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China plays down hopes for ‘strong medicine’ at top economic policy meeting

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China plays down hopes for ‘strong medicine’ at top economic policy meeting

Peng, an employee at a Chinese state-owned media outlet in Beijing, is reeling after being forced to take her second pay cut in less than a year, as the country’s economic weakness hits even its government enterprises.

“I can barely live on this,” she complained. “The work keeps increasing, but the money keeps decreasing.”

Peng’s situation, which is mirrored across China as the economy struggles to recover from a property crisis and the pandemic, illustrates the challenges facing President Xi Jinping’s government as it prepares to hold one of the Communist party’s most important quinquennial meetings this month.

In the past, the Chinese Communist party has used the third plenary session of its central committee, its elite leadership body, to address the most important economic issues of the day. In 1978, Deng Xiaoping used the meeting to launch China’s post-Mao Zedong-era “reform and opening up” drive.

Some experts argue similarly bold action is needed now to kick-start domestic demand and prevent the world’s second-biggest economy from falling into a deflationary spiral. But at a recent World Economic Forum event known as the “summer Davos” in the north-eastern seaside city of Dalian, Premier Li Qiang signalled that no shock therapy would be forthcoming.

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In the wake of the pandemic, China’s economy was like a patient recovering from a serious illness, Li said. “According to Chinese medical theory, at this time, we cannot use strong medicine. We should precisely adjust and slowly nurture [the economy], allowing the body to gradually recover”.

China’s economy has been hit by weak consumer and investor confidence, hampering its return to stronger growth © Vincent Thian/AP

China’s headline growth was solid in the first quarter, expanding 5.3 per cent on the year before, driven by manufacturing and industrial output, although consumer spending remained patchy.

Analysts have been scrutinising recent speeches by Xi and other leaders for signals of Beijing’s policy direction over the next five or more years that could be unveiled at the conclave, which will be held from July 15 to 18.

Possible areas of focus include Xi’s “new quality productive forces”, party jargon that analysts believe refers to advanced technology, green energy industries and upgraded manufacturing, as well as fiscal and social welfare reforms, changes to China’s hukou household registration system and efforts to reinvigorate private sector confidence.

The central committee — which currently consists of 205 full members and 171 alternates appointed at the party’s 20th congress in October 2022 — generally convenes seven plenums over its five-year term. The third meeting attracts particular international attention because of past pronouncements on economic policy.

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“The base case is that this third plenum will not mark a fundamental departure from the course Xi has already laid out,” said Gavekal analysts Andrew Batson and Wei He in a research note.

“Its official agenda is to study ‘advancing Chinese-style modernisation’, Xi’s term for pursuing his vision of national greatness, in which technological self-sufficiency and national security outweigh economic growth.”

A factory worker is seen in a reflection at a lithium-ion battery production facility in China’s eastern Zhejiang province
Xi has prioritised industrial output in cutting-edge sectors such as electric vehicles, batteries and semiconductors to revive China’s economy © Stringer/Reuters

New productive forces is one such example. Xi this year linked his industrial production strategy, which has prioritised investment in sectors such as electric vehicles, batteries, semiconductors and biotech, to the concept of total factor productivity, a measure of economic output not driven by increases in inputs such as capital and labour.

This has raised hopes among economists of a more market-driven approach to growth. But Gavekal argued there was no indication the state would reduce its role in the economy. Beijing still wants to “direct the allocation of resources to achieve the policy goals of industrial upgrading and technological innovation”, Batson and Wei said.

Fiscal reform, however, is one area where there could be change, analysts in Beijing said.

China’s central government only accounts for about 10 per cent of total government spending, compared with a global average of about 20 per cent. Yet Beijing controls a disproportionate amount of revenue compared with local governments. This has contributed to a debt crisis in many local governments, which have struggled to raise revenue amid the property crisis.

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“The main direction of the reform to take place is how to increase the percentage of central government spending in the whole country’s expenditure,” economists at one government-linked think-tank said.

Line chart of Share of government revenue and expenditure, by level (%) showing China’s government spending burden mostly falls on local governments

On pension reform, businesses will be closely watching for any hint of delays to the retirement age, which is among the lowest in the world, at 60 for men, 55 for women in white-collar work and 50 for women in manual work.

As demographic decline sets in — China’s population shrank for the second year in a row last year — policymakers need to find ways to mitigate the growing fiscal burden of pension payments, experts have warned.

Further relaxation of the hukou household registration regime — which restricts people from fully accessing public services outside their home cities — could fuel more urbanisation and aid the struggling property market.

But some observers argued that Xi was unlikely to fully dismantle hukou, which prevents the overcrowding of “first-tier” cities, especially Beijing and Shanghai, and provides the party with control over population flows.

Column chart of Central government revenue and expenditure (Rmb100mn) showing China’s central government spending has not kept up with rising revenue

Some businessespeople hope for sweeteners for the private sector, such as lifting limits on foreign shareholding in some industries, to revive spirits damped by crackdowns on the property and ecommerce sectors.

Others are also still seeking a decisive response to the property crisis. The government has launched schemes to directly intervene in the market by buying unsold inventory, but its measures have failed to lift confidence. The third plenum could be a good forum for a ‘big bang’ announcement on real estate, some analysts suggested.

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“In an upside scenario . . . forceful policies could be hinted at or even introduced in the third plenum,” said Yifan Hu, chief investment officer at UBS Global Wealth Management.

But most observers admit this is unlikely, cautioning that the main focus will be continuity as Beijing tries to transition from a debt-fuelled, high-growth economic model driven by real estate and infrastructure to one marked by investment in high-tech industries and the green transition.

“We should not expect too much around the third plenum,” said one prominent economist with a government think-tank.

The economist added that markets were already anticipating a muted meeting. The Shenzhen and Shanghai stock indices have slumped 1.6 per cent since Li Qiang’s remarks in Dalian.

For Chinese citizens seeking relief from salary cuts and job losses, that is not good news. State media worker Peng said austerity was evident in all levels in her organisation.

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One of her bosses recently had his salary slashed by 35 per cent, which “left him unable to keep up with his monthly mortgage payments”, she said.

Landmark events at China’s third plenum

1978

Regarded as a turning point in the Chinese Communist party’s history, the 11th third plenum in 1978 established Deng Xiaoping as China’s top leader and initiated the “reform and opening up” era that ended Mao Zedong’s planned economy and led to rapid economic growth

1993

Jiang Zemin, the late CCP general-secretary, called for the establishment of a “socialist market economy” by the end of the 20th century, and instituted reforms to encourage private enterprise and amend the operations of state-owned companies’ operations

2013

The first third plenum under President Xi Jinping affirmed the market’s “decisive role” in resource allocation, and included steps to liberalise the banking system, encourage private investment in state-owned enterprises, abolish re-education through labour and ease the one-child policy

2018

The most recent third plenum, held unusually early in the term, approved reforms to party and state institutions and consolidated Xi’s status after the party announced a constitutional amendment to abolish presidential term limits, paving the way for Xi to rule for life

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Why the next president's judicial appointments will impact climate action

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Why the next president's judicial appointments will impact climate action

Environmental activists rally in front of the U.S. Supreme Court in 2022 after it ruled against the Obama administration’s plan to cut climate-warming emissions at the nation’s power plants. The Supreme Court has since further limited the power of federal agencies like the Environmental Protection Agency.

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Nerdy question for all of you policy wonks out there: What did the Obama administration’s landmark climate regulation on the nation’s power plants — the Clean Power Plan — and the Trump administration’s more lenient replacement of it — the Affordable Clean Energy Rule — have in common?

Both were seen as major industry-changing regulations. Both were lauded by some and reviled by others.

And neither went into effect.

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“Basically any environmental rule of any magnitude is challenged in the courts,” said Lisa Heinzerling, a law professor at Georgetown University and a senior adviser to former President Barack Obama’s Environmental Protection Agency (EPA). “The courts have the final word.”

As President Biden and former President Donald Trump vie for a second term amid what’s sure to be one of the hottest years in recorded history, NPR’s Climate Desk has looked at both candidates’ records on climate change and what to expect if either is elected. Trump is promising to “drill, baby, drill,” and weaken regulations on oil and gas development. Biden is promising to create more jobs with an energy transition away from climate-warming fossil fuels.

But given the litigious nature of environmental law and the U.S. Supreme Court’s recent decisions, particularly one limiting the power of federal agencies, legal experts say one of the election’s most consequential aspects for the climate would be the judicial appointments either candidate makes.

The president has the power to nominate federal judges for lifelong terms. Not only to the Supreme Court, but also to federal appellate and district courts, which see tens of thousands of cases each year. Pending Senate approval, those appointments shape the country’s judiciary and the government’s ability to implement laws for decades.

People cool off in misters along the Las Vegas Strip, Sunday, July 7, 2024, in Las Vegas. Used to shrugging off the heat, Las Vegas residents are now eyeing the thermometer as the desert city is on track Wednesday to set a record for the most consecutive days over 115 degrees (46.1 C) amid a lingering hot spell that's expected to continue scorching much of the U.S. into the weekend.

People cool off in misters along the Las Vegas Strip during a deadly, record-breaking heatwave. Heatwaves are growing in intensity, frequency and duration as climate change intensifies.

John Locher/AP

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“Almost all cases involving some type of environmental action ultimately go to a court of appeals,” said Jeff Holmstead, an attorney with the law firm Bracewell LLC, who worked on air issues at the EPA under former President George W. Bush.

Biden has appointed 201 judges, including one justice to the Supreme Court. Trump appointed 234, including three Supreme Court justices, giving conservatives a 6-3 majority on the nation’s highest court.

Since then, the Supreme Court has ruled against agencies’ ability to cut climate-warming emissions, to protect the nation’s wetlands and ephemeral streams and to limit air pollution for states downwind of power plants and factories.

“I think it is clearer than ever that folks who believe fervently that we should protect public health from environmental harms really can’t make progress if they have a hostile judiciary waiting,” said Cara Horowitz, executive director of the Emmett Institute on Climate Change and the Environment at the UCLA School of Law. “The work becomes a lot harder when you have a Supreme Court sitting at the end of every litigation road that’s hostile to the administrative state and environmental regulations.”

Recent SCOTUS decision could greatly affect climate regulation

For the last 40 years, the American judicial system has operated with the understanding that if a law is ambiguous, the courts should defer to the expertise of the federal agency implementing it, as long as that implementation is reasonable.

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In other words, if a law like the Clean Air Act isn’t crystal clear, the courts would defer to experts and scientists at federal agencies, like the EPA, to fill in the gaps when writing regulation and implementing laws.

In its recent term, the Supreme Court’s conservative majority threw out what’s known as the Chevron deference in a ruling on two related cases. Writing for the majority, Chief Justice John Roberts argued that “courts must exercise their independent judgment in deciding whether an agency has acted within its statutory authority.”

Legal experts say the decision could affect the government’s ability to regulate food, medicine, telecommunication and worker safety, among others. But the implications for environmental regulations are particularly stark. That’s because the Clean Air Act, the Clean Water Act and the Endangered Species Act were purposely written vaguely to accommodate for future problems.

“Many of these laws were passed in the 1970s when we were gaining an understanding of various environmental issues, and when Congress wrote these laws, they imparted on agencies a very capacious authority to account for the best available science,” said Erik Schlenker-Goodrich, executive director of the Western Environmental Law Center. “And the best available science emerges over time.”

The Endangered Species Act, which protects imperiled plants and animals like the Key Deer, is more than 50 years old. Federal agencies are tasked with using old environmental statutes to deal with modern problems, fueling much of the environmental litigation seen in federal courts.

The Endangered Species Act, which protects imperiled plants and animals like the Key Deer, is more than 50 years old. Federal agencies are tasked with using old environmental statutes to deal with modern problems, fueling much of the environmental litigation seen in federal courts.

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Scientists’ understanding of emerging environmental problems like climate change, PFAS and plastic pollution is constantly evolving. Government agencies are tasked with protecting people from those problems using existing laws.

“So when Supreme Court justices are saying we’re going to freeze things as we knew them back in the 1970s, what they’re essentially saying is agencies can’t account for the science, agencies can’t adapt to the science and agencies cannot protect the public’s interest,” Schlenker-Goodrich said.

Proponents of the Supreme Court’s decision argue the Chevron deference gave federal agencies too much power.

“The fact that a statute was silent on an issue doesn’t mean that Congress intended to let the agency sort of read it however it wants,” Holmstead said.

Agency attorneys “are acting like anybody else’s attorneys,” said Damien Schiff, a senior attorney focused on environmental law at the Pacific Legal Foundation, a conservative public interest law group. “They’re just simply advocates articulating a view, but it’s not necessarily privileged in terms of its accuracy or propriety just because it’s being articulated by a government agency.”

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Schiff, whose law firm filed an amicus brief calling for the end of Chevron, said the change is part of a broader shift in the court’s approach to law that could help groups on the left and those on the right, making it easier “for private parties to try to vindicate their rights against government entities.”

JJ Apodaca, executive director of the Amphibian and Reptile Conservancy, said the shift means instead of relying on federal scientists, “with Ph.D.s and master degrees,” decisions will now be made by judges who, “have political affiliations and in many cases, haven’t taken a science or biology class since high school.”

A coal-fired power plant is silhouetted against the morning sun.

The Obama and Biden administration’s have tried using the Clean Air Act to limit climate-warming emissions from the nation’s power plants, but their efforts have been held up or blocked in courts.

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The politics of the judiciary

An impartial judiciary has been a cornerstone of American democracy since its inception.

Trump’s term led to the most conservative Supreme Court in more than 90 years, but it also allowed Republican leadership to place more than 230 other judges in federal district and appellate courts — which issue “the bulk of the federal legal decisions in this country,” Heinzerling said.

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Earlier this year, a federal appeals court ended a long-running lawsuit by young plaintiffs in Oregon who argued the U.S. government’s contribution to climate change violated their constitutional rights. In 2022, a U.S. district court restored endangered species protections to gray wolves in 44 states.

Those lower courts often get the benefit of the doubt, Heinzerling said. “Which means they can have a huge influence on what the regulatory landscape looks like.”

In his first campaign, Trump vowed to appoint judges in the mold of the late conservative Justice Antonin Scalia. Three-quarters of his appointees were men and roughly 84% were white, according to the Pew Research Center. An analysis by The Washington Post in May found that Biden has placed more non-white federal judges than any president in history. Nearly two-thirds are women.

“When he talks about rights and liberties, [Biden] knows that in the end those rights and liberties are decided by federal judges, so the makeup of the federal judiciary is connected to everything else we do,” former White House chief of staff Ron Klain told NPR last year.

Biden has had less say on the makeup of the Supreme Court, filling only one opening during his first term — Justice Ketanji Brown Jackson — and legal experts say it’s unlikely he’d be able to shift it in a second term. The court’s two oldest justices, Clarence Thomas and Samuel Alito, are both conservative and unlikely to retire if Biden is reelected. If Trump wins in November, critics fear he could replace both with younger justices, locking in the court’s conservative majority for decades to come.

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Regardless of who wins, legal experts say, the Supreme Court’s recent decisions will make it harder for the federal government to tackle environmental problems like climate change, barring new legislation from Congress.

“[Chevron] makes it harder for agencies to use old laws to address new problems,” said Sam Sankar, senior vice president for programs at the environmental firm Earthjustice. “But that doesn’t mean that we can’t address the threats of climate, and we will. Problems are getting bad enough that Congress, even the right wing, is going to start needing to react to these things in federal lawmaking.”

“The question is,” he added, “how much do we lose and how much does it cost us to try to address the problems we’ve got?”

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Pakistan reaches $7bn loan deal with IMF

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Pakistan reaches $7bn loan deal with IMF

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Pakistan has reached a deal for $7bn in medium-term financing from the IMF, offering the government a reprieve as it seeks to navigate the crisis-hit country out of soaring public debts and weak economic growth.

The IMF announced on Friday that it had reached a staff-level, or preliminary, agreement with Prime Minister Shehbaz Sharif’s government for a 37-month financing programme under a so-called extended fund facility.

The deal, which is Pakistan’s 24th bailout with the multilateral lender, will now go to the IMF’s executive board, which is expected to approve the loan, though it did not specify a date that it would do so.

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“The programme aims to capitalise on the hard-won macroeconomic stability achieved over the past year by furthering efforts to strengthen public finances, reduce inflation, rebuild external buffers and remove economic distortions to spur private sector led growth,” the lender said in a statement.

As part of the deal, Pakistan agreed to phase out incentives for its special economic zones, which were launched in 2012 to attract international investment, and expand the tax net to include more of the country’s agricultural sector, a politically sensitive issue.

Pakistan has suffered one of Asia’s worst recent economic crises, with the country of 240mn teetering on the brink of default last year before the IMF granted a short-term $3bn rescue package. Inflation surged as high as 38 per cent as Islamabad struggled to bring down a ruinous debt burden, which swallowed 57 per cent of government revenue in interest payments.

China, Saudi Arabi and the UAE, to whom Pakistan owes about half of its debt repayments for this year, are expected to roll over the terms of their loans for another year, said Muhammad Aurangzeb, the finance minister.

Inflation has fallen to 12.6 per cent in June and central bank reserves — which dipped in February 2023 below $3bn, less than three weeks’ worth of imports — are now above $9bn. The economy contracted last year, but has returned to growth. 

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To meet the IMF’s conditions, Sharif’s government has announced a rash of politically unpopular reforms, including tax rises that primarily fell on salaried workers and increases to household energy tariffs. Aurangzeb previously told the Financial Times that the loan would not be Pakistan’s last programme with the IMF if the government failed to significantly boost tax revenues.

The fund praised Pakistan’s plans in its latest budget approved last month to increase government revenue by 1.5 per cent of GDP in this fiscal year and by 3 per cent by the end of the programme.

But measures have generated a backlash, including from the government’s coalition partners, on which it depends to remain in power after a disputed election in February.

Khurram Husain, a business and economics commentator in Karachi, said that the deal would help put to rest concerns about a default and “anchor expectations for continued stability”. But its success depend on the government maintaining the political will to stick with its reforms, he added.

“The possibility that the government will develop cold feet and start backpedalling on some of the measures that they have announced is very real and it should not be underestimated.”

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“The conditionality is now tougher and the authorities will have to sustain the policy effort for longer,” said Krisjanis Krustins, a director in Fitch. “As economic and financing conditions improve, the temptation to loosen policies will increase, as in the past.”

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Homeless person allegedly abducts 4-year-old at California restaurant amid uptick of crime

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Homeless person allegedly abducts 4-year-old at California restaurant amid uptick of crime

A 4-year-old girl was allegedly kidnapped from a California restaurant by a suspected homeless woman, police said.

The Santa Monica Police Department said a “frantic” grandmother called police at 12:11 p.m. local time when she and her 4-year-old granddaughter were having lunch at a Panda Express restaurant.

Police were on the scene “within minutes” desperately searching for the disappeared child, authorities said.

ILLEGAL DEPORTED 3 TIMES RETURNS TO CALIFORNIA AND LIGHTS DEADLY HOUSE FIRE WITH MOM, CHILDREN INSIDE: SOURCE

A woman said that her 4-year-old granddaughter was abducted while they were eating at Panda Express. (Universal Images Group/Getty)

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Authorities quickly gathered video images of potential suspects and began sending additional units to the general area of the restaurant.

Police said there were more than 30 law enforcement officers searching for the suspect.

Video footage revealed that the suspect was a heavyset white female in her 30s.

Santa Monica police car

People walking, shopping. Santa Monica Downtown, pedestrian street. (iStock)

At 12:37 p.m., officers located the suspect and child in a room at the Holiday Motel.

“Thankfully, the child was unharmed, and the suspect was taken into custody,” police said.

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OAKLAND POLICE REFUTE CLAIMS IT IS DISTORTING MASSIVE CRIME FIGURE DROP

Police said “no stone was left unturned” in their investigation.

“Our heartfelt best wishes go out to the child and her family as they deal with the shock of this ordeal,” police said. “We will do everything we can to make sure they are helped through this time and also to make sure no stone is left unturned in the investigation.”

Authorities, who did not immediately release the name of the suspect, said she was booked on suspicion of kidnapping.

Santa Monica Promenade

A 73-year-old woman was assaulted in May by a homeless person. (Morgan Lieberman/Getty Images)

The alleged abduction comes after a 73-year-old woman was assaulted by a homeless man in May.

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The woman said she was on her daily morning walk and tried to get out of his way so he could pass, but “he intentionally pushed her to the ground,” resulting in a back injury and cuts on her hands, police said. 

About a week beforehand, a homeless man was arrested for the attempted rape of a female jogger.

Santa Cruz County Sheriff vehicle

Santa Monica residents said that the town is “not what it was.” (Santa Cruz County Sheriff’s Office/Facebook)

One Santa Monica resident said that the once-idyllic coastal town is “not what it was.”

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“Everybody knows that Santa Monica is not what it was three or four years ago,” one resident told FOX 11. “Every day is something new.”

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