cuba.</li><li>Russia has been pivoting to alternative markets in the face of Western sanctions.</li></ul>Russia has set its sights on broader economic and trade ties with Cuba.Russian Deputy Prime Minister Dmitry Chernyshenko said on Friday that more than 100 Russian companies had started operations in Cuba over the past year, according to the state news agency <a target="_blank" href="https://tass.com/economy/1760231">TASS</a>.Speaking at an intergovernmental meeting between Russia and Cuba, Chernyshenko said the companies were involved in various sectors including heavy industry, energy, banking, agriculture, IT, and tourism. He didn't name any companies.He added that some Russian banks were also considering <a target="_blank" href="https://tass.com/economy/1760225">opening representative offices in Cuba</a>. He didn't name any banks but said the rollout of <a target="_blank" href="https://www.reuters.com/business/finance/russia-launches-its-mir-payment-cards-cuba-2023-12-05/">Russia's Mir cards in Cuba</a> last year was a milestone.He said the developments would boost bilateral trade."Cuba is a reliable Russia's ally," Chernyshenko said, according to an <a target="_blank" href="http://government.ru/en/news/51120/">online post by the Russian government</a>. "Today's meeting confirms the policy of strengthening Russian-Cuban relations."<h2>Russia has pivoted to alternative markets</h2>Chernyshenko's trumpeting of Russia's economic ties with Cuba has come two years after President Vladimir Putin's regime invaded Ukraine, triggering sweeping Western sanctions against Moscow.The trade restrictions hit Russia's trade with Europe, traditionally its single largest market.But Russia has <a target="_blank" href="https://www.businessinsider.com/russia-economy-how-moscow-pays-war-economy-afloat-sanctions-ukraine-2024-2">managed to keep its economy humming</a> by pivoting its trade to alternative markets including <a target="_blank" rel="" href="https://www.businessinsider.com/russia-economy-divert-oil-exports-europe-india-china-circumvent-sanctions-2023-12">India, China</a>, and <a target="_blank" rel="" href="https://markets.businessinsider.com/news/currencies/dedollarization-russia-iran-agreement-us-dollar-currency-bilateral-trade-2023-12">Iran</a>. It's even building rail lines to create what one analyst called "a trade route for the pariahs" with <a target="_blank" rel=" nofollow" href="https://www.statista.com/chart/27015/number-of-currently-active-sanctions-by-target-country/">heavily sanctioned Iran</a>.Moscow is also aligning itself closer to Cuba, which was already an ally.In November, <a target="_blank" href="http://government.ru/en/news/49966/">Russia and Cuba</a> signed an agreement for a trade and economic cooperation program that aims to strengthen ties between the two countries.Despite the close relationship, Moscow-Havana ties appeared to show cracks in September when the <a target="_blank" href="https://cubaminrex.cu/en/statement-ministry-foreign-affairs">Cuban Ministry of Foreign Affairs</a> said in a statement that it was working to "neutralize and dismantle" a "human-trafficking network" in Russia that was recruiting Cubans to fight the war in Ukraine.A <a target="_blank" rel=" nofollow" href="https://www.reuters.com/world/whatsapp-war-how-cubans-were-recruited-fight-russia-2023-09-30/">Reuters investigation</a> published in the same month found that some poor Cubans who signed up to fight had been lured by Russian offers of signing bonuses and fast-track citizenships.Cuba has been <a target="_blank" href="https://www.state.gov/cuba-sanctions/">sanctioned by the US</a> for decades. The country has been in <a target="_blank" href="https://www.reuters.com/world/americas/protest-erupts-eastern-cuba-amid-blackouts-food-shortages-2024-03-18/">economic crisis</a> since the COVID-19 pandemic, prompting many citizens to flee to the US. <a target="_blank" href="https://www.reuters.com/world/americas/sticker-shocked-cubans-prepare-inflation-bomb-2024-01-23/">Cuba's inflation rate</a> hit 30% in 2023, while food and medicine shortages are frequent, media reports say.On Sunday, hundreds of people in Santiago — Cuba's second-largest city — staged a rare public protest against blackouts that stretched for 18 hours or more a day, <a target="_blank" href="https://www.reuters.com/world/americas/protest-erupts-eastern-cuba-amid-blackouts-food-shortages-2024-03-18/">Reuters reported</a>.

Russia is betting big on Cuba as it courts alternative economic partners

<ul class="summary-list"><li>The first-quarter GDP report surprised investors with disappointing growth, while consumer prices kept rising.</li><li>The provides the backdrop for stagflation, which can't be combated with rate cuts.</li></ul>The latest GDP and inflation readings were what investors were least eager to see, and could hint at serious trouble ahead. "This was a worst of both worlds report – slower than expected growth, higher than expected inflation," wrote David Donabedian, chief investment officer of CIBC Private Wealth US. First-quarter growth fell well behind estimates, rising at an <a href="https://www.businessinsider.com/gdp-gross-domestic-product-first-quarter-economy-growth-2024-4?utm_medium=ingest&amp;utm_source=markets&amp;_gl=1*1c405xn*_ga*MTMxNDIwNDI1Ni4xNjc1Njg3OTU4*_ga_E21CV80ZCZ*MTcxNDA1Mjk4My4zNDMuMS4xNzE0MDYwODk5LjYwLjAuMA..">annualized rate of 1.6%</a>, according to the <a href="https://www.bea.gov/data/gdp/gross-domestic-product" target="_blank">Bureau of Economic Analysis</a>. Not only is that far under forecasts of 2.5%, but it also fails to live up to the 3.4% increase achieved in the fourth quarter. While such a cooldown would usually bolster calls for interest rates to start easing, the report noted a hotter-than-expected rise in consumer prices as well. That puts serious limits on the Federal Reserve's ability to take action, as the central bank has made clear it needs inflation to climb lower before any rate cuts can happen. Stocks — which have long priced in those cuts — <a href="https://markets.businessinsider.com/news/stocks/stock-market-today-q1-gdp-sp500-earnings-meta-microsoft-alphabet-2024-4" target="_blank">sold off sharply</a>. It's also bad news for the economy, as sputtering growth and higher prices are the key ingredients for stagflation, which is characterized by economic listlessness and stubbornly elevated inflation over a prolonged period. Such a scenario that can be even harder to combat than a <keyword id="6357558" type="General" weightage="20" keywordseo="recession" source="Orion">recession</keyword>, because of the dynamic outlined above: the Fed's hands are largely tied. America's last dalliance with stagflation came in the 1970s. The precedent can offer a glimpse into how the US economic picture could unfold, and makes it clear why economists are desperate to avoid a re-run. Early that decade, geopolitical disagreement prompted the OPEC coalition to restrict crude exports to the US, and energy <a href="https://cepr.org/voxeu/columns/wage-price-spirals-historical-evidence" target="_blank">prices rocketed</a> in response. With additional help from high government spending and the <a href="https://www.businessinsider.com/today-is-the-40th-anniversary-of-nixon-ending-the-gold-standard-2011-8">dollar's de-coupling from gold</a>, inflation surged into double digits, while the economy <a href="https://www.nber.org/research/data/us-business-cycle-expansions-and-contractions" target="_blank">tumbled</a>. The period was so tumultuous that it undid long-standing <a href="https://www.businessinsider.in/investment/news/keynesian-economics-a-depression-era-idea-thats-seen-a-resurgence-in-the-21st-century/articleshow/87594974.cms" target="_blank">macroeconomic theories</a>, and required the Fed to step up its role in the economy. In order to finally reign things in, then-Fed Chairman Paul Volcker was forced to raise interest rates a staggering 20%, calming price highs but throwing the US into a deep recession. It's for this reason current analysts <a href="https://www.businessinsider.com/what-is-stagflation-explained-oil-outlook-low-growth-high-inflation-2021-10">shudder at comparisons</a> to the period 50 years ago, and why stagflationary forecasts bear weight. JPMorgan's Jamie Dimon is among those who have recently made allusions to the stagflationary 1970s, warning that markets have become too cheerful about the state of the economy. "I worry it looks more like the '70s than we've seen before," the prominent bank chief <a href="https://fortune.com/2024/04/24/jpmorgan-jamie-dimon-economy-1970-stagflation-fear/" target="_blank">said at the Economic Club of New York</a> last week. His point — one he's asserted <a href="https://www.businessinsider.com/jamie-dimon-jpmorgan-economy-looking-like-1970s-stagflation-inflation-rates-2024-1?utm_medium=ingest&amp;utm_source=markets&amp;_gl=1*1v016fo*_ga*MTMxNDIwNDI1Ni4xNjc1Njg3OTU4*_ga_E21CV80ZCZ*MTcxNDA1Mjk4My4zNDMuMS4xNzE0MDY3NDAzLjI2LjAuMA..">on multiple occasions</a> — comes from the fact that fiscal spending has once again exploded, while the economy is poised to bear a number of inflation-drivers: from <a href="https://www.businessinsider.com/jamie-dimon-soft-landing-outlook-recession-inflation-jpmorgan-geopolitics-2024-4">green industrialization to global remilitarization</a>. But stagflation remains a long shot. Despite sticky-high inflation, markets continue to price in at least one rate cut this year. Further, Barclays analysts led by Pooja Sriram pointed out after the GDP report that final sales to domestic purchasers rose by enough to suggest "demand conditions remain strong." Friday's personal consumption expenditures report — viewed as the Fed's main inflation bellwether — will offer investors a clearer picture of where inflation is headed. If it goes higher, the Fed will have little choice but to become more tighten policy, according to Donabedian. "We are not far from all rate cuts being backed out of investor expectations. It forces Chair Powell into a hawkish tone for next week's FOMC meeting," he said.

The US economy may be barrelling towards stagflation, an outcome worse than recession

<ul class="summary-list"><li>Elon Musk told Beijing officials that he's against the US and China decoupling their economies.</li><li>In a visit to the country, he described the US and China as "conjoined twins," per a statement from China's foreign ministry.</li></ul>Elon Musk told officials in Beijing that he's opposed to the US and China weakening economic ties, according to the Chinese Foreign Ministry.The Tesla CEO reportedly expressed his disapproval of China and the US decoupling economically, while meeting China's foreign, commerce, and industry ministers."The interests of the United States and China are intertwined like conjoined twins," Musk was quoted saying in a ministry statement on Wednesday.China's foreign minister Qin Gang, meanwhile, told Musk that both countries needed to "keep the steering wheel in the right direction" in their relationship, emphasizing "mutual respect" and "win-win cooperation.""China always welcomes business figures from all countries, including Mr. Musk, to visit China for a deeper understanding of the country and mutually beneficial cooperation," a foreign ministry spokesperson said at a <a href="https://www.fmprc.gov.cn/eng/xwfw_665399/s2510_665401/2511_665403/202305/t20230530_11086032.html" target="_blank" rel="noopener">press conference</a> on Tuesday. "We welcome foreign companies to invest and do business in China, explore the Chinese market and share in development opportunities.Musk's private jet landed in Beijing on Tuesday, marking the billionaire's first visit to China in nearly three years. That comes as US-China tensions reach a potential breaking point, with Chinese officials expressing fury in recent months over <a href="https://markets.businessinsider.com/news/stocks/stock-market-news-today-nancy-pelosi-taiwan-visit-china-tensions-2022-8">US politicians' show of support for Taiwan</a> and <a href="https://www.businessinsider.com/tiktok-ceo-hearing-congress-failed-to-convince-against-ban-2023-3?utm_medium=ingest&amp;utm_source=markets&amp;_gl=1*1aeeqfa*_ga*MjMxMzA1Mzg2LjE2NTY0NDQxNTU.*_ga_E21CV80ZCZ*MTY4NTQ0OTgyMi4yOTIuMS4xNjg1NDUxOTQyLjIxLjAuMA..">Congress's heated questioning of TikTok's CEO</a> over security concerns. US lawmakers are reportedly considering <a href="https://www.wsj.com/articles/u-s-prepares-new-rules-on-investment-in-technology-abroad-a451e035" target="_blank" rel="noopener">limits on US investment in Chinese firms</a>, which caused China to suggest it could retaliate if its companies continue to face <a href="https://markets.businessinsider.com/news/stocks/nouriel-roubini-economy-us-china-tensions-recession-depression-trade-decoupling-2023-5">harsh treatment in the US</a>.Fraying economic ties between the two countries could be a major worry for firms like Tesla, which has key production and manufacturing plants in China that help it keep production costs low. But Musk's visit so far has largely been welcomed with open arms, both by Chinese officials and industry figures. Later on Tuesday, Musk shared a <a href="https://www.businessinsider.com/elon-musk-china-trip-feast-restaurant-beijing-2023-5">16-course feast with one of China's top battery executives</a>, with his menu at the restaurant customized with a Tesla logo, Reuters reported.Tesla has floated creating a new battery factory in Shanghai, and Musk is expected to visit Tesla's existing Shanghai production plant later in his trip. That visit will be particularly important to Tesla investors, <a href="https://markets.businessinsider.com/news/stocks/tesla-stock-price-outlook-forecast-elon-musk-china-factory-visit-2023-5">Wedbush</a> analysts said, as the plant represents one of Tesla's "key advantages" while it battles other competitors in the EV market.

Elon Musk told officials in Beijing that he is opposed to the US and China breaking down economic ties

<ul class="summary-list"><li>Experts see a narrow path for China to engineer an economic rebound in 2024.</li><li>While Beijing may manage to stabilize and achieve modest growth, a "bull case" seems unlikely. </li></ul>The world has yet to witness any post-pandemic rebound in China, and <a href="https://www.businessinsider.com/china-economy-us-trade-markets-investors-policy-beijing-finance-outlook-2024-1">Wall Street expects little to change</a> in 2024.The ongoing exodus of global investors is evidence <a href="https://markets.businessinsider.com/news/stocks/china-outlook-economy-beijing-stock-market-rescue-property-real-estate-2024-1">the bear case is intact</a>, and the country's real estate sector continues to look <a href="https://www.businessinsider.com/china-economy-beijing-lehman-moment-policy-deflation-economy-markets-property-2023-8">more and more precarious</a>. Meanwhile, Beijing must figure out how to resolve <a href="https://www.businessinsider.com/china-economy-deflation-markets-property-real-estate-housing-beijing-2023-8">deflation</a> and historic youth unemployment, as well as the crisis of confidence among its citizens.It's possible China will achieve some degree of stabilization this year, but experts remain hesitant to make any bullish calls on the country. The Chinese stock market, for one, has shed roughly $6 trillion in value since peaking in 2021. Tech names in particular, such as Tencent, Alibaba, and Baidu, have seen meteoric rise-and-falls in the last three years amid China's widespread antitrust crackdowns."Clearly, China's tighter rein on its tech companies over the last +3 years has put them at a serious disadvantage versus their US counterparts in public markets," DataTrek cofounders Nicholas Colas and Jessica Rabe wrote in a note Friday.The lack of supportive policy — or anything like a coherent policy outlook — has kept benchmark indexes near multi-year lows. Foreign investors were <a href="https://markets.businessinsider.com/news/stocks/china-stock-market-outflows-economy-foreign-investors-beijing-2024-2">net sellers in January</a> for a record sixth month in a row.Mike Edwards, deputy chief investment officer at Weiss Multi-Strategy, said policymakers haven't provided investors enough reason to move into stocks. "Dire sentiment" on China, he said, is just about universal right now. "It's been relatively clear that a 'bazooka' or 'shock-and-awe' approach to stimulus is not in the cards," Edwards told Business Insider. "But we believe the turn can be engineered by demonstrating dedication to market-friendly policies, even if this dedication is born of desperation."<h3>China's old and new economy</h3>China has been attempting to shift from its old economy — powered by massive real estate growth — into a new one fueled by energy technology and manufacturing, according to Tracy Chen, a portfolio manager at Brandywine Global.While the government is dedicating resources to lithium batteries, solar, and electric vehicles, she said it will ultimately take years for the transition to become sizable enough to compensate for the downturn in the property market. "Right now the growth in the new economy cannot offset the drag of the old economy," Chen told Business Insider. "To be confident in China you have to be really contrarian right now."Real estate accounts for about one-fifth of the country's economy. Supply in China far outpaces demand, however, which has spurred a prolonged depreciation of property values.That in turn has cratered sentiment, as Chinese households have the majority of their wealth tied to real estate. <h3>Economic growth alone won't bring investors back</h3>Caesar Maasry, who leads the emerging markets cross-asset strategy team at Goldman Sachs, forecasts China's economy to see a real GDP of 4.8% this year, above the current consensus of 4.6%. But even so, he said it will take much more than an uptick in growth to turn sentiment around. To that point, in 2023 real GDP touched 5.2%, beating the 3.0% seen in 2022. Yet the Hang Seng China Enterprises Index tumbled 16% over the same 12-month stretch."Strong inflows into local funds last week, perhaps driven by government support, have yet been unable to catalyze a sustainable rally, and we suspect the key to turning sentiment around may come from policymakers both in China and the US," Maasry told Business Insider.He added that the US presidential election could spark unfavorable rhetoric on US-China relations, but any positive news it could bring on the geopolitical front could fuel a bounce for Chinese stocks.In any case, most strategists agree that China must traverse a narrow path to not only convince investors to return to markets but to catalyze domestic confidence.In January, <a href="https://www.bloomberg.com/news/articles/2024-01-23/china-mulls-stock-market-rescue-package-backed-by-278-billion" target="_blank" rel="noopener">Bloomberg</a> reported that authorities were weighing a rescue package for the stock market worth as much as $278 million, and separate data showed the <a href="https://www.bloomberg.com/news/articles/2024-01-23/china-selloff-leads-to-record-38-trillion-gap-with-us-stocks?itm_source=record&amp;itm_campaign=China%E2%80%99s_Market_Trouble&amp;itm_content=$38_Trillion_Gap-2" target="_blank" rel="noopener">$48 trillion disparity</a> between US and Chinese equities is an all-time gap. To be sure, Beijing has been relatively restrained in its interventions over the last two years, in Edwards' view, which grants policymakers some added fiscal and monetary flexibility. But incremental "piecemeal" policy measures appear to be their most likely step forward, which may fall short."Roughly a year ago, people were almost universally bullish around a 'reopening' trade that didn't materialize," Edwards said. "The bull case is a contrarian one."

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