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China’s growth enigma

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China’s growth enigma

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The Chinese economy grew by 5.2 per cent last year, according to official statistics. But for many in business, it probably did not feel like that from the evidence on the streets of Beijing and other large cities.

Restaurants were not busy, shops were vacant and there were widespread reports of property prices falling more than the official numbers. Rhodium Group, a research company, argued in December that most economic indicators in 2023 suggested actual growth was more like 1.5 per cent. There were bright spots, it said, such as electric vehicle production, but these could not offset the “general malaise”.

For business, the divide between such estimates and official data on how fast the world’s second-largest economy can grow this year and beyond has become an important issue for their global expansion plans. An annual survey by the American Chamber of Commerce in China of its members found just over half were planning to increase their investments in the country this year, a little up from last year. For slightly more than a quarter of this group, expectations of faster economic growth in 2024 were an important factor.

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The question of measuring that growth though is becoming increasingly politicised as Beijing seeks to steer the narrative away from criticisms that its growth model is overly dependent on state-driven investment rather than consumption.

In its annual report on China released on Friday, the IMF said that the country’s post-pandemic recovery last year was “subdued” as property and weak exports and investment weighed on growth. It also forecast slower growth in 2024.

This provoked an indignant response from Chinese officials. IMF staff should provide a “more appropriate forecast” to help China “stabilise” confidence “at home and abroad”, said a statement from Zhengxin Zhang, China IMF executive director, that accompanied the IMF’s report.

So who is right? At 5.2 per cent year-on-year, Beijing’s official 2023 gross domestic growth figure is the lowest in decades, excluding the pandemic years of 2020 and 2022, But is still sizeable for an economy of China’s heft and sophistication.

The issue for China though is that the rebound might have been expected to be more robust from 2022 — a year when Covid lockdowns and rigid travel restrictions hit service industries and supply chains and deepened the slowdown in the property sector.

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While growth was strong in the first quarter of 2023, it required increasing government support as the year wore on. Consumption, boosted by the release of pent-up demand from lockdowns, made up most of the growth in 2023. However, consumer confidence remained well below pre-pandemic levels towards the end of the year, the IMF said. It estimated that net foreign direct investment also declined from 2022.

Lower business and market confidence was reflected in capital markets. China’s CSI 300 stock index has lost 5.5 per cent this year, compounding falls in 2023. The benchmark is down 45 per cent from 2021 highs. And the AmCham China survey showing that while profitability of its members had improved in China from 2022, most companies were breaking even or lossmaking, further suggesting less than robust growth.

The government insists that everything is going to plan. Yet domestically it has cracked down on dissenting opinions about the economy, deepening long-running scepticism about the accuracy of official data.

Some economists believe that when calculating real GDP growth from nominal data, Beijing is able to adjust the deflator, the broadest measure of prices in the economy, to hit its targets. “Some estimates suggest that official Chinese data overstate its GDP by around 20 per cent,” Oxford Economics wrote in December.

For 2024, the IMF is forecasting 4.6 per cent growth and then about 3.5 per cent by 2028 on “weak productivity and ageing”. These forecasts are broadly in line with market expectations. Oxford Economics is predicting growth to fall to about 3.5 per cent by 2030 and just 2 per cent by 2040, possibly delaying the day that China’s economy will converge with the US in terms of size.

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China’s Zhang responded that the country still has many growth drivers — the population is getting older but more educated, urbanisation has more room to grow and Beijing is investing in science and technology. “China will continue to be the vital engine of global economic growth,” insisted Zhang. Global boardrooms are hoping he is right. But the bar is rising for China to prove it.

joseph.leahy@ft.com

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California’s primary for governor is undecided as candidates vie to be in the top two

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California’s primary for governor is undecided as candidates vie to be in the top two

Xavier Becerra, Democratic gubernatorial candidate for California, and Steve Hilton, Republican gubernatorial candidate for California, shake hands while arriving for a gubernatorial debate at KRON Studios in San Francisco in April.

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SAN FRANCISCO — The primary election for California governor is too close to call, with vote counting continuing Wednesday. Democrat Xavier Becerra and Republican business executive Steve Hilton lead the field with Democrat Tom Steyer in third place.

In California’s unusual primary system, all candidates, regardless of party, appear on a single ballot open to any registered voter. The top two candidates then move on to the general election, even if they’re from the same party. This year, voters had 60 names for governor to choose from.

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The winner will lead the country’s most populous state, where leaders often take on national political prominence. Incumbent Gov. Gavin Newsom is at his two-term limit and could be a Democratic contender for president.

Becerra, former Health and Human Services secretary under President Joe Biden, pitched himself to voters as an experienced political leader who isn’t afraid of President Trump, but his lead caps one of the most surprising and dramatic comebacks in recent state political history. As recently as April, polls were showing Becerra — also a former member of Congress and California attorney general — languishing in single digits in a crowded field.

In his remarks at his watch party in Los Angeles, Becerra noted his underdog status.

“Here in Hollywood’s hometown, we love a good underdog success story,” he said, drawing parallels between his campaign and his immigrant parents’ success story in California. “Guess what? The underdog stayed in the fight. Like my parents, I never gave up. Never stopped putting one foot in front of the other. Never stopped believing in the beacon-like goodness of California. And thankfully, neither did you.”

Hilton is a former Fox News commentator who also served as a political adviser to former British Prime Minister David Cameron. He was endorsed by President Trump in April, helping him to pull ahead of Riverside County Sheriff Chad Bianco, the other major Republican in the race. Hilton has campaigned on the idea that California needs change after 16 years under total Democratic control.

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The race is narrowing down after a tumultuous campaign

At his watch party in Huntington Beach, the British-born candidate — who became an American citizen five years ago — said it was the “honor of his lifetime” to receive over 1 million votes so far.

“Change is coming to California and it’s long overdue,” Hilton said. “We’re not there yet, but it’s looking good. It looks very much as if Californians really will have the chance to vote for change in November and take our state in a new direction.”

Democratic billionaire activist Steyer spent more than $213 million of his own money to boost his candidacy and push a progressive, populist message. While he was trailing Becerra and Hilton on Tuesday night, he said at his watch party in San Francisco that he remains confident he can close the gap in the days ahead.

“Together, we’ve scared the hell out of the corporate interests used to getting their way,” Steyer said. “It might take some time to figure out where this is going. We’re going to wait until every ballot is counted. We’re gonna give democracy a time to work. And we know we finished really strong.”

The early results are not certain to hold, in part because of unusual voting patterns in this primary election: Ballot-tracking data heading into Tuesday evening showed that Republicans were more likely to vote early by mail, while Democratic voters in this deep-blue state held onto their mail-in ballots or chose to vote in person. That’s the reverse of recent elections, which saw more Democrats voting by mail and Republicans tending to vote in person on Election Day.

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The uncertainty on election night capped a race that remained crowded and unsettled to the end. To some extent, the race was defined by who wasn’t running.

Some of the state’s most high-profile Democrats — former Vice President Kamala Harris, U.S. Sen. Alex Padilla and California Attorney General Rob Bonta — all passed on a potential bid to succeed Newsom.

The race was disrupted in April when then-U.S. Rep. Eric Swalwell’s campaign for governor imploded amid allegations of sexual assault and harassment. Swalwell resigned from Congress shortly after the accusations surfaced and has denied assault allegations.

Swalwell had been gaining in polls and racking up high-profile endorsements, and his exit seemed to primarily benefit Becerra, who had been stuck in single digits in many polls. Ultimately, it quieted fears among Democrats who worried that the messy Democratic field could result in Bianco and Hilton winning the top spots in the June primary.

Marisa Lagos covers California politics at KQED and co-hosts the Political Breakdown show and podcast.

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Supreme Court reinstates Republican-favored Alabama congressional districts

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Supreme Court reinstates Republican-favored Alabama congressional districts

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The Supreme Court on Tuesday cleared the way for Alabama to use a congressional district map favored by Republicans.

The court, in an unsigned order, overturned a three-judge district court panel that found that the map is “tainted by intentional race-based discrimination.” The court’s three liberals publicly dissented.

The ruling means that Alabama’s 2026 midterm elections will feature six Republican-leaning districts and one Democratic-leaning one, as opposed to a map with only five safe Republican seats. Democrat Shomari Figures, who represents Alabama’s Second District, will likely lose his seat as a result of the high court’s ruling.

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The story of Alabama’s congressional map is long and tortured. It began in 2021, when the state implemented a new map to account for population changes in the census. The map featured only one majority-black district out of seven, even though the state is more than one-quarter Black.

Voters immediately sued, claiming the map illegally diluted minority votes in violation of the Voting Rights Act and the Constitution. Lower court judges agreed, ruling that the state must draw a map with two districts where Black voters have a realistic chance of electing their candidate of choice. The Supreme Court more than once has ordered Alabama to draw a compliant map.

But the state has refused and instead continued to litigate the case. On Tuesday, that tactic paid off.

What changed? In April, the Supreme Court’s conservative supermajority all but gutted what remains of the Voting Rights Act, ruling that states cannot purposefully draw districts that are majority-minority.

Alabama then asked the high court to reinstate the state’s old map, under the theory that this new ruling meant that it was permissible to use a map with only one majority-Black district. In an unsigned, unexplained order in May, the high court essentially reversed its previous opinions, and allowed Alabama to use the old map for the upcoming midterm elections.

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This set off a flurry of activity in Alabama. By the time the Supreme Court issued its May order, absentee balloting had already begun, using the court-drawn map. So Republican Governor Kay Ivey cancelled elections and scheduled a special primary for August for the affected congressional races.

The case, however, was not over.

In its ruling, the Supreme Court had ordered a lower court panel to continue evaluating Alabama’s map in light of its recent Voting Rights Act decision. And just 15 days after that order, the panel, composed of three Republican judges—two of them Trump appointees—concluded unanimously that even under the Supreme Court’s new standards, the plan for a single black district was “intentionally discriminatory.”

So, once again, Alabama returned to the Supreme Court, arguing that the map was partisan, not racially discriminatory. In short, that the Republican legislature simply drew the map to elect more Republicans. And that under the Supreme Court’s new interpretation of the Voting Rights Act, the GOP map should be allowed to stand.

The court’s conservative agreed, writing that the lower court “did not heed the presumption of legislative good faith.”

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The court’s three liberals publicly dissented, castigating the conservative majority for failing to abide by its 2006 decision in the case of Purcell v. Gonzalez. That decision declared that courts should not change election rules too close to an election.

Justice Sonia Sotomayor, in her dissent, said the court “debases the democratic process” and “corrodes the rule of law by rewarding Alabama’s gamesmanship and outright defiance of court orders.”

Tuesday’s decision is the latest in a series of Supreme Court rulings that could well reshape the 2026 midterm elections, making it much harder for Democrats to prevail.

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Map: 3.7-Magnitude Earthquake Shakes the San Francisco Bay Area

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Map: 3.7-Magnitude Earthquake Shakes the San Francisco Bay Area

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Note: Map shows the area with a shake intensity of 3 or greater, which U.S.G.S. defines as “weak,” though the earthquake may be felt outside the areas shown.  All times on the map are Pacific time. The New York Times

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A minor, 3.7-magnitude earthquake struck in the San Francisco Bay Area on Tuesday, according to the United States Geological Survey.

The temblor happened at 9:44 a.m. Pacific time about 4 miles southeast of Cloverdale, Calif., data from the agency shows.

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U.S.G.S. data earlier reported that the magnitude was 3.6.

As seismologists review available data, they may revise the earthquake’s reported magnitude. Additional information collected about the earthquake may also prompt U.S.G.S. scientists to update the shake-severity map.

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Aftershocks detected

Subsequent quakes have been reported in the same area. Such temblors are typically aftershocks caused by minor adjustments along the portion of a fault that slipped at the time of the initial earthquake.

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Quakes and aftershocks within 100 miles

Aftershocks can occur days, weeks or even years after the first earthquake. These events can be of equal or larger magnitude to the initial earthquake, and they can continue to affect already damaged locations.

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When quakes and aftershocks occurred

 All times are Pacific time. The New York Times

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Sources: United States Geological Survey (epicenter, aftershocks, shake intensity); LandScan via Oak Ridge National Laboratory (population density) | Notes: Shaking categories are based on the Modified Mercalli Intensity scale. When aftershock data is available, the corresponding maps and charts include earthquakes within 100 miles and seven days of the initial quake. All times above are Pacific time. Shake data is as of Tuesday, June 2 at 12:59 p.m. Eastern. Aftershocks data is as of Tuesday, June 2 at 1:59 p.m. Eastern.

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