Connect with us

Business

China’s Tax Revenue Declines as Its Leaders Brace for Trump’s Tariffs

Published

on

China’s Tax Revenue Declines as Its Leaders Brace for Trump’s Tariffs

Buried in China’s latest government budget were some numbers that add up to an alarming trend. Tax revenue is dropping.

The decline means that China’s national government has less money to address the country’s serious economic challenges, including a housing market crash and the near bankruptcy of hundreds of local governments.

Weak tax revenue also puts China’s leaders in a box as they square off with President Trump, who has imposed 20 percent tariffs on goods from China and threatened more to come. Beijing has less spare cash to help the export industries that are driving economic growth but could be hurt by tariffs.

The drop in tax collections leaves China’s leaders in an unfamiliar position. Until the last several years, China enjoyed robust revenue, which it used to invest in infrastructure, a rapid military buildup and extensive industrial subsidies. Even as economic growth has slowed gradually over the past 12 years, taking a dent out of consumer spending, tax revenue held fairly steady until recently.

Tax revenue fell further last year than ever before. And the only two previous declines in recent decades were under special circumstances: In 2020, China imposed an essentially nationwide pandemic lockdown for a couple of months, and in 2022, Shanghai endured a two-month lockdown.

Advertisement

China’s declining tax revenue now has several causes. A big one is deflation — a broad decline in prices. Companies and now the Chinese government find themselves with less money to make monthly payments on their debts.

Since September, Chinese officials have promised several times that they were on the cusp of doing what practically every foreign and Chinese economist recommends: spending more money to help the country’s beleaguered consumers with such measures as higher pensions, better medical benefits, more unemployment insurance or restaurant vouchers. But again and again, including on Sunday, they have laid out ambitious programs without providing more than a smidgen of extra spending.

The usual explanation for the frugality lies in longstanding opposition from Xi Jinping, China’s top leader, who warned in a speech in 2021 that China “must not aim too high or go overboard with social security, and steer clear of the idleness-breeding trap of welfarism.”

But China’s 2025 budget, which the Ministry of Finance released on March 5, suggests a different explanation: The national government may not have the money. Despite record borrowing, it would be hard-pressed to find the money needed to stimulate consumption.

Overall tax revenue fell 3.4 percent last year. That might not look like a lot. But it is a sizable divergence from the overall economy, which according to official statistics grew 5 percent before being adjusted for deflation.

Advertisement

Falling tax revenue means that China’s budget deficits are widening not because of extra government spending to help the economy, but because there is less money coming into the till. The problem has been worsening for years at local governments, which have plummeting revenues from selling state land, and has spread to the national government.

Fitch Ratings calculates that overall revenue for the national and local governments — including taxes and land sales — totaled 29 percent of the economy’s output as recently as 2018. But this year’s budget indicates that overall revenue will be just 21.1 percent of the economy in 2025.

Roughly half of the decline comes from plummeting revenue from land sales, a well-documented problem related to the housing-market crash, but the rest comes from weakness in tax revenue, a new problem.

That adds up to a huge sum of money. If overall revenue had kept up with the economy over the past seven years, the Chinese government would have another $1.5 trillion to spend in 2025.

China announced this month that it would allow its official target for the budget deficit to increase to 4 percent this year, after trying to keep it near 3 percent ever since the global financial crisis in 2009. But analysts say the true deficit is already much larger, because China is quietly counting a lot of long-term borrowing as though it were tax revenue.

Advertisement

Comparing spending only with actual revenue, without the borrowing, the Finance Ministry’s budget shows a deficit equal to almost 9 percent of the economy. In 2018, it was only 3.2 percent.

“Deficits are quite high and debt is rising quite quickly, so they are fiscally challenged,” said Jeremy Zook, a director of Asia and Pacific sovereign ratings at Fitch.

The biggest taxes in China are value-added taxes, a kind of sales tax that the government collects on practically every transaction, from rent to refrigerators. Last year, revenue from value-added taxes fell short of expectations by 7.9 percent.

The word “deflation” is prohibited in official Chinese documents, so the ministry came up with a euphemistic explanation: “This decrease was mainly due to the fact that the producer prices were lower than expected.”

Producer prices, essentially wholesale prices calculated as goods leave factories and farms, fell 2.3 percent in China last year.

Advertisement

Revenue from value-added taxes began weakening in 2018. That was when the government cut these taxes sharply for exporters to help them offset the impact of tariffs imposed by President Trump in his first term.

The cost of that tax break has soared since then as China’s exports have surged, producing a trade surplus of almost $1 trillion last year even as the rest of the economy stagnated.

Another problem lies in falling salaries and rising layoffs, especially during the second half of last year. Income taxes collected from individuals were 7.5 percent below expectations last year, the Finance Ministry said in its budget.

China’s own steep tariffs on imports are another large source of revenue. But having lost much of their savings in the housing market crash, China’s consumers have cut back on purchases of imports like handbags and perfume, while prices have fallen for many imported goods. So revenue from customs duties was 9.2 percent below forecasts last year, the Finance Ministry said.

This year’s financial picture could be even worse than the budget anticipates. The Finance Ministry’s budget repeated many of the same optimistic assumptions about tax revenue and overall economic performance that it made last year.

Advertisement

Governments in the West derive considerable revenue from taxes on investment gains, inheritances and real estate. But China has no taxes on investment gains or inheritances and almost none on real estate.

The general lack of real estate taxes lies at the root of a separate problem: China’s local governments are also running out of money. Until recently, they derived up to 80 percent of their revenues from selling land to property developers.

But those sales have plummeted since the housing crash began in 2021, which has gutted demand for new apartments and bankrupted many developers.

Local governments are responsible for most pensions, medical benefits and other social spending in China. The national government has been selling extra bonds to raise money for bailing out the weakest local governments, many of which are behind on their debts. The national government has called for local governments to step up social spending but, short on cash itself, has offered scant new financial assistance.

And new taxes are not likely forthcoming, according to Jia Kang, a retired research director at the Finance Ministry and still one of China’s most influential voices on tax policy. He said in an interview that public opposition to inheritance taxes is strong, while taxes on investment gains or real estate would hurt stocks or the housing market.

Advertisement

One factor not causing China’s tax challenges is fraud or tax evasion, Mr. Jia said. The procedures for checking on payments have become very detailed, he said. “It is difficult to cheat in this system.”

Siyi Zhao contributed research.

Business

Commentary: Farewell to Peter Duesberg, a godfather of scientific disinformation

Published

on

Commentary: Farewell to Peter Duesberg, a godfather of scientific disinformation

It can hardly be disputed that science and medicine today are awash in disinformation.

It’s why respected scientists get physically assaulted and hauled before partisan committees in Congress to be smeared. It’s why childhood vaccine rates in some places are plummeting and measles is on the rampage across the country.

Therefore, it behooves us to look at the origins of this outbreak of politically manipulated pseudoscience. Nature has given us a peg, with the death Jan. 13 of former UC Berkeley scientist Peter Duesberg, at 89.

Peter Duesberg was an AIDS denialist. He is the precursor to contemporary denialists like RFK Jr., who brought AIDS denialism into the 21st century.

— Yale epidemiologist Gregg Gonsalves

Advertisement

At the dawn of research into what is now known as HIV/AIDS, Duesberg took the heterodox view that HIV was a harmless virus that had nothing to do with AIDS.

“That virus is a pussycat,” he said. He maintained that the cause of AIDS had to be found elsewhere, notably the lifestyles and drug habits of gay men. His claim motivated a phalanx of AIDS deniers, the forebears of the anti-vaccine militants today.

“Duesberg was a pioneer of disinformation on infectious disease,” says John P. Moore, professor of microbiology and immunology at Weill Cornell Medical College and the author of a devastating 1996 takedown in Nature of Duesberg’s claims.

Duesberg’s embrace of a dangerously wrong hypothesis to the point that it destroyed his career is almost a Shakespearean narrative.

Advertisement

The German native built a career in the U.S. as a brilliant virologist with significant discoveries to his credit and long had been revered among his colleagues. But that ended when he entered the HIV wars. By 1996, Richard Horton, then the editor of the Lancet, the British medical journal, could marvel: “He is now perhaps the most vilified scientist alive.”

Some of the adversaries against whom he leveled ad hominem attacks — he accused Anthony S. Fauci, the respected immunologist and long-term director of the National Institute of Allergies and Infectious Diseases, of committing mass murder by promoting the use of the highly toxic drug AZT against HIV — could barely hear his name without suffering apoplectic fits. AZT remains part of standard HIV therapies and is estimated to have saved or prolonged millions of lives.

Asked by science journalist William Booth to respond to a Duesberg statement, Robert Gallo, the co-discoverer of HIV, replied, “I cannot respond without shrieking.” Fauci derided Duesberg’s scientific claims as “absolute and total nonsense.”

But it would be a mistake to think that Duesberg’s baleful influence on medical science will end with his death.

Duesberg’s heirs are all around us. Actually, they’re more than that — they’re now in charge.

Advertisement

As secretary of Health and Human Services, Duesberg’s most highly placed follower, Robert F. Kennedy Jr., is presiding over what has become an overtly anti-vaccination and anti-science agency with a stranglehold on government health policy and funding.

“Peter Duesberg was an AIDS denialist,” says Gregg Gonsalves, a Yale epidemiologist who was active in the AIDS research community starting in the 1990s. “He is the precursor to contemporary denialists like RFK Jr., who brought AIDS denialism into the 21st century.”

Indeed, Kennedy has embraced the denialist position that HIV is not the cause of AIDS: In a 2023 interview with New York magazine, Kennedy attributed the conclusion that HIV and AIDS were inextricably linked to “phony, crooked studies to develop a cure that killed people,” referring to AZT.

In his 2021 book “The Real Anthony Fauci,” Kennedy highlighted Duesberg’s depiction of Fauci as an all-powerful scientific panjandrum intent on blocking his grant applications because his findings might be costly for Fauci’s patrons, Big Pharma.

Kennedy also picked up Duesberg’s broader brief against government science agencies such as the Centers for Disease Control and Prevention. Duesberg’s claim was that the CDC existed only to drum up medical emergencies so the NIH could solve them, ensuring the continued flow of taxpayer dollars into both agencies.

Advertisement

Starting in the mid-1970s, Duesberg asserted and Kennedy quoted, “‘the CDC increasingly needed a major epidemic’ to justify its existence.”

Kennedy added his own gloss: “Drumming up public fear of periodic pandemics was a natural way for NIAID and CDC bureaucrats to keep their agencies relevant.”

One can draw a straight line from that statement to the unapologetic malevolence with which Kennedy treats the CDC and NIH, insinuating that they’re rife with corruption and conflicts of interest. I sought a comment from Kennedy about Duesberg’s influence on his thinking, but received no reply.

Because AIDS isn’t caused by a virus, Duesberg maintained, the antiviral drugs used as therapies were worse than the disease. He specifically targeted AZT, then as now a common component of AIDS therapies.

The publicity his claims received encouraged untold patients to refuse AZT, causing a toll that may number in the millions. Duesberg met with South African President Thabo Mbeki and chaired a South Africa conference on alternative AIDS theories in 2000, and influenced Mbeki to deny AZT treatments for South African patients. That policy contributed to more than 300,000 deaths from AIDS in that country alone.

Advertisement

“That’s his biggest legacy in terms of the death toll,” Moore says.

Duesberg’s intellectual journey points to an eternal question in science: At what point does a theory become so discredited and the empirical evidence against it so strong, that its advocates should be ignored?

For Duesberg, that point may have come in 1989, when he published an article in the Proceedings of the National Academy of Sciences outlining his position in detail. The article was filled with with so many assertions about virus science that experienced virologists knew to be false that it “closed the book on him,” Moore told me.

But as Jon Cohen of Science magazine would observe, “the press was less skeptical.” Journalists saw Duesberg as an iconoclastic truth-teller because he carried “visible credentials,” as Gallo put it — after all, he was a professor at a leading research university and a member of the elite National Academy of Sciences.

The press feasted on Duesberg’s self-portrayal as the victim of ostracism arising from professional jealousies — a target of cancel culture before that was a thing. But it rang as false then as do those of RFK Jr.’s anti-science appointees who claim today to have been silenced for their unorthodox views while proclaiming their victimhood at university-sponsored symposiums and appearances on Fox News.

Advertisement

Duesberg’s position also appealed to “the unwary, desperate or gullible” with “twisted facts and illogical lines of argument,” Moore wrote in 1996.

He attracted followers eager to make their name by challenging the scientific consensus on HIV and AIDS.

One was Robert Willner, who had lost his medical license in Florida for claiming to have cured an AIDS patient by administering ozone. Willner went on the road with presentations that included his injecting himself with blood from an AIDS sufferer, as if to show that there was nothing to be feared from HIV. (Willner died in 1995 of a heart attack.)

In his 1989 article, Duesberg had insisted that the true cause of AIDS was drug use by abusers and nitrite poppers favored by homosexuals. AIDS had only been discovered and named, he wrote, because “the particular permissiveness toward these risk groups in metropolitan centers encouraged the clustering of cases that was necessary to detect AIDS.”

His advice was that AIDS prevention efforts should be “concentrated on AIDS risks rather than on transmission of HIV,” which — if followed — would have set AIDS research inexorably down the wrong path.

Advertisement

Duesberg kept making his argument well after evidence that the human immunodeficiency virus, HIV, causes AIDS became incontestable. It’s on that evidence that AIDS treatment is based today, with spectacular success — with proper treatment, an AIDS patient can live about as long as an uninfected individual. In the old days, an infection was a death sentence.

The memorial page posted by UC Berkeley after Duesberg’s death walked a tightrope in acknowledging his descent into infamy. In its first sentence, it labeled him as a “public controversialist,” a term new to me. It recounted, “In his later years, Peter enjoyed being a maverick and the center of controversy.”

But it candidly addresses the controversies he triggered by noting that his unorthodox stance “was amplified by political leaders to the detriment of public health.”

And it delivers a final verdict that “the scientific consensus is that HIV is indeed the primary cause of AIDS, and that the current suite of anti-retroviral agents is very effective in slowing or halting the progression of the disease and its spread in the population.”

Advertisement
Continue Reading

Business

These California companies want you to ditch your keyboard

Published

on

These California companies want you to ditch your keyboard

Gavin McNamara has abandoned his keyboard and spends all day talking rather than typing.

He speaks for hours with his computer and phone, sending emails, writing presentations, posting on LinkedIn and even coding through conversations using an AI dictation app from San Francisco startup, Wispr Flow.

The AI punctuates, formats and adapts his rambling into coherent copy. McNamara averages 125 words per minute, which is twice the average typing speed.

“At this point, anything that could be done by typing, I do by speaking,” said the 32-year-old, founder of software agency Why Not Us. “I just talk.”

Advertisement

Across 77 apps, he has dictated nearly 300,000 words in the past five months — that’s equivalent to writing three novels.

California’s tech titans and startups are at the forefront of a movement to use AI and the large language models they are based on to push people to interact with technology using their voices rather than their fingers.

“AI and LLMs have changed the dynamic,” said CJ Pais, the San Diego-based creator of free voice-to-text dictation app Handy. “Using your voice is much faster than typing.”

A mix of independent developers and startups, including Handy, San Francisco’s Wispr Flow and Willow and others, have sprung up to offer accurate voice interaction with artificial intelligence.

The biggest names in tech are also creating new ways for people to partner with AI. Meta’s latest smart glasses rely on voice. OpenAI and Meta have designed distinct personalities for their bots’ voice chats. Even Amazon’s Alexa and Apple’s Siri are undergoing AI upgrades, which the companies anticipate will have everyone talking to their tech much more.

Advertisement

These free and paid methods for using spoken words with computers have attracted millions of users, including coders, executive assistants, lawyers, content creators, and medical practitioners. Some optimists think the keyboard could become obsolete.

“I’m excited to announce that we’ve removed keyboards from the most prestigious television awards in the world,” Allan Guo, the founder of Willow, said in a post on LinkedIn, noting that the Emmy Awards team used Willow’s voice dictation for sending Slack messages and clearing inboxes faster in preparation for the 2026 awards.

Over the years, big tech companies have adapted many of their products with voice-first features — for convenience. Today’s pivot away from voice as an accessibility feature to a productivity tool.

In late 2022, the maker of ChatGPT started giving away unfettered acccess to its automatic speech recognition model called Whisper, trained on 680,000 hours of multilingual data. OpenAI shared the tech for accurate audio transcription, once a closely guarded big tech secret. Anyone could now download and run high-quality AI transcription for free on their laptop.

The new wave of AI dictation apps uses Whisper as the foundation and builds on top to offer live dictation. While there are free alternatives, paid subscription costs between $8 and $12 a month.

Advertisement

AI-powered dictation is now gaining a toehold among programmers and regular users — and getting people to talk to their laptops. Be it writing emails, sending SMS, designing a website, or giving AIs tasks, early adopters say dictation allow them to work faster, think more clearly, and be more productive.

“The people who’ve adopted voice heavily aren’t going back. Once you’re talking 20 hours a week to your laptop, typing feels like friction,” said Naveen Naidu, the general manager of New York-based voice dictation app Monologue. “Where I think it’s heading: Voice becomes the delegation layer. You speak your intent, and things happen.”

These new AI dictation apps leverage Apple’s advanced chips on iPhones and Macs to run private on-device dictation.

Geoffrey Huntley, an independent software developer, switched almost completely to voice for work in June.

He often starts projects by opening a voice prompt and asking the AI to interview him about his concerns and project requirements before any code is generated.

Advertisement

“I speak to it, like I’m riffing in a jazz band, backwards, forwards, backwards, forwards,” Huntley said. This vocal dance helps refine the specifications, then the AI takes the wheel, and builds software.

Beyond coding, Huntley uses voice to “let it rip” when capturing blog post ideas or messaging, using apps like Superwhisper or Wispr Flow to get a “first dump” of thoughts before moving to a keyboard for final editing.

A growing number of software developers in Silicon Valley are dictating coding instructions for hours at a time instead of typing. The combination of rapidly advancing AI agents that can code for hours, with voice inputs capturing thoughts faster than typing, has boosted their productivity.

Self-described “vibe coder” McNamara built over 25 web apps in a few months, a speed of development that would be impossible without voice instructions.

“I don’t think that [typing], by any means, would be even efficient or effective to get there as fast as I did with talking,” McNamara said.

Advertisement

He used a meandering conversation and a few hours to get AI to build Sprout Gifts, a gifting registry for kids, and an app to appraise any items via photos.

To be sure, AI can make mistakes, and its work needs to be checked.

Meanwhile, wide adoption has brought new inconveniences, as even power users feel awkward talking to their laptops. Crowded open offices are not designed for many people to be conversing with their computers at the same time.

“Love voice, but not in an office setting,” said one user on X. “I dislike talking around other people. I would do it in a closed-door office, or go work in my car.”

McNamara uses headphones so people assume he is on a call.

Advertisement

“It’s like the social hack that I have,” he said.

While it is too early to call whether and when the Qwerty keyboard might follow the ticker tape and fax machines into obsolescence, the velocity toward voice is accelerating, said Dylan Fox, founder of San Francisco-based AssemblyAI, which offers audio models to companies.

“We’re definitely in the beginning of what we think of as like this 10 to 100x increase in demand for voice, AI applications and interfaces,” he said.

For the coder, McNamara, talking more to chatbots has made him a better buddy.

He used to be bad at responding to texts. Now he gets back to friends right away.

Advertisement

“I am so quick to respond, they are like ‘Who’s this guy?’” he said.

Continue Reading

Business

After Warner defeat, Comcast loads up on Winter Olympics, Super Bowl and NBA

Published

on

After Warner defeat, Comcast loads up on Winter Olympics, Super Bowl and NBA

Shaking off its defeat in the Warner Bros. bidding war, Comcast is focusing on its big sports bet.

NBCUniversal will broadcast the Winter Olympics, Super Bowl, NBA, Major League Baseball and the World Cup this year.

The Philadelphia giant released its fourth-quarter earnings Thursday and its sports-heavy strategy is revealing both the benefits and costs. NBCUniversal’s new NBA deal has had the hoped-for effect of boosting subscribers to its Peacock streaming service.

Peacock now has 44 million customers and streaming revenue grew 23% to $1.6 billion. But Peacock’s losses swelled to $552 million in the fourth quarter as the streaming service absorbed the expense of NBC’s NBA TV rights agreement and an exclusive NFL game.

Comcast executives said during an earnings call that Peacock reduced its full-year losses by $700 million compared to 2024. Last year, the service lost $1.1 billion and profitability is still a ways off.

Advertisement

Comcast Chairman Brian Roberts noted that the entertainment industry is in the throes of a major transformation and that NBCUniversal has laid the groundwork for its own metamorphosis. His company has made a sharp pivot away from NBC’s 1990s glory days of “Must-See TV” comedies, water-cooler dramas like “ER” and “West Wing,” as well as a fleet of formidable cable channels, including USA and CNBC.

This month, the cable channels were spun off into a new company called Versant.

Comcast entered last fall’s high-stakes Warner auction with hopes of combining NBCUniversal with Warner Bros. to create a new Hollywood behemoth. But Netflix swooped in with a $82.7-billion deal and David Ellison’s Paramount Skydance also made an all-cash bid. Paramount has refused to accept defeat, launching a hostile takeover to attempt to claim its rival — a pursuit that Warner board members are fighting.

“In terms of Warner Bros., what can you say?” Roberts said. “It’s still underway, obviously.”

Marrying NBCUniversal and Warner Bros. would have made a compelling company, Roberts said. But as soon as its competitors turned to all-cash offers, “We were just not interested in these values, stretching our balance sheet to do something like that,” he said.

Advertisement

NBCUniversal’s Peacock grew to 44 million subscribers.

(Peacock)

The longtime cable chief pointed to the silver lining.

Preparing its bid for Warner Bros. “forced us on the journey to really take a good look at what we have and what we’re building,” Roberts said. “We have a wonderful studios business … 2026 should be a great year for the film business. … We have two studios in the television business, which is feeding Peacock.”

Advertisement

NBCUniversal is moving closer to its goal of becoming “an integrated media business that is profitable and [has] got a lot of sports,” a streaming service and Universal theme parks, Roberts said, adding the Warner auction has prompted other firms to discuss possible combinations.

NBC, which turns 100 this year, has long carried live sports.

But it has doubled down and February will be packed with the Winter Olympics in Italy, the Super Bowl near San Francisco and the NBA All-Star game in Inglewood.

In March, NBC and Peacock will begin broadcasting MLB games, including the Dodgers hosting the Arizona Diamondbacks on opening day.

The company’s Spanish-language network Telemundo will broadcast the World Cup this summer, including a stop in Los Angeles.

Advertisement

“We’re very confident and comfortable that we’re in the right part of the industry,” Roberts said. “We hope the Olympic Games can offer a moment of connection for our country and for people everywhere” during such divisive times, he said.

Comcast has been struggling in its core broadband business as cellphone carriers with 5G service have cut into its former dominance. Millions of customers have ditched their cable TV packages.

The company switched up management in Philadelphia in October, installing Steve Croney as chief executive of its connectivity and platforms business. And Comcast has trimmed some of its internet package prices to better compete.

In the fourth quarter, Comcast lost 181,000 domestic broadband customers — more than what analysts had forecast. The company said some of the losses were offset by gaining international customers.

Comcast generated quarterly revenue of $32.3 billion, a slight increase that was in-line with expectations. Adjusted earnings a share decreased 12% to 84 cents, higher than expected.

Advertisement

Net income attributed to Comcast came in at $2.2 billion, which was more than 50% lower than the year-earlier period. The decline reflected a tough comparison to the prior year period, which included a $1.9 billion income tax benefit attributed to an internal corporate reorganization.

NBCUniversal produced $12.7 billion in revenue, a 5.4% increase.

The media unit, which includes television and streaming, contributed $7.6 billion in revenue, a 5.5% gain. (The numbers included results from the profitable cable channels, which became a separate entity on Jan. 2.) Higher advertising sales and Peacock, which began carrying the NBA, helped deliver the gains. Peacock recently raised its monthly fee.

But media earnings before interest, taxes, depreciation and amortization tumbled 141% to a loss of $122 million to account for the NBA contract.

Theme parks, which now boast Universal’s Epic Universe near Orlando, produced $2.9 billion in revenue — a 22% increase. It generated $1 billion in profit.

Advertisement

NBCUniversal’s studio business generated $3 billion in revenue, a decline of 7.4%. It notched $351 million in earnings, a decline of 38%.

Although shut out of the Oscar nominations, Universal Pictures’ “Wicked: For Good” roared at the box office. The two-part “Wicked” franchise has fetched $1.3 billion in global ticket sales.

Comcast shares were up 2.9% to $29.24 on Thursday.

Advertisement
Continue Reading
Advertisement

Trending