Latest News Clips 2018.11.12

                    

1.      A Partisan War Awaits Trump. That Just Might Suit Him.

   

President Trump may have to choose between escalating the partisan warfare in Washington and trying to reach bipartisan deals.CreditCreditGabriella Demczuk for The New York Times        Nov. 7, 2018

WASHINGTON — President Trump will wake up on Wednesday morning to a radically new political environment as he confronts the prospect of a two-year partisan war with a Democratic-run House armed with subpoena power and empowered to block his legislative agenda.

Combative by nature, happier in a fight, the president may now have to choose between escalating the pitched conflict that has torn Washington apart in recent years and attempting the sort of reach-across-the-aisle conciliation that has rarely marked his presidency so far.

After waging a divisive and racially charged campaign, Mr. Trump signaled in the days leading up to Tuesday’s vote that he may soften his tone going forward, although past nods toward bipartisanship have never lasted long. With his party no longer holding all the levers of power in Washington, he cannot bypass the opposition if he hopes to transform his priorities into law.

[Mr. Trump claimed a “Big Victory” on Wednesday morning.]

Perhaps just as important, he will no longer have Republican majorities to guard his flank against investigations into all manner of issues that Democrats are eager to examine. The new House may press far more deeply into his personal and political affairs, demanding the tax returns he has kept secret, delving deeper into any ties with Russia and exploring any conflicts of interest.

At its most extreme, a Democratic House could even potentially pose an impeachment threat against the president depending on the results of the investigation by the special counsel, Robert S. Mueller III, who has remained quiet during the campaign, although party leaders are wary of such a move.

“The administration will be under higher scrutiny and accountability by a Democratic House,” said former Representative Tom Davis, Republican of Virginia. “Look for more investigations and subpoenas. The honeymoon is over. Voters voted to put a check on the president rather than giving him a blank check.”

Mr. Trump became the fourth president in a row to endure a major midterm setback. Bill Clinton’s Democrats lost both houses of Congress in 1994, George W. Bush’s Republicans lost both houses in 2006, and Barack Obama’s Democrats lost the House in 2010 and the Senate in 2014.

But Mr. Clinton and Mr. Obama both bounced back from their first-term defeats to win re-election two years later, finding it useful politically to have an opposition to play off. In his time in politics, Mr. Trump has been at his most comfortable and confident when he has an enemy to joust with.

 “The subpoena process and investigations will be difficult,” said Marc Short, a former White House legislative director for Mr. Trump. “But there’s probably nothing that could help the president’s re-election prospects better than having Nancy Pelosi as speaker.”

Former Representative Steve Israel, Democrat of New York, said the election results were a “mixed bag” for the president. “With a House Democratic majority, he has the foil he needs for his re-election campaign in 2020,” Mr. Israel said. “But no president wants the other party with subpoena power — certainly not this president.”

On the campaign trail, Mr. Trump characterized the midterm elections as a referendum on his presidency, telling supporters that they needed to vote for Republicans to continue his policies and guard him against impeachment. He made clear that he would cast a victory as a personal vindication while pre-emptively insisting that if Republicans lost, it would not be a repudiation of him.

2.      The Global Impact of a Chinese Recession

The Project Syndicate   Nov 7, 2018 

 Most economic forecasts suggest that a recession in China will hurt everyone, but that the pain would be more regionally confined than would be the case for a deep recession in the United States. Unfortunately, that may be wishful thinking.

CAMBRIDGE – When China finally has its inevitable growth recession – which will almost surely be amplified by a financial crisis, given the economy’s massive leverage – how will the rest of world be affected? With US President Donald Trump’s trade war hitting China just as growth was already slowing, this is no idle question.

Typical estimates, for example those embodied in the International Monetary Fund’s assessments of country risk, suggest that an economic slowdown in China will hurt everyone. But the acute pain, according to the IMF, will be more regionally concentrated and confined than would be the case for a deep recession in the United States. Unfortunately, this might be wishful thinking.

First, the effect on international capital markets could be vastly greater than Chinese capital market linkages would suggest. However jittery global investors may be about prospects for profit growth, a hit to Chinese growth would make things a lot worse. Although it is true that the US is still by far the biggest importer of final consumption goods (a large share of Chinese manufacturing imports are intermediate goods that end up being embodied in exports to the US and Europe), foreign firms nonetheless still enjoy huge profits on sales in China.

Investors today are also concerned about rising interest rates, which not only put a damper on consumption and investment, but also reduce the market value of companies (particularly tech firms) whose valuations depend heavily on profit growth far in the future. A Chinese recession could again make the situation worse.

I appreciate the usual Keynesian thinking that if any economy anywhere slows, this lowers world aggregate demand, and therefore puts downward pressure on global interest rates. But modern thinking is more nuanced. High Asian saving rates over the past two decades have been a significant factor in the low overall level of real (inflation-adjusted) interest rates in both the United States and Europe, thanks to the fact that underdeveloped Asian capital markets simply cannot constructively absorb the surplus savings.

Former US Federal Reserve chair Ben Bernanke famously characterized this much-studied phenomenon as a key component of the “global savings glut.” Thus, instead of leading to lower global real interest rates, a Chinese slowdown that spreads across Asia could paradoxically lead to higher interest rates elsewhere – especially if a second Asian financial crisis leads to a sharp draw-down of central bank reserves. Thus, for global capital markets, a Chinese recession could easily prove to be a double whammy.

As bad as a slowdown in exports to China would be for many countries, a significant rise in global interest rates would be much worse. Eurozone leaders, particularly German Chancellor Angela Merkel, get less credit than they deserve for holding together the politically and economically fragile single currency against steep economic and political odds. But their task would have been well-nigh impossible but for the ultra-low global interest rates that have allowed politically paralyzed eurozone officials to skirt needed debt write-downs and restructurings in the periphery.

When the advanced countries had their financial crisis a decade ago, emerging markets recovered relatively quickly, thanks to low debt levels and strong commodity prices. Today, however, debt levels have risen significantly, and a sharp rise in global real interest rates would almost certainly extend today’s brewing crises beyond the handful of countries (including Argentina and Turkey) that have already been hit.

Nor is the US immune. For the moment, the US can finance its trillion-dollar deficits at relatively low cost. But the relatively short-term duration of its borrowing – under four years if one integrates the Treasury and Federal Reserve balance sheets – means that a rise in interest rates would soon cause debt service to crowd out needed expenditures in other areas. At the same time, Trump’s trade war also threatens to undermine the US economy’s dynamism. Its somewhat arbitrary and politically driven nature makes it at least as harmful to US growth as the regulations Trump has so proudly eliminated. Those who assumed that Trump’s stance on trade was mostly campaign bluster should be worried.

3.      Alibaba Goes International to Hit New Singles’ Day Record

The Bloomberg    Nov.09, 2018  

This Singles’ Day to be the last with Jack Ma as chairman

Alibaba targeting Southeast Asia as it seeks global expansion

Alibaba Group Holding Ltd. is looking beyond borders to turn its annual Singles’ Day shopping celebration into a global phenomenon.

This Sunday, the Chinese internet giant is including sales from Lazada, the online shopping mall it controls. Southeast Asia’ biggest web retailer is becoming a key part of Alibaba’s plan to fuel growth, on top of the company’s efforts to move into shopping malls, convenience stores and food delivery.

Jack Ma, center, flanked by celebrities during the Alibaba Singles’ Day festival in Nov. 2017.

The challenge for billionaire Jack Ma’s online empire is to break another sales transaction record after a decade of exceeding prior results. With a brewing trade war, a cooling economy and rising competition from smaller platforms such as JD.com Inc. and Pinduoduo Inc., Alibaba is seeking to add new growth engines. The retail celebration on Nov. 11 dedicated to the nation’s unattached has become an important bellwether not just for the company, but also the world’s No. 2 economy.

“Singles’ Day has now become a stage for Alibaba to showcase its capabilities across all its platforms,” Daniel Zhang, chief executive officer, said at an October news conference in Beijing. He’s taking over after Ma steps down as executive chairman next year.

It was Zhang who came up with the idea of turning Singles’ Day into a shopfest a decade ago. Now that this year’s one-day bazaar will be Ma’s last as chairman, Zhang will need to prove he can carry on the legacy. “We think 1 billion packages will become a daily event in the future,” he said.

More than half a billion people are projected to visit Alibaba’s websites in search of Dyson hair dyers, infant formula and Gucci bags. Alibaba has been able to post breakneck growth for almost a decade, including a 39 percentjump in sales last year to 168 billion yuan ($24.2 billion).

Still, there’s some uncertainty this year, due to a slowing economy, real estate deflation and trade tensions with the U.S. that could impact on Chinese consumption. The weaker economy and rising household debt have, to some extent, dampened consumers’ confidence in China.

Online retail sales growth slowed to 24 percent, down 12 percentage points in the second quarter, according to the National Bureau of Statistics. Policy makers have made a slew of changes, including reductions in income tax and tariffs on goods. That indicates spending may pick up in coming months; the earliest proof could come from data during Singles’ Day.

Last week, Alibaba reported quarterly profit and sales well above analysts’ estimates, while trimming its prediction for full-year sales by as much as 6 percent, with Ma warning that the economic conflict between the world’s two largest economies could last 20 years.

To fuel growth, Alibaba is expanding its playbook. Ele.me, the startup it took control of this year, will provide delivery services for select Starbucks stores across 11 cities in China. Rural Taobao will offer coupons for goods across 800 counties, and Lazada will roll out promotions across six Southeast Asian countries including Indonesia, Malaysia and Thailand.

Although it’s been three years since Ma said he wants to make Singles’ Day a global shopping event, that hasn’t happened yet. International expansion will be a key part of Zhang’s plan to keep breaking sales records. Last year, Russia, Hong Kong and the U.S. were the top three regions outside of mainland China to buy goods during the annual event. Popular items purchased overseas included mobile phones, wool coats and knitted sweaters, according to the company.

At the same time, Alibaba’s efforts to push into the U.S. are sputtering. It discarded a pledge to create a million jobs in the country, lost its top U.S. dealmaker and jettisoned plans for affiliate Alipay to acquire MoneyGram. U.S. President Donald Trump said in October that he plans to withdraw from a 192-nation treaty that gives Chinese companies discounted shipping rates for small packages sent to American consumers, making it harder to push into the market.

Southeast Asia will give the clearest indication of Alibaba’s ability to go international. With Singapore-based Lazada now fully under its wing, the region remains one of the company’s relative bright spots.

The slump in China’s advertising sector is also hurting Alibaba. A significant chunk of revenue comes from merchants spending money across the e-commerce giant’s platforms to lure customers. That item, which falls under the category “customer management revenue,” rose 26 percent in the latest quarter, compared with 35 percent in the prior period.

“The macro slowdown has affected advertisers’ sales performances and thus their online ad spending budgets,” Ella Ji, an analyst at China Renaissance, wrote in a report.