Friday, October 23, 2015
China interest rate cut fuels fear over economy; South Africa announces 0% increase in university fees; Weather's too hot for global economy
1 China interest rate cut fuels fear over economy (Phillip Inman in The Guardian) China fuelled fears that its ailing economy is about to slow further after Beijing cut its main interest rate by 0.25 percentage points. The unexpected rate cut, the sixth since November last year, reduced the main bank base rate to 4.35%. The one-year deposit rate will fall to 1.5% from 1.75%.
The move follows official data earlier this week showing that economic growth in the latest quarter fell to a six-year low of 6.9%. A decline in exports was one of the biggest factors, blamed partly by analysts on the high value of China’s currency, the yuan.
The rate cut sent European stock markets higher as investors welcomed the boost from cheaper credit in China, together with the hint of further monetary easing by the European Central Bank president, Mario Draghi, on Thursday. Investors were also buoyed by the likelihood that the US Federal Reserve would be forced to signal another delay to the first US rate rise since the financial crash of 2008-2009 until later next year.
Some economists have warned that the world economy is about to experience a third leg of post-crash instability after the initial banking collapse and eurozone crisis. The slowdown in China, as it reduces debts and a dependence for growth on investment in heavy industry and property, will be the third leg.
World trade has already contracted this year with analysts forecasting weaker trade next year. The International Monetary Fund (IMF) in July trimmed its forecast for global economic growth for this year to 3.1% from 3.3% previously, mainly as a result of China’s slowing growth. The Washington-based fund also warned that the weak recovery in the west risks turning into near stagnation.
Corporations considered bellwethers of the global economy have also warned of a sharp slowdown. Caterpillar, the industrial equipment manufacturer, has seen profits slide over the last year. AP Moller-Maersk, the shipping firm cut its 2015 profit forecast by 15% on Friday, blaming a slowdown in the container shipping market.
2 South Africa announces 0% university education fee hike (Johannesburg Times) "We agreed that there will be a zero increase of university fees in 2016," President Jacob Zuma has said. His address comes after a meeting with student leaders and university officials following a nationwide protest against increased fees.
Thousands of students had travelled from around Pretoria and Johannesburg to attend the demonstration, which gradually degenerated into violent scenes at a fence erected on the south lawn separating the students from the Union Buildings.
Students who had come to protest peacefully were overshadowed by a minority of students at the fence, many of them wearing T-shirts bearing the branding of the Economic Freedom Fighters, the SA Students Congress, ANC Youth League, and the Pan Africanist Movement of Azania.
Those at the front of fence antagonised riot police by tearing down the fence, and throwing stones, bricks and other objects at police and even media. Police used stun grenades, tear gas and a water cannon to disperse some of them.
3 Weather’s too hot for global economy (Khaleej Times) With each upward degree, global warming will singe the economies of three-quarters of the world's nations and widen the north-south gap between rich and poor countries, according to a new economic and science study.
Compared to what it would be without more global warming, the average global income will shrivel 23 per cent at the end of the century if heat-trapping carbon dioxide pollution continues to grow at its current trajectory, according to a study published in the scientific journal Nature.
Some countries, like Russia, Mongolia and Canada, would see large economic benefits from global warming, the study projects. Most of Europe would do slightly better, the US and China slightly worse. Essentially all of Africa, Asia, South America and the Middle East would be hurt dramatically, the economists found.
"What climate change is doing is basically devaluing all the real estate south of the US and making the whole planet less productive," said study co-author Solomon Hsiang, an economist and public policy professor at the University of California Berkeley. "Climate change is essentially a massive transfer of value from the hot parts of the world to the cooler parts of the world. This is like taking from the poor and giving to the rich," Hsiang said.
Lead author Marshall Burke of Stanford and Hsiang examined 50 years of economic data in 160 countries and found what Burke called "the goldilocks zone in global temperature at which humans are good at producing stuff" - an annual temperature of around 13 degrees Celsius or 55.4 degrees Fahrenheit, give or take a degree.
For countries colder than that economic sweet spot, every degree of warming heats up the economy and benefits. For the US and other countries already at or above that temperature, every degree slows productivity, Burke and Hsiang said.
The 20th-century global average annual temperature is 57 degrees, or 13.9 degrees Celsius, according to the National Oceanic and Atmospheric Administration. Last year - the hottest on record - was 58.24 degrees and this year is almost certain to break that record, according to NOAA.