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China ‘plans to ban’ US IPOs for data-heavy tech firms, and proposes algorithm controls – business live

China ‘plans to ban’ US IPOs for data-heavy tech firms, and proposes algorithm controls – business live thumbnail

Jerome Powell also adds that the Fed has “much ground to cover” before it actually achieves maximum employment, and feels ready to raise interest rates from current record lows.


The timing and pace of the coming reduction in asset purchases will not be intended to carry a direct signal regarding the timing of interest rate liftoff, for which we have articulated a different and substantially more stringent test.

We have said that we will continue to hold the target range for the federal funds rate at its current level until the economy reaches conditions consistent with maximum employment, and inflation has reached 2 percent and is on track to moderately exceed 2 percent for some time.

We have much ground to cover to reach maximum employment, and time will tell whether we have reached 2 percent inflation on a sustainable basis.

CNBC
(@CNBC)

Fed Chair Powell indicates that the central bank is likely to begin tapering by the end of the year, but says there’s “much ground to cover” before rate hikes. https://t.co/HotzBsstM4 pic.twitter.com/9N3xm4fdHp

August 27, 2021

Powell: tightening policy too early would be harmful

Jerome Powell also warns that tightening monetary policy too early, in response to temporary inflation pressures, would be a “particularly harmful” mistake.

In a signal that he is determined to avoid a hawkish premature tightening, the Fed chair says that workers would suffer from such an error,.

He insists:


If a central bank tightens policy in response to factors that turn out to be temporary, the main policy effects are likely to arrive after the need has passed.

The ill-timed policy move unnecessarily slows hiring and other economic activity and pushes inflation lower than desired. Today, with substantial slack remaining in the labor market and the pandemic continuing, such a mistake could be particularly harmful. We know that extended periods of unemployment can mean lasting harm to workers and to the productive capacity of the economy.

Powell signals Fed could start tapering its stimulus this year

America’s top central banker, Jerome Powell, has just addressed the Jackson Hole economic symposium….and declared that the Federal Reserve could begin to slow its bond-buying stimulus programme later this year.

In an eagerly awaited speech, Powell says that the Fed has achieved the ‘substantial further progress’ it was aiming for on inflation, and is making “clear progress toward maximum employment” too, given strong jobs gains in recent months.

But, Powell hasn’t given a clear pledge on exactly when the Federal Reserve might start winding back the $120bn/month programme, or how quickly it will act. He’s not lit the tapering touch paper today.

Pointing to the spread of the Delta variant, Powell says:


We have said that we would continue our asset purchases at the current pace until we see substantial further progress toward our maximum employment and price stability goals, measured since last December, when we first articulated this guidance.

My view is that the “substantial further progress” test has been met for inflation. There has also been clear progress toward maximum employment.

At the FOMC’s recent July meeting, I was of the view, as were most participants, that if the economy evolved broadly as anticipated, it could be appropriate to start reducing the pace of asset purchases this year.

The intervening month has brought more progress in the form of a strong employment report for July, but also the further spread of the Delta variant. We will be carefully assessing incoming data and the evolving risks. Even after our asset purchases end, our elevated holdings of longer-term securities will continue to support accommodative financial conditions.

Powell also expresses hope that America’s jobs market will continue to recover this autumn, despite the threat from the Delta variant of Covid-19.


With vaccinations rising, schools reopening, and enhanced unemployment benefits ending, some factors that may be holding back job seekers are likely fading. While the Delta variant presents a near-term risk, the prospects are good for continued progress toward maximum employment.

After faltering last winter, job gains have risen steadily over the course of this year and now average 832,000 over the past three months, of which almost 800,000 have been in services, the Fed chair says.

Powell started his speech by hailing those in the front line fighting the pandemic: the essential workers who kept the economy going, those who have cared for others in need.

He also points to those in medical research, business, and government who developed, produced and distributed vaccines that have allowed economies to reopen, adding:


We should also keep in our thoughts those who have lost their lives from Covid, as well as their loved ones.

Powell points out that the pandemic recession—the briefest yet deepest on record—displaced roughly 30 million workers in the space of two months.

The slump in Q2 2020 was twice as severe as the full decline during the Great Recession of 2007–09. But, the pace of the recovery has exceeded expectations too, with the economy surpassing its previous peak after only four quarters, less than half the time required following the Great Recession.

Employment gains have also come faster than expected, but are lagging the output recovery, he points out.

On inflation, Powell says that the spike in inflation is so far largely the product of a relatively narrow group of goods and services, driven by the pandemic and the reopening of the economy.

He cites energy prices, hotel rooms and airplane tickets, and used car prices (which seem to have stabilised after surging, and could soon pull inflation down).

Updated

Stocks have opened higher on Wall Street after dipping yesterday, with the Dow gaining 107 points or 0.3% to 35,320.

The tech-focused Nasdaq has also opened higher, gaining 0.4% or 64 points to 15,010 points.

Energy news: British Gas will freeze the direct debits of 2m households over the winter to help customers manage the highest cap on standard energy bills since the regulatory measure was introduced in 2019.

The UK’s largest energy supplier confirmed it would raise the price of its default dual fuel tariff in line with the industry price cap, which will climb by 12% to an average of £1,277 a year.

British Gas will delay increasing the direct debits paid by customers on the default tariff until February next year, before smoothing out the higher costs over the warmer months, when homes tend to use less energy.

The company said it wanted to give its direct debit customers “the option to create a bit of extra financial breathing space if they need it”.

Daniel Boffey

The US multinational technology company Nvidia has said it will answer “any concerns” raised by the European Commission as regulators appeared set to launch an investigation into the firm’s proposed $54bn (£39bn) purchase of the British chip designer Arm.

The world’s leading maker of graphics and artificial intelligence chips is expected to notify the commission early in September of its plan to purchase Arm, when regulators would probably undertake a preliminary review.

A spokesperson for Nvidia said:


“This transaction will be beneficial to Arm, its licensees, competition, and the industry. We are working through the regulatory process and we look forward to engaging with the European Commission to address any concerns they may have.”

The Financial Times reports this morning that Brussels is set to launch a formal competition probe early next month, once Nvidia officially notifies the European Commission of its plan to buy Arm (which also face scrutiny in the UK).

US core PCE inflation sticks at 30-year high

Just in. The prices paid for Americans for goods and services continues to rise last month, according to a closely watched survey.

The PCE index rose by 4.2% year-on-year in July, up from 4.0% in June. Energy prices were one factor, jumping 23.6% year-on-year, while food prices increased 2.4 percent.

And core PCE, which strips out food and energy, rose by 3.6% per year. That’s a 30-year high, matching last month’s reading.

Liz Ann Sonders
(@LizAnnSonders)

PCE #inflation for July +4.2% y/y (+0.4% m/m) vs. +4.1% est. … core PCE +3.6% y/y (+0.3% m/m) vs. +3.6% est. pic.twitter.com/o377Z9PGDt

August 27, 2021

Kathy Jones
(@KathyJones)

Core pce at 3.6% yr/yr and personal income up 1.1% in July – more evidence that the Fed can move forward with tapering.

August 27, 2021

PCE is the Federal Reserve’s preferred measure of inflation, so this rise could increase pressure to rein in its stimulus programme.

However, officials may still feel that the factors pushing price up are mostly transient – such as ongoing supply-chain bottlenecks, shortages caused by the pandemic.

MarketWatch Economy
(@MKTWeconomics)

INFLATION WATCH: Prices rise 0.4% in July using the Federal Reserve’s preferred PCE gauge. Inflation still climbing – it’s up 4.2% the past year. Highest since 1991. High inflation likely to persist at least through end of 2021 …

August 27, 2021

Mohamed A. El-Erian
(@elerianm)

PCE numbers are out: 4.2% and 3.6% — that is, in line to very slightly hotter-than-expected inflation. https://t.co/gVcrU2CNOB

August 27, 2021

Prices rose 0.4% during the month while core PCE rose 0.3% month-on-month — both down from the pacey 0.5% price growth seen in June.

Michael McDonough
(@M_McDonough)

Largest Drivers of the PCE Price Index (MoM%): pic.twitter.com/OXq4FjnNVS

August 27, 2021

Michael McDonough
(@M_McDonough)

Largest Drivers of the PCE Price Index (YoY%): pic.twitter.com/e7r07mdlyL

August 27, 2021

The Bureau of Economic Analysis has also reported that US personal incomes rose by 1.1% last month, helped by rising wages and child tax credit payments under the White House’s stimulus plan.

AnnElizabeth Konkel
(@AE_Konkel)

Disposable personal income sees a slight bump. As the report notes, that’s from both “government social benefits and compensation of employees”. The Child Tax Credit is the government benefit referred to. Compensation is mostly from wage & salary. pic.twitter.com/uNdyesD6Fu

August 27, 2021

But personal spending was more subdued, rising 0.3% in the month.

Asif Abdullah
(@Asif_H_Abdullah)

US Personal Spending for Jun’21 up 0.3% vs 0.4% expected.

Up: Food/ accommodation services.

Down: Autos, transportation, recreation.

A mixed picture. pic.twitter.com/wXtZeDv5aV

August 27, 2021

scott horsley
(@HorsleyScott)

The Federal Reserve’s preferred measure of inflation was 4.2% for the 12 months ending in July (3.6% excluding food and energy). Personal income rose thanks to wages and the child tax credit. Personal spending fell in real terms as Americans spent more on services, less on stuff.

August 27, 2021

In other tech news…shares in Just Eat Takeaway have tumbled 5.5% in London today after New York’s City Council approved legislation to permanently cap commissions delivery apps can charge restaurants.

The move is a blow to Just Eat’s Grubhub, one of New York’s biggest food delivery apps, as well as rivals like DoorDash and Uber Eats.

Under the plan, food delivery services may only charge up to 15% of food orders, and 5% for marketing — restaurants had complained that some had commonly charged up to 30%.

Councilman Francisco Moya, a Queens Democrat, said the move would help independent eateries.


By limiting, without expiration, the fees charged to restaurants by third-party food delivery services, we are ensuring that mom-and-pop shops have a real opportunity to recover and thrive.

New York had previously had a temporary cap, to help restaurants through the pandemic. Analysts suspect other cities with temporary curbs, such as Los Angeles, Seattle, and Chicago, could make them permanent too.

Chinese authorities say overtime ‘996’ policy is illegal

In yet another blow to China’s tech sector, Beijing’s top court said today the country’s notorious “996” overtime policy is illegal.

Under 996, employees work 9am to 9pm, six days a week — part of an engrained culture of overwork that has been particularly prevalent at fast-growing technology companies.

China’s Supreme People’s Court and the Ministry of Human Resources and Social Security have today jointly published guidelines and examples on what constituted as overtime work, warning companies not to abuse staff.

These new “model” cases that will guide courts on how to treat workers’ rights in labour disputes.

Reuters
(@Reuters)

China’s Supreme People’s Court said the overtime practice of ‘996,’ working 9 a.m. to 9 p.m. six days a week, is illegal, taking aim at the controversial policy that is common among many Chinese technology firms https://t.co/OvtSW0vqNF pic.twitter.com/eDQRmwbk1U

August 27, 2021

Back in 2019 Jack Ma, founder of e-commerce giant Alibaba, was criticized for endorsing the controversial culture of 12-hour workdays, saying those who put in longer hours would get the “rewards of hard work.”

Younger workers have been pushing back against 996, with an online movement encouraging people to take breaks, relax – and embrace a less intense philosophy known as “touching fish”.

And recently, tech firms have been moving away from it – with TikTok owner ByteDance pledging to end its weekend overtime policy this month.

The FT has a good take:


The strengthening of labour rights followed years of dissent among tech workers over the so-called 996 system, which had been held up for many years as a badge of pride and a source of competitive advantage. Jack Ma, the founder of Alibaba, once told his employees that they needed to be prepared to work 12 hour days at his company, and described 996 as “a blessing”.

But an anti-996 campaign has taken hold at China’s big tech companies after complaints of gruelling conditions and deaths blamed on overwork. In response companies including ByteDance, owner of short video platform TikTok, and the internet group Tencent have recently cut back working hours.

“This clarification of regulations is very specifically targeted at tech giants and even medium-sized tech companies in China,” added Suji Yan, founder of Mask Network, a Singapore-based cryptographic and encryption start-up.

“If tech companies still practice further violations of working hours, regulators will highly likely take action against them.”

Financial Times
(@FT)

China’s top court takes aim at ‘996’ working culture in blow to tech groups https://t.co/bljLJFTVGL

August 27, 2021

Joanna Partridge

Back in Britain, pig producers are warning that healthy animals may end up being culled if the government does not take urgent action to deal with shortages of workers at abattoirs and meat-processing plants.

As many as 70,000 pigs that should have already been taken to slaughter are stranded on UK farms, according to the industry trade body the National Pig Association (NPA).

The excess numbers of pigs on UK farms is growing by 15,000 each week, the NPA said, with about a quarter fewer pigs leaving for slaughter than would be expected in normal times. More here.

Here’s Raffi Boyadjian, lead investment analyst at XM, on the markets and the state of the economy today:


US stock futures were rebounding on Friday, pointing to gains of 0.3% at the open. Shares in Europe were mixed but in Asia, only Chinese indices managed to close higher as virus woes continue to sap sentiment.

It’s not just in low vaccinated Asian countries, though, that the Delta variant is spreading uncontrollably. The number of people hospitalized in the United States is back above 100,000 and in Britain, there are fears that cases will soar once schools reopen.

As the global recovery comes under threat again, optimism is becoming increasingly reliant on hopes that monetary policy will remain accommodative for the foreseeable future even though many central banks have been moving in the opposite direction lately.

South Korea’s central bank hiked rates for the first time during the pandemic on Thursday. But in China, policymakers have been trying to calm markets by ramping up cash injections into the banking system this week whilst signalling that the reserve requirement ratio for banks could be cut again very soon.

China lays out plans for tighter control of algorithms

In another significant move to control its technology sector, China is seeking to tighten oversight of the algorithms they use to drive their businesses.

The Cyberspace Administration of China has issued a swathe of draft proposals to more rightly regulate how companies use algorithms.

The proposed guidelines say they must comply with laws and regulations, respect social ethics and ethics, abide by business ethics and professional ethics, and follow principles of (among others) fairness, openness and transparency.

The wide-ranging regulations would bar companies from using algorithms to hit consumers with higher prices based on their known preferences and trading habits, or influence online public opinion, or excessively manipulate search results in a way that harms competition.

Practices which violate public order, or encourage addiction or “high consumption” would also be curbed.

The proposals also say users must be given simple options to turn off algorithm recommendation services — which are used to provide personalised adverts and shopping recommendations — and to select, modify or deleting user tags used for algorithm recommendation services.

The proposals would also force firms to ensure that they protect children, and don’t serve them content that could encourage unsafe behaviors, violate social ethics or induce bad habits among minors… such as becoming addicted to the Internet.

And companies who use algorithms to schedule their workers (such as ride-hire companies) must ensure they protect pay, working hours and other labor rights.

Kendra Schaefer, head of tech policy research at Beijing-based consultancy Trivium China, says the proposals mean algorithms would be “tightly controlled”.

Here’s her full take:

Kendra Schaefer 凯娜
(@kendraschaefer)

My goodness. China’s cyberspace watchdog, the CAC, just published a long (and unprecedented) set of draft regulations for recommendation algorithms. The short version: they will be tightly controlled. Key points below. 1/ https://t.co/YDtodrtsSY

August 27, 2021

Kendra Schaefer 凯娜
(@kendraschaefer)

Most interesting to me: Users must be provided with a convenient way to see and delete the keywords that the algorithm is using to profile them. 2/

August 27, 2021

Kendra Schaefer 凯娜
(@kendraschaefer)

And there are limits on the types of keywords algos can collect: “Providers … shall not record illegal and undesirable keywords in the user points of interest or as user tags and push information content accordingly, and may not set discriminatory or biased user labels.” 3/

August 27, 2021

Kendra Schaefer 凯娜
(@kendraschaefer)

Users must be informed that algorithms are being used to recommend content or products to them, and must be allowed to opt out, and see non-personalized results. 4/

August 27, 2021

Kendra Schaefer 凯娜
(@kendraschaefer)

There is a clear concern that algorithms will be used to the detriment of socialist core values. “The algorithm recommendation service provider shall adhere to mainstream values … actively spread positive energy, and promote the application of algorithms for the better.” 5/

August 27, 2021

Kendra Schaefer 凯娜
(@kendraschaefer)

Also a clear concern they may be used to manipulate consumers: “Providers shall regularly review, evaluate, and verify algorithm mechanisms, models, data, and application results, etc., and may not set up models … such as inducing users to indulge or consume high amounts.” 6/

August 27, 2021

Kendra Schaefer 凯娜
(@kendraschaefer)

Alogs can’t be used to “falsely register accounts … or falsely likes, comment, forwards… manipulate search rankings, control hot topics, … implement self-preferential treatment, unfair competition, influence online public opinion, or evade supervision.” 7/

August 27, 2021

Kendra Schaefer 凯娜
(@kendraschaefer)

Protecting kids: Algorithms cannot push info to minors that induce them to imitate unsafe behaviors or bad habits, or profile them in order to encourage internet addiction. 8/

August 27, 2021

Kendra Schaefer 凯娜
(@kendraschaefer)

No brutal work conditions for ride-hailing drivers, delivery drivers: “Algos that provide scheduling services to workers shall improve … platform order distribution, remuneration, working hours, rewards and punishments, [to] protect workers’ rights and interests.” 9/

August 27, 2021

Kendra Schaefer 凯娜
(@kendraschaefer)

No using algorithms for differential treatment: “providers shall not use algorithms to implement unreasonable trading conditions such as differential treatment and transaction prices based on consumer preferences and transaction habits and other illegal acts.” 10/

August 27, 2021

Kendra Schaefer 凯娜
(@kendraschaefer)

The Party does not want algorithms running amok and influencing public opinion. The CAC will keep records of algos that have “public opinion attributes or social mobilization capabilities,” and algos which have such attributes must register. 11/

August 27, 2021

Kendra Schaefer 凯娜
(@kendraschaefer)

CAC will also conduct security and safety inspections of recommendation algorithm providers. Algo providers must also set up channels to receive, and respond to, complaints from the public. 12/

August 27, 2021

Kendra Schaefer 凯娜
(@kendraschaefer)

Buuuttttt… fines for violations are pretty low. First penalty is a warning. If the violation is serious, max fine is RMB 30,000 (around USD 5,000). This is likely because they need to be payable by small app developers, not just big tech. 13/

August 27, 2021

Kendra Schaefer 凯娜
(@kendraschaefer)

That said, if a criminal act has taken place (say, a violation of the upcoming Personal Information Protection Law), then fines could be huge. 14/

August 27, 2021

Kendra Schaefer 凯娜
(@kendraschaefer)

As far as I’m concerned, this policy marks the moment that China’s tech regulation is not simply keeping pace with data regulations in the EU, but has gone beyond them. 15/

August 27, 2021

Last weekend, my colleague Vincent Ni wrote a detailed piece about China’s attacks on its entrepreneurs, particularly in the technology sector [one target of this latest clampdown on overseas IPOs].

It outlined how their vast fortunes has clashed with Beijing’s political philosophy, posing a threat to the communist party, prompting Xi Jinping to rein them in.

Here’s a taste:


China’s tech bosses are among its wealthiest citizens, and they are very much in Xi’s sights. The boss of social and gaming giant Tencent, Pony Ma, is estimated by Forbes to be worth $43bn (£31bn). His peer Jack Ma, founder of Alibaba, is not far behind at $41bn.

With money have come power at home and influence abroad, both of which pose a threat to the Communist party, analysts say. China’s technologies increasingly shape the western world, from Alibaba in global trade, linking western buyers with exporters of goods made in China, to TikTok in popular culture, to online gaming, where Tencent has an interest in some of the most successful European developers.

“The recent regulatory crackdowns also send a chilling message to enterprising Chinese business people, whose contributions to the economy are far bigger than many state-owned firms,” said Dexter Roberts, senior fellow at Atlantic Council’s Scowcroft Center for Strategy and Security.

“Chinese economists have long wondered whether the tech sector would be Xi’s next move in addressing the issue of wealth distribution,” said Roberts, who is also the author of The Myth of Chinese Capitalism. “In this sense, it’s unsurprising that this is now happening. After all, these tech firms are the symbol of excessive wealth in China.”

Xinhua: China issues guidelines on promoting employment in next five years

China’s State Council, the cabinet, has issued guidelines on promoting employment in the 2021-2025 period, including targets for boosting the extent of employment and improving workers’ skillsets, according to the official Xinhua News Agency.

China will aim to solve structural issues with the workforce and effectively fend off large-scale unemployment risks, Xinhua cited the State Council as saying (via Reuters).

This looks to be another sign that Beijing’s trying to limit the slowdown in its economy, with factory profit growth having slowed this morning.

CN Wire
(@Sino_Market)

#China‘s State Council issues the Employment Promotion Scheme for the 14th Five Year Plan.

China’s cabinet says will boost the size of employment, effectively fend off large-scale unemployment risks. pic.twitter.com/WMGDxbZL4x

August 27, 2021

Breaking Market News
(@FinancialJuice)

CHINA WILL TAKE STEPS TO AVOID LARGE-SCALE LAYOFFS, ACCORDING TO XINHUA.

August 27, 2021

Breaking Market News
(@FinancialJuice)

CHINA HAS ISSUED A FIVE-YEAR PLAN TO PROMOTE EMPLOYMENT – XINHUA.

August 27, 2021

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