Connect with us

News

China is turning Japanese

Published

on

China is turning Japanese

Stay informed with free updates

The “Japanification” of China continues to be a big theme, with a lot of eerie parallels right down to stimulus proving wanting. Here’s the latest symptom:

Yep, the 30-year government bond yields of China and Japan are on the cusp of crossing paths for the first time (ever, we think, but LSEG data for both 30-year benchmarks doesn’t go further back than 2009).

At pixel time there’s still a 10 basis point spread between the two long-term bond yields, with the Chinese 30-year yielding 2.245 and the Japanese 30s trading at 2.144 per cent. But it looks like that won’t last long. Shorting Chinese government bonds really has been the new widow-maker trade.

Advertisement

The fading yield curve differential is another stark manifestation of China’s growing economic and demographic malaise, and Japan’s (for now) success in finally winning a three-decade battle against deflation. The subject even got the full Martin Wolf treatment in the FT earlier this week:

Need China turn into Japan? No. Might it turn into Japan? Yes. Moreover, the longer it waits to tackle its ailments, the more likely it is to fall seriously ill, with slow growth and chronic deflationary pressure. Some outside analysts believe this is inevitable. But wanting to believe something does not make it true. China’s disease is not incurable. But it is serious.

The shift from the dominant narrative of the past 20-30 years — that China would inevitably catch up with and eventually eclipse the US as the world’s largest and most dynamic economy — couldn’t be starker.

The post-financial crisis era was particularly euphoric on China, as it kept proving the naysayers and short sellers wrong. In fact, it became by far the biggest contributor to global economic growth in the post-2008 era.

As we noted in a previous post, between the beginning of 2010 and the end of 2020, China’s gross domestic product grew by about $11.6tn in current-dollar terms. That’s roughly equivalent to adding almost four UKs or Indias, nearly three Germanys, more than two Japans, and an Indonesia every year for a decade.

Today, the narrative couldn’t be more different — it’s all about whether China can escape a Japanese-style multi-decade battle against deleveraging, deflation, adverse demographics and dismal growth rates.

Advertisement

Here’s what Barclays’ economists said in a big report on the topic last month:

China’s accelerated economic development was reminiscent of Japan’s postwar economic miracle. Moreover, China was in certain quarters once expected to overtake the US as the world’s largest economy by 2035.

However, after decades of rapidly narrowing the gap to the US, since 2022 China has started losing ground. Surpassing the US economy now appears a distant hope; its weakening labour market, declining firm profitability, slumping housing activity, and adverse debt-deflation dynamics have raised concerns about China’s longer-term growth outlook.

. . . We think China’s deleveraging journey has only just started, and it is unlikely to be completed before 2030, which implies the structural headwinds to consumption and investment will persist.

Indeed, as Goldman Sachs noted recently, China’s overall indebtedness is actually rising again, and will probably cross the 300 per cent of GDP mark this year (if it hasn’t already).

It should be noted that there’s still a decent-sized if narrowing gap between China and Japan on the 10-year part of the curve. But on the even longer end of the curve, yields have already crossed, with the Japanese government bond maturing in March 2064 currently yielding 2.472 per cent, and China’s November 2064 bond trading at 2.275 per cent.

Advertisement
Line chart of Government bond yields (%) showing Flipping hell

The parallels between Japan in the early 1990s and China today are myriad, Barclays noted in its report. And in some economic respects, China is now looking more Japanese than Japan. FT Alphaville’s emphasis below:

The economic circumstances facing China have parallels with Japan’s experience after its asset bubble burst in the early 1990s. This created the term ‘Japanification’, which is typically defined as a combination of slow growth, low inflation, and a low policy rate, accompanied by deteriorating demographic trends.

To measure this phenomena, a Japanese economist, Takatoshi Ito, introduced a Japanification Index, which measured the sum of the inflation rate, nominal policy rate, and GDP gap. To apply to China’s economy, we have adjusted this index, replacing the GDP gap with working-age population growth, as the estimation methods of GDP gaps differ across nations and working-age population is by far the most fundamental determinant for long-term growth. Our amended index shows that China’s economy has become more ‘Japanised’ than Japan’s recently, albeit marginally.

This not a surprise to us. A demographic drag, the emergence and collapse of asset bubbles, debt overhang, zombie companies, deflationary pressures from excess capacity/high debt, and high youth unemployment, to name a few, are some of the notable similarities between the economies of China and Japan post their bubbles.

And here’s that index.

Beijing is obviously not oblivious to the dangers, and is unveiling a series of measures designed to restore some economic vim. As Martin Wolf pointed out, China still has a lot of advantages over Japan in the 1990s, not least that it can learn from what its neighbour did wrong.

But so far it seems to be making some of the same mistakes. Third-quarter GDP data will be published tomorrow, and economists expect it to have slowed to 4.5 per cent. The IMF’s own forecasts will come out next week. 🍿

Advertisement

News

‘Horrifying’ mistake to harvest organs from a living person averted, witnesses say

Published

on

‘Horrifying’ mistake to harvest organs from a living person averted, witnesses say

TJ Hoover, left, and his sister, Donna Rhorer. In October 2021, Hoover was declared dead and on the brink of having his organs removed to be transplanted into other people. The surgery was halted in the operating room.

Hoover Rhorer Family


hide caption

toggle caption

Advertisement

Hoover Rhorer Family

Natasha Miller says she was getting ready to do her job preserving donated organs for transplantation when the nurses wheeled the donor into the operating room.

She quickly realized something wasn’t right. Though the donor had been declared dead, he seemed to her very much alive.

“He was moving around — kind of thrashing. Like, moving, thrashing around on the bed,” Miller told NPR in an interview. “And then when we went over there, you could see he had tears coming down. He was crying visibly.”

Advertisement

The donor’s condition alarmed everyone in the operating room at Baptist Health hospital in Richmond, Ky., including the two doctors, who refused to participate in the organ retrieval, she says.

“The procuring surgeon, he was like, ‘I’m out of it. I don’t want to have anything to do with it,’ ” Miller says. “It was very chaotic. Everyone was just very upset.”

Miller says she overheard the case coordinator at the hospital for her employer, Kentucky Organ Donor Affiliates (KODA), call her supervisor for advice.

“So the coordinator calls the supervisor at the time. And she was saying that he was telling her that she needed to ‘find another doctor to do it’ – that, ‘We were going to do this case. She needs to find someone else,’ ” Miller says. “And she’s like, ‘There is no one else.’ She’s crying — the coordinator — because she’s getting yelled at.”

“Everybody’s worst nightmare”

The organ retrieval was canceled. But some KODA workers say they later quit over the October 2021 incident, including another organ preservationist, Nyckoletta Martin.

Advertisement

“I’ve dedicated my entire life to organ donation and transplant. It’s very scary to me now that these things are allowed to happen and there’s not more in place to protect donors,” says Martin.

Martin was not assigned to the operating room that day, but she says she thought she might get drafted. So she started to review case notes from earlier in the day. She became alarmed when she read that the donor showed signs of life when doctors tried to examine his heart, she says.

“The donor had woken up during his procedure that morning for a cardiac catheterization. And he was thrashing around on the table,” Martin says.

Cardiac catheterization is performed on potential organ donors to evaluate whether the heart is healthy enough to go to a person in need of a new heart.

Martin says doctors sedated the patient when he woke up and plans to recover his organs proceeded.

Advertisement

KODA officials downplayed the incident afterwards, according to Martin. She was dismayed at that, she says.

“That’s everybody’s worst nightmare, right? Being alive during surgery and knowing that someone is going to cut you open and take your body parts out?” Martin says. “That’s horrifying.”

The patient

Donna Rhorer of Richmond, Kentucky, told NPR that her 36-year-old brother, Anthony Thomas “TJ” Hoover II, was the patient involved in the case. He was rushed to the hospital because of a drug overdose, she says.

Rhorer was at the hospital that day. She says she became concerned something wasn’t right when TJ appeared to open his eyes and look around as he was being wheeled from intensive care to the operating room.

“It was like it was his way of letting us know, you know, ‘Hey, I’m still here,’ ” Rhorer told NPR in an interview.

Advertisement

But Rhorer says she and other family members were told what they saw was just a common reflex. TJ Hoover now lives with Rhorer, and she serves as his legal guardian.

TJ Hoover danced with his sister, Donna, on her wedding day in May 2023. Donna has long blond hair and is wearing a white wedding dress. TJ is wearing a pink dress shirt and black pants. She has a bouquet in her hands. They are outside, dancing on green grass near trees.

TJ Hoover danced with his sister, Donna, on her wedding day in May 2023 — more than a year after he was mistakenly declared dead.

Hoover Rhorer family


hide caption

toggle caption

Advertisement

Hoover Rhorer family

The general outline of the incident was disclosed in September by a letter Nyckoletta Martin wrote to the House Energy and Commerce Committee, which held a hearing investigating organ procurement organizations. She later provided additional details about the case to NPR.

“Several of us that were employees needed to go to therapy. It took its toll on a lot of people, especially me,” Martin told NPR.

Investigations underway

The Kentucky state attorney general’s office wrote in a statement to NPR that investigators are “reviewing” the allegations.

Advertisement

The federal Health Services and Resources Administration (HRSA), which helps oversee organ procurement, said in a statement to NPR that the agency is “investigating these allegations.” And some people involved in the case told NPR they have answered questions from the Office of the Inspector General of the federal Department of Health and Human Services, though no federal official from that office has commented on the case.

Baptist Health Richmond, the Kentucky hospital where that incident allegedly occurred, told NPR in a statement:

“The safety of our patients is always our highest priority. We work closely with our patients and their families to ensure our patients’ wishes for organ donation are followed.”

“Not been accurately represented”

KODA, the organ procurement organization, confirmed that Miller was assigned to the operating room for the case. But the organization told NPR in a statement that “this case has not been accurately represented.

“No one at KODA has ever been pressured to collect organs from any living patient,” according to the statement from Julie Bergin, president and chief operating officer for Network for Hope, which was formed when KODA merged with the LifeCenter Organ Donor Network. “KODA does not recover organs from living patients. KODA has never pressured its team members to do so.”

Advertisement

Organ procurement system officials, transplant surgeons and others said that there are strict protocols in place to prevent unsafe organ retrieval from happening.

“Incidents like this are alarming. And we would want them to be properly reported and evaluated,” Dorrie Dils, president of the Association of Organ Procurement Organizations, told NPR in an interview. “And obviously we want to ensure that individuals are, in fact, dead when organ donation is proceeding. And we want the public to trust that that is indeed happening. The process is sacred.”

The accusations that emerged at the congressional hearing in September undermine trust in the organ donation system and have led to a drop in people signing up to be donors, according to an open letter released Oct. 3 by the organization.

“For over five years, our nation’s organ procurement organizations (OPOs) – the non-profit, community-based organizations that work with grieving families every day to save lives through transplantation – have been subject to malicious misinformation and defamatory attacks based on hearsay, creating a false narrative that donation and transplant in the U.S. is untrustworthy and broken,” the letter reads.

Others also fear such unnerving reports could undermine the organ transplant system.

Advertisement

“These are horrifying stories. I think they need to be followed up carefully,” says Dr. Robert Truog, a professor of medical ethics, anesthesia and pediatrics at Harvard Medical School who works as a critical care physician at Boston Children’s Hospital.

“But I really would not want the public to believe that this is a serious problem. I believe that these are really one-offs that hopefully we’ll be able to get to the bottom of and prevent from ever happening again,” Truog says.

103,000 people waiting for transplants

Some critics of the organ procurement system say they weren’t entirely surprised by the allegations. With more than 103,000 people on the waiting list for a transplant, organ procurement organizations are under enormous pressure to increase the number of organs obtained to save more lives. In addition, there is an ongoing debate about how patients are declared dead.

“I hope that a case like this really is extreme, but it does reveal some of those underlying issues that can arise when there are disagreements about the determination of death,” says Dr. Matthew DeCamp, an associate professor of Medicine and bioethicist at the University of Colorado.

But some wonder how rarely this happens.

Advertisement

“This doesn’t seem to be a one-off, a bad apple,” says Greg Segal, who runs Organize, an organ transplant system watchdog group. “I receive allegations like that with alarming regularity.”

Likewise, Thaddeus Pope, a bioethicist and lawyer at the Mitchell Hamline School of Law in Saint Paul who studies organ donation, cites similar accusations reported elsewhere.

“This is not a one-off,” Pope says. “It has been alleged to happen before.”

Another near miss described

Dr. Robert Cannon, a transplant surgeon at the University of Alabama at Birmingham, described a similar incident during the congressional hearing where Martin’s letter was disclosed.

“We actually were in the operating room. We had actually opened the patient and were in the process of sort of preparing their organs, at which point the ventilator triggered and so the anesthesiologist at the head of the table spoke up and said, ‘Hey, I think this patient might have just breathed,’” Cannon later told NPR in an interview. “If the patient breathes, that means they’re not brain dead.”

Advertisement

Nevertheless, a representative from the OPO wanted to proceed anyway, Cannon says. He refused.

“We were kind of shocked that an OPO person would have so little knowledge about what brain death means that they would say, ‘Oh, you should just go ahead.’ And we thought, ‘No. We’re not going to take any risk that we murder a patient.’ Because that’s what it would be if that patient was alive.”

“Why me?”

Since TJ’s release from the hospital, his sister, Donna Rhorer, says her brother has problems remembering, walking and talking.

When she asks TJ about what happened, she says he says: “Why me?”

“I do feel angry,” says Rhorer.

Advertisement

“I feel betrayed by the fact that the people that were telling us he was brain dead and then he wakes up,” Rhorer says. “They are trying to play God. They’re almost, you know, picking and choosing — they’re going to take this person to save these people. And you kind of lose your faith in humanity a little bit.”

Continue Reading

News

Can Harris Really Build 3 Million New Housing Units?

Published

on

Can Harris Really Build 3 Million New Housing Units?

Luke Muir and his wife moved to Phoenix from Louisiana two years ago for a better-paying job. They prepared for higher temperatures and low housing costs. The weather has lived up to their expectations; housing prices have not.

Pretty much since they arrived, Mr. Muir and his family have been trying and failing to find a single-family house for no more than $500,000. The options have been too small, too remote or too much of a fixer-upper.

“I’m like, ‘Wow, I thought this would be a more affordable place to live,’” said Mr. Muir, who is 44 and works in financial services. “It’s not like it’s San Diego or L.A. or some other place that is just known for astronomical prices.”

Across the country, rising prices and rents have become a crisis — eroding family budgets and leading to doubled-up households and multiplying homeless camps. The root of this pain is a decades-old housing shortage.

The remedy proposed by Vice President Kamala Harris is contained in a housing plan that, among other things, calls for the construction of three million new housing units over the next four years — a 50 percent increase over the current pace of building.

Advertisement

Vastly expanding the supply of housing is the only thing economists believe will make a meaningful difference in an affordability crunch. They disagree, however, about whether Ms. Harris’s plan would actually do that. (Economists also agree that former President Donald J. Trump’s housing plan, which aims to free up housing by deporting immigrants, would probably make the housing crisis worse by devastating the construction work force).

Reduced to its essence, Ms. Harris’s plan aims to flood the system with money for builders and buyers in the hope that it will jolt the construction market. It calls on Congress to expand a federal tax credit for subsidized rental housing while creating a new tax credit for developers to build starter homes, and another credit for families looking to rehabilitate their own worn-down housing stock. It also creates a $25,000 credit for first-time home buyers.

Mark Zandi, the chief economist of Moody’s Analytics, who has advised the Harris campaign, called it the most aggressive plan to increase the nation’s housing supply since modern suburbs were built after World War II. And if the numbers were to pencil out as neatly as they do in Ms. Harris’s 82-page economic plan, Mr. Zandi’s superlative would be accurate.

But that “if” creates pause.

Developers in Phoenix and elsewhere are naturally amenable to a federal plan that would reduce their taxes. Many developers said the idea of giving first-time home buyers money, which buyers would then give to them, sounded nice, too.

Advertisement

The question, as ever, is where and how they will build. This is why other economists, such as Ed Pinto at the market-oriented American Enterprise Institute, have said Ms. Harris’s plan would make shortages worse by inflating housing demand (because the home buyer credit would give families more to spend) without doing enough to increase supply.

Over the past half-century, Phoenix grew into one of America’s largest cities by building low-slung neighborhoods further and further outward. That playbook kept housing affordable for a long time, but no longer.

The average price of a home in Maricopa County, which surrounds Phoenix, is now $470,000, up about 50 percent since the pandemic. And that pattern of expansion is resulting in the same problems — congestion, smog, water shortages, sprawl — that many residents moved there from California to escape.

The Arizona Legislature recently passed several laws designed to speed construction and make neighborhoods denser — to build more housing per lot — but it will take more than a few years for that to translate into ramped-up building.

“We can turn 40 acres of cotton field into a subdivision in the blink of an eye,” said Jason Morris, a land use attorney at Withey Morris Baugh in Phoenix. “But that is much easier than trying to do 75 apartments in the middle of a neighborhood.”

Advertisement

Ms. Harris’s plan includes a $40 billion “Local Innovation Fund” that would, among other things, encourage cities to make building faster and easier by cutting the regulations that consume local zoning meetings. But for that to work, cities in Arizona and elsewhere have to want to change how they grow, which so far many are reluctant to do.

Even Mr. Muir, the frustrated home buyer, is leery of neighborhoods becoming too compact. Many of the new developments he sees when he is house-hunting are town-home projects or ones built so closely together that they might as well be apartments, he said.

“It’s baffling that people can reach out their window and touch the neighbor’s wall,” Mr. Muir said.

Would this housing, smaller and tighter, fulfill the American dream of people like Mr. Muir?

The solution to the country’s housing shortage will almost certainly require some sort of federal program — one that may be tough to get through Congress. But for a rush of money to work, cities and states also have to want it.

Advertisement

Ms. Harris’s main challenge will be convincing them to build. And then persuading Americans to be happy with it.

Continue Reading

News

Meta fires staff for abusing $25 meal credits

Published

on

Meta fires staff for abusing  meal credits

Unlock the Editor’s Digest for free

Meta has fired about two dozen staff in Los Angeles for using their $25 meal credits to buy household items including acne pads, wine glasses and laundry detergent.

The terminations took place last week, just days before the $1.5tn social media company separately began restructuring certain teams across WhatsApp, Instagram and Reality Labs, its augmented and virtual reality arm, on Tuesday.

The revamp has included cutting some staff and relocating others, several people familiar with the decisions said, in a sign that chief executive Mark Zuckerberg’s recent efficiency drive is still under way.

Advertisement

Like most Big Tech companies, Meta offers free food to employees based out of its sprawling Silicon Valley headquarters as a perk. Staff based in smaller offices without a cafeteria are offered Uber Eats or Grubhub credits, for example, for food to be delivered to the office.

Staff are given daily allowances of $20 for breakfast, $25 for lunch and $25 for dinner, with meal credits issued in $25 increments.

Those who were fired were deemed to have abused the food credit system over a long period of time, said one person familiar with the matter. Some had been pooling their money together, they said, while others were getting meals sent home even though the credits are intended for the office.

Those who only violated the company rules on occasion were reprimanded but not terminated, the person added.

In one post on anonymous messaging platform Blind, seen by the Financial Times, one former Meta staffer wrote they had used $25 credits on items such as toothpaste and tea from the pharmacy Rite Aid, adding: “On days where I would not be eating at the office, like if my husband was cooking or if I was grabbing dinner with friends, I figured I ought not to waste the dinner credit.”

Advertisement

The person, who indicated they had a salary of about $400,000 at Meta and worked “nights [and] weekends”, wrote they had admitted to the oversight when human resources investigated the practice, before later being unexpectedly fired. “It was almost surreal that this was happening,” the person wrote.

Meta declined to comment on the firings.

However, the company said of the wider lay-offs: “Today, a few teams at Meta are making changes to ensure resources are aligned with their long-term strategic goals and location strategy.”

It added: “This includes moving some teams to different locations, and moving some employees to different roles. In situations like this when a role is eliminated, we work hard to find other opportunities for impacted employees.”

Zuckerberg announced about 21,000 job cuts in two rounds of lay-offs in 2022 and 2023, dubbing the latter a “year of efficiency”.

Advertisement

He also cancelled low-priority projects in an attempt to boost sluggish growth and alleviate investor concern over his costly bet on the metaverse.

Wall Street has welcomed the cuts together with a renewed focus on artificial intelligence. The company’s shares are now trading around all-time highs of $577 each.

Continue Reading
Advertisement

Trending