Google may be the giant in the digital advertising world, but even it is not immune to the impact that the economic downturn and recession fears are having on the online ad market.
Google parent company Alphabet
(GOOGL) on Tuesday reported earnings results for the third quarter that fell short of Wall Street analysts’ estimates for both sales and profits, due in large part to a sharp slowdown in the growth of its core advertising business.
It reported revenue of nearly $69.1 billion, up just 6% from the same period in the prior year. Google’s advertising revenues grew just 2.5% year-over-year, compared to the 43% growth it posted a year ago. YouTube’s ad business, which competes with TikTok, was especially hard hit, with revenue declining nearly 2% from the year-ago quarter.
Google’s net income, meanwhile, came in at $13.9 billion, down more than 26% from the year prior and well below the $16.6 billion analysts had projected.
The company’s shares fell 6% in after-hours trading Tuesday following the report.
Sundar Pichai, CEO of Alphabet and Google, nodded to the tougher economic climate in a statement included with the results.
“We’re sharpening our focus on a clear set of product and business priorities,” Pichai said. “We are focused on both investing responsibly for the long term and being responsive to the economic environment.”
Tech companies, including Google, reported that they’d started to feel the impact of declining online ad spending in the prior quarter. High inflation, looming recession fears and the ongoing war in Ukraine have all continued to weigh on the industry.
Growth in other areas of Google’s business also appear to be slowing. Google Cloud revenue grew 37% year-over year, a deceleration from the nearly 45% growth it posted in the year-ago quarter, and the segment’s net loss increased to $699 million from $644 million during the same quarter last year.
Net loss from Google’s “Other Bets” segment, which includes business efforts such as its self-driving car unit Waymo, also accelerated year-over-year during the quarter to $1.6 billion.
“Google delivered a disappointing quarter with the search giant underperforming our expectations across almost all business units, most importantly its core ad search segment,” said Investing.com Senior Analyst Jesse Cohen.
During a call with analysts Tuesday, Pichai said the company has begun “realigning resources to invest in our biggest growth opportunities.”
“Over the past quarter, we have made several shifts away from lower priority efforts to fuel highest growth priorities,” Pichai said, adding that the company plans to cut back on headcount additions during the final three months of the year.
Google CFO Ruth Porat said on the call that strong growth in the fourth quarter of 2021 will make year-over-year ad revenue growth comparisons to the current quarter difficult, and that the strength of the US dollar is expected to increasingly weigh on the company’s results. The company did not provide detailed financial outlook for the current quarter.
New inflation data shows that US prices were still uncomfortably high last month, despite aggressive action from the Federal Reserve to rein in decades-high inflation.
The Personal Consumption Expenditures Index, which measures prices paid by consumers for goods and services, climbed by by 0.3% from August to September but remained unchanged at 6.2% for the year.
Core PCE, which strips out volatile food and energy prices and is the Fed’s preferred measure of inflation, climbed by 5.1% on an annual basis, higher than the August rate of 4.9% but below the consensus estimate of 5.2%, per Refinitiv.
From August to September, the core index rose by 0.5%, matching estimates. The prior month’s jump was revised down to 0.5% from 0.6%.
Even though the price of gas, groceries and other essentials shot up in 2022, health care premiums for employer-sponsored coverage remained essentially flat, according to a survey released Thursday.
Job-based policies for families cost an average of roughly $22,500 in 2022, with workers contributing an average of about $6,100, the Kaiser Family Foundation Employer Health Benefit Survey found. That is basically the same as last year.
The average cost of single policies was just over $7,900 for this year, with employees responsible for about $1,350.
Unlike in previous years, premium growth trailed behind the increases in inflation and workers’ wages, which came in at 8% and 6.7%, respectively. That’s because the cost of coverage is typically set months in advance – before inflation really took off.
Also, utilization of health care services remained low in 2021, so employers that fund their own health plans didn’t spend as much as anticipated, which allowed them to keep premiums steady this year, said Matthew Rae, associate director for the Program on the Health Care Marketplace at Kaiser.
But workers can expect to feel the sting of inflation when they enroll in coverage for next year, which is happening now at many companies.
“Employers are already concerned about what they pay for health premiums, but this could be the calm before the storm, as recent inflation suggests that larger increases are imminent,” said Drew Altman, Kaiser’s chief executive officer.
Other surveys show that premiums and out-of-pocket costs are expected to increase in 2023 at a faster rate than in recent years due to inflation. Hospitals, doctors and other providers are feeling the pricing pressure. Their costs for labor, particularly nurses and service staff, and supplies have increased sharply due to inflation and demand. So they are pushing insurers to raise their reimbursement rates when contracts are up for renewal.
Nearly 159 million non-elderly people are covered by employer-sponsored health insurance, according to Kaiser.
For this year, deductibles only inched up. The average annual deductible stands at roughly $1,760 among workers who face a deductible for single coverage. That compares with about $1,670 last year.
Employers, particularly large ones, see a growing need for mental health services, the Kaiser survey found.
Nearly half of big companies saw an increase in the share of workers using mental health services, and more than a quarter say that more employees are asking for family leave because of mental health issues.
But many employers don’t feel they have enough providers in their networks to provide timely access to mental health care, Rae said.
While 82% of firms said they have a sufficient number of primary care providers, only 44% said the same of behavioral health providers.
Telehealth remains important, with three-quarters of firms saying telemedicine matters “somewhat” or “a great deal” in providing access to mental health services.
Katherine Janes, 81, said she had to turn to her son for financial help.
“It makes things a little easier,” Janes said. “Everything is expensive.”
Ron Longhurst cut back on evening socializing, which has been difficult as a single 79-year-old.
“Day-to-day, I stay home more,” he said. “You think twice about the big night out… I’m taking maybe a week or two longer between haircuts.”
Ann Smith, 82, cut down on her favorite “simple pleasure” — drinking soda.
“I used to enjoy a Coke or two a day,” she said. “I now do one a day, maybe one every other day instead.”
Seniors on a fixed income have been hit particularly hard by inflation, with September prices up 8.2% from a year ago. The price hikes are even steeper in areas like Tampa, Florida, where the housing market has exploded.
Sharon Johnson, 67, said her family’s monthly rent in Tampa jumped $350 this year, rising to roughly $3,100 per month. And with other bills surging, like her utilities, it has thrown her budget into chaos.
“The cost of living is not working well right now for us. It’s hard,” Johnson said. “I’ve never had to feel a worry about how we were going to eat, but today, we’re only doing light foods, sandwiches.”
They already have some boxes packed, expecting another rent hike when their lease ends early next year.
Johnson, a retired university counselor, and her husband, a retired engineer and teacher, moved to Florida from Michigan three years ago, bringing along her sister and nephew to live with them.
The family would like to buy a home, but the draining price hikes and red-hot housing market are making that more difficult. Johnson says they may have to downsize as a result.
“We are middle income, but with less to work with than when we worked full time,” Johnson said. “We have worked hard. And we’ve been honest. Then why is it going in reverse?”
But for now, many seniors are feeling little relief.
Barbara Smith, 70,is a caretaker and also volunteers at Trinity Cafe in Tampa, a restaurant that serves free meals to the less fortunate. But she said she has come to rely on the take-home meal she gets after her shift and it is often the only one she eats all day.
“Then I don’t have to go and purchase it, because I don’t have the money to do that,” Smith said.
As she weathers price hikes on food, gas, and personal items, she’s stopped buying puzzles, her favorite hobby. The strain of inflation can be isolating, she said.
“If it wasn’t for volunteering, I’d probably be insane by now,” she said.
What’s the best way to invest? Plenty of active traders are out there trying to make a quick buck on meme stocks like AMC and GameStop, fads like Snap and Peloton or bitcoin and other cryptocurrencies. Professional money managers try to identify stocks that can beat the broader market over the long haul.
But for most individual investors, a strategy of buying and holding so-called passive funds that track top indexes like the S&P 500 and Nasdaq 100 makes the most sense if you want to accumulate wealth for retirement. It’s like that popular old rotisserie chicken infomercial slogan: Set it and forget it.
Index funds tend to be cheaper. New data from S&P Dow Jones Indices showed that investors saved more than $400 billion in fees with index funds over the past quarter of a century.
Obviously, index provider S&P Global
(SPGI) has a vested interest in promoting passive funds backed to various benchmark indexes.
The company, along with competitors like iShares owner BlackRock
(BLK) and index provider MSCI
(MSCI), offers many options for investors looking to get exposure to the broader market without trying to pick individual winners and losers.
Even legendary investing guru Warren Buffett of Berkshire Hathaway
(BRKB) has extolled the virtues of index funds for average investors. That’s because Buffett, despite being one of the most successful stock pickers ever, doesn’t believe most active investment managers can beat the broader market.
The 92-year-old Oracle of Omaha famously wrote in Berkshire’s 2014 annual shareholder letter that his advice for the trustee of his estate is to “put 10% of the cash in short-term government bonds and 90% in a very low-cost S&P 500 index fund” for his wife. (Buffett suggested one from Vanguard.)
“I believe the trust’s long-term results from this policy will be superior to those attained by most investors – whether pension funds, institutions or individuals – who employ high-fee managers,” he wrote.
And given how some high-profile active investors have lagged the market lately, there is something to be said for conservative investors with a long-term horizon betting on the S&P 500 over a handful of stocks.
Just look at Cathie Wood at Ark, who has made big, high profile bets on companies like Tesla
(TSLA), Zoom
(ZM), Roku
(ROKU) and Teladoc
(TDOC). Ark’s flagship Innovation ETF has plunged 60% this year, compared to “just” a 20% drop for the S&P 500.
“Actively managed funds have failed to survive and beat their benchmarks, especially over longer time horizons,” said Bryan Armour, director of passive strategies research for North America at Morningstar, in a report last month. He noted that just one of every four active funds beat their passive benchmarks over the ten years ending in June.
Of course, buying index funds is no guarantee of investing success either…especially not in the short-term. After all, the S&P 500 has plunged this year, too.
“Diversified portfolios do okay usually, but they’ve been hit hard lately by the rise in rates,” said Shamik Dhar, chief economist at BNY Mellon Investment Management, in an interview with CNN Business.
Even the vaunted 60/40 asset allocation recommendation for investors, i.e. owning 60% stocks and 40% bonds, has so far failed to beat the market in 2022.
“This year, it seems like there has been a broad-based source of fear. It’s shock therapy. There is slowing growth and inflation. That is disorienting investors,” said Adam Hetts, global head of portfolio construction and strategy at Janus Henderson Investors, in an interview with CNN Business.
Along those lines, any investor with decent exposure to bonds, hoping that they’d hold up better as stocks tanked, has gotten a rude awakening. The iShares 20+ Year Treasury Bond ETF
(TLT), a top proxy for long-term bonds, has done even worse than the stock market, plunging more than 35% this year.
That’s why some investors aren’t singing a funeral dirge for active stock picking – just yet.
“A 10-year ‘secular bear market’ is underway,” said Stifel chief equity strategist Barry Bannister in a recent report,who predicts that the market may be stuck in a narrow range throughout the rest of the decade.
“We believe this environment favors the following approach: active (not broad passive) management,” he said.
In trading outside of mainland China, the yuan briefly plunged to around 7.36 per dollar early Tuesday, the lowest level on record, according Refinitiv, which has data going back to 2010. It then pared losses, trading at 7.33 by 1 pm Hong Kong time.
On the tightly managed domestic market, the yuan also dropped sharply on Tuesday, hitting the weakest level in nearly 15 years.
The declines came alongside a historic market rout for Chinese assets worldwide. On Monday, Chinese stocks plummeted in Hong Kong and New York, wiping out billions of dollars in their market value. Hong Kong’s benchmark Hang Seng
(HSI) Index closed down 6.4%. The Nasdaq Golden Dragon China Index also dived more than 14%. On Tuesday, the Hang Seng
(HSI) rebounded slightly, up 0.8% by noon.
The huge sell-offs came just days after the ruling Communist Party unveiled its new leadership for the next five years. In addition to securing an unprecedented third term as party chief, Xi packed his new leadership team with staunch loyalists.
A number of senior officials who have backed market reforms and opening up the economy were missing from the new top team, stirring concerns about the future direction of the country and its relations with the United States.
International investors spooked by the outcome of the Communist Party’s leadership reshuffle dumped Chinese assets despite the release of stronger-than-expected GDP data. They’re worried that Xi’s tightening grip on power will lead to the continuation of Beijing’s existing policies and further dent the economy.
China’s leadership reshuffle “sparked worries about the continuation of market-unfavourable policies and increasing risk of policy mistakes under President Xi’s power domination in coming years,” said Ken Cheung, chief Asian forex strategist at Mizuho Bank.
“Foreign investors took action to cut their exposure on Chinese assets,” he said, adding that the Chinese currency was faced with mounting capital outflow pressure.
The Chinese yuan, together with other major global currencies, has weakened rapidly against the dollar in recent months. The greenback has surged to the highest level in two decades against a basket of major counterparts, boosted by a hawkish Fed that attempts to contain runaway inflation.
So far this year, the yuan has slumped more than 15% against the dollar, on track to log its worst year since 1994 — whenChina devalued its currency by 33% overnight as part of market reforms.
Foreign investors spooked by the outcome of the Communist Party’s leadership reshuffle dumped Chinese equities and the yuan despite the release of stronger-than-expected GDP data. They’re worried that Xi’s tightening grip on power will lead to the continuation of Beijing’s existing policies and further dent the economy.
Hong Kong’s benchmark Hang Seng
(HSI) Index plunged 6.4% on Monday, marking its biggest daily drop since November 2008. The index closed at its lowest level since April 2009.
The Chinese yuan weakened sharply, hitting a fresh 14-year low against the US dollar on the onshore market. On the offshore market, where it can trade more freely, the currency tumbled 0.8%, hovering near its weakest level on record, even as the Chinese economy grew 3.9% in the third quarter from a year ago, according to the National Bureau of Statistics. Economists polled by Reuters had expected growth of 3.4%.
The sharp sell-off came one day after the ruling Communist Party unveiled its new leadership for the next five years. In addition to securing an unprecedented third term as party chief, Xi packed his new leadership team with staunch loyalists.
A number of senior officials who have backed market reforms and opening up the economy were missing from the new top team, stirring concerns about the future direction of the country and its relations with the United States. Those pushed aside included Premier Li Keqiang, Vice Premier Liu He, and central bank governor Yi Gang.
“It appears that the leadership reshuffle spooked foreign investors to offload their Chinese investment, sparking heavy sell-offs in Hong Kong-listed Chinese equities,” said Ken Cheung, chief Asian forex strategist at Mizuho bank.
The GDP data marked a pick-up from the 0.4% increase in the second quarter, when China’s economy was battered by widespread Covid lockdowns. Shanghai, the nation’s financial center and a key global trade hub, was shut down for two months in April and May. But the growth rate was still below the annual official target that the government set earlier this year.
“The outlook remains gloomy,” said Julian Evans-Pritchard, senior China economist for Capital Economics, in a research report on Monday.
“There is no prospect of China lifting its zero-Covid policy in the near future, and we don’t expect any meaningful relaxation before 2024,” he added.
Coupled with a further weakening in the global economy and a persistent slump in China’s real estate, all the headwinds will continue to pressure the Chinese economy, he said.
Evans-Pritchard expected China’s official GDP to grow by only 2.5% this year and by 3.5% in 2023.
Monday’s GDP data were initially scheduled for release on October 18 during the Chinese Communist Party’s congress, but were postponed without explanation.
The possibility that policies such as zero-Covid, which has resulted in sweeping lockdowns to contain the virus, and “Common Prosperity” — Xi’s bid to redistribute wealth — could be escalated was causing concern, Cheung said.
“With the Politburo Standing Committee composed of President Xi’s close allies, market participants read the implications as President Xi’s power consolidation and the policy continuation,” he added.
Mitul Kotecha, head of emerging markets strategy at TD Securities, also pointed out that the disappearance of pro-reform officials from the new leadership bodes ill for the future of China’s private sector.
“The departure of perceived pro-stimulus officials and reformers from the Politburo Standing Committee and replacement with allies of Xi, suggests that ‘Common Prosperity’ will be the overriding push of officials,” Kotecha said.
Under the banner of the “Common Prosperity” campaign, Beijing launched a sweeping crackdown on the country’s private enterprise, which shook almost every industry to its core.
“The [market] reaction in our view is consistent with the reduced prospects of significant stimulus or changes to zero-Covid policy. Overall, prospects of a re-acceleration of growth are limited,” Kotecha said.
On the tightly controlled domestic market in China, the benchmark Shanghai Composite Index dropped 2%. The tech-heavy Shenzhen Component Index lost 2.1%.
The Hang Seng Tech Index, which tracks the 30 largest technology firms listed in Hong Kong, plunged 9.7%.
Shares of Alibaba
(BABA) and Tencent
(TCEHY) — the crown jewels of China’s technology sector — both plummeted more than 11%, wiping a combined $54 billion off their stock market value.
The sell-off spilled over into the United States as well. Shares of Alibaba and several other leading Chinese stocks trading in New York, such as EV companies Nio
(NIO) and Xpeng, Alibaba rivals JD.com
(JD) and Pinduoduo
(PDD) and search engine Baidu
(BIDU), were all down sharply Thursday afternoon.
When Australia’s richest woman Gina Rinehart threw a financial lifeline to Netball Australia, she triggered a debate about sponsorships and the role of social and political issues in the sporting sphere. Then she walked away.
Rinehart’s bombshell decision to withdraw a 14 million Australian dollar ($8.9 million) sponsorship deal for the Diamonds, Australia’s national netball team, caught the players off-guard and struck a blow to the future of Netball Australia – a sporting body mired in debt.
The drama engulfing the Diamonds is not new, but experts say disputes could become more common as athletes and fans take a stronger stance on the source of sponsorship money.
Meanwhile, Australian test cricket captain Pat Cummins reportedly raised issues with Cricket Australia’s deal with Alinta Energy, for the same reasons.
For members of the Diamonds, the objections focused on racist comments made almost 40 years ago by Rinehart’s father, Lang Hancock, the founder of her company Hancock Prospecting.
Rinehart is a prolific supporter of Australian sports teams and typically earns praise for her sponsorship deals. Last year, Olympic swimmer Cate Campbell reportedly said that Rinehart had “saved swimming.”
But Kevin Argus, a lecturer in marketing from RMIT University, said Rinehart’s decision on Saturday to pull funding from Netball Australia was a “lost opportunity” to “embrace the national mood.”
“In Australia, we have witnessed many large powerful companies benefit enormously from positive associations with sport and withdraw their funding support as soon as an issue arises with athletes,” he told CNN Sport.
“The Diamonds athletes raised concerns about being seen to be supporting a legacy of Aboriginal discrimination. Some have expressed concerns about the environment.
“These are major issues today that won’t go away,” he said.
At the center of the controversy is Noongar woman Donnell Wallam, a rising star who is set to make her debut this week as only the third Indigenous netball player to represent Australia.
Wallam had reportedly expressed reservations about wearing the Hancock logo due to comments Rinehart’s father made about Australia’s First Nations people.
His words are a dark reminder of racist attitudes toward Indigenous people, and though Rinehart promotes her longstanding support of Aboriginal communities through mining royalties and charities, she has never publicly condemned her father’s statements.
Wallam’s teammates have rallied around her, and when the team ran onto the court to play New Zealand in the Constellation Cup last week, they wore their old uniforms, without the Hancock logo.
In the statement on Saturday, Rinehart and Hancock Prospecting said there was no requirement for the Diamonds to wear the logo during the New Zealand games and they did not refuse to wear it.
The statement said Hancock’s majority-owned mining company Roy Hill would also pull its support of Netball WA, a state netball body, as the two companies “do not wish to add to Netball’s disunity problems.”
Both Netball Australia and Netball WA would be offered four months of funding while they find new partners, the statement added.
Separately, Rinehart and Hancock seemed to take a swipe at the players by saying they consider it “unnecessary for sports organisations to be used as a vehicle for social or political causes.”
“There are more targeted and genuine ways to progress social or political causes without virtue signalling or for self-publicity,” the statement added.
On Monday, Kathryn Harby-Williams, CEO of the Australian Netball Players’ Association told the Australian Broadcasting Corporation that Wallam had asked for an exemption not to wear the logo and was refused.
“In the end, unfortunately, Donnell found the pressure too much and decided that she would wear the logo.”
But it was too late.
Netball Australia has made no secret of its financial difficulties. Despite being the most popular team sport in Australia with 1.2 million players, it made a loss last year of 4.4 million Australian dollars ($2.8 million).
“There is a really important role that sporting organizations do play from grassroots right through to the elite to create a safe environment to have really strong social conversations,” Ryan said.
“But there also needs to be a balance in terms of the commercial realities of that as well.”
In a statement, the players said they were “disappointed” with Hancock’s decision to withdraw sponsorship and thanked other sponsors for their ongoing support.
The statement added: “Reports of a protest on behalf of the players, on environmental grounds, and a split within the playing group are incorrect. The singular issue of concern to the players was one of support for our only Indigenous team member.”
Vickie Saunders, founder of The Brand Builders, says Wallam’s objection to wearing the Hancock logo was deeply personal, and not a matter of a player using their public profile to promote a political cause.
“Her 60,000-year-old culture will tell you that it’s important. Her 200 years of survival, and her fellow Indigenous people will tell you it’s important,” Saunders said.
“She has a very personal reason for not wanting to wear a logo that represents a person who said that her people should be sterilized or bred out,” she said. “This isn’t a new issue for her. This is her life.”
Hancock Prospecting was founded in 1955 and retains interests in iron ore, coal, and mineral exploration, as well as beef and dairy.
The company also funds services for remote and rural Aboriginal communities, including health and education programs, and Rinehart is a familiar face in elite sporting circles.
The billionaire sponsors Swimming WA, Swimming Queensland, Volleyball Australia, Rowing Australia and Artistic Swimming Australia, and recently struck a deal to sponsor the Australian Olympic Team until 2026.
This week, in response to debate surrounding the Diamonds, many of those sporting bodies released statements lauding Rinehart’s dedication to sport.
The Australian newspaper also weighed in with an editorial saying there was no room for “cancel culture” – “to sacrifice Mrs Rinehart because of comments made decades ago by her father, Lang Hancock, is a bridge too far.”
The Netball Australia sponsorship deal would have been worth 3.5 million Australian dollars ($2.2 million) per year for four years – an almost negligible amount for a company that posted a 7.3 billion Australian dollar ($4.6 billion) profit in 2021 on the back of soaring iron ore prices.
Kim Toffoletti, an associate professor of sociology at Melbourne’s Deakin University, said for less established sports, it can be difficult to say no to any offer of sponsorship.
“Their livelihoods are on the line … it’s very hard to turn that down that kind of money because that keeps your sport viable,” Toffoletti told CNN Sport.
“I don’t see it as a failure of the sport but maybe a system in which certain sports are economically and culturally rewarded over others, which means that there are many that do miss out.”
Today’s up and coming sports stars are members of Gen Z, born in the late 1990s to around 2010, whose attitudes may differ from the executives running established sporting bodies and big name brands.
Experts say sponsors can’t expect young athletes to align themselves with their values.
“Some of these sports have got very old-fashioned business models, which are built probably around 30-40 years ago in a different era,” Andrew Hughes, a marketing expert from the Australian National University, told CNN Sport.
“But now we put a lot of value on what brands stand for, what they represent. I think we see that reflected in how the athletes themselves think.”
Saunders, from The Brand Builders, said athletes are realizing that protecting their personal brand is more important than falling into line with the values of their sponsors.
“Your brand is actually your most valuable asset because after the game, or after your career, that’s the thing that you get to take with you into employment or other opportunities in life,” she said.
And that’s especially important for players who aren’t earning big money – like netballers – who need to find another source of income when their sports career is over, Saunders added.
Kevin Argus from RMIT University said Rinehart’s response to the debate – to cancel the contract – demonstrates “reactive decision making” that’s counterproductive for a company seeking to win public support.
He said a better option would have been to engage with the players, as a mentor would in a workplace, to better understand their values and how they can work together for the benefit of both parties.
“Exiting sponsorships when athletes behave as normal functioning human beings demonstrates reactive decision making and shines a light on the need for bolder, transformative leadership,” he said.
“When done well, sport sponsorship is brand transforming for both the sport and sponsor.”
Rep. Nancy Mace on Sunday said she supports Republican Leader Kevin McCarthy’s strategy of refusing to lift the debt limit, if Republicans win back the House, unless Democrats in the White House agree to spending cuts.
“And I can tell you, I sit on the Oversight Committee, where we look at waste, fraud, and abuse in the federal agency level, and there is waste in every single agency,” Mace said to CNN’s Jake Tapper on “State of the Union.”
The Republican from South Carolina said that when Covid-19 began, businesses had to make tough decisions about how they would keep their doors open, and the federal government continued to get record revenue without making those tough decisions.
“We can find ways to be more responsible with our spending, just like we forced companies and businesses to during Covid. So, that’s one of the ways that I would approach it,” she said.
President Joe Biden said on Friday that he will not relent to Republican lawmakers threatening to send the nation into default if he doesn’t meet their demands but he doesn’t support Democrats’ efforts to abolish the debt limit entirely.
When asked by Tapper about legislating and meeting with leaders of the Senate and people in the White House to come up with a way to reduce spending, Mace noted Republicans had been “shut out of many of those conversations.”
“We have seen Republicans for a year-and-a-half now talk about more responsible spending, looking at the deficit spending in these bills that have been passed talking about how we can move this country forward. And we have been shut out.”
In a separate appearance on “State of the Union” on Sunday, Vermont Sen. Bernie Sanders said he sided with increasing the debt ceiling.
“But what Republicans are basically doing – and I hope everybody understands this – they are saying look, we are prepared to let the United States default on its debt, not raise the debt ceiling, unless – you talk about making cuts.”
Sanders added “You know what they’re talking about? Cuts in Social Security, Medicare, and Medicaid. Is that irresponsible? It is absolutely irresponsible. You don’t use the debt ceiling to do that.”
Mace also indicated to Tapper that she would not automatically be on board with impeaching Biden if Republicans take the House in November. However, she didn’t dismiss it completely either, noting allegations of high crimes and misdemeanors “would have to be investigated.”
“I am not interested in playing tit-for-tat. I am not interested in retaliation. Impeachment has been weaponized over the years, and we’ve seen that. I really want us to be focused on the economy, on tackling inflation with responsible policy,” she said.
Mace, who has travelled to Ukraine since the war began, dodged when asked if she supported McCarthy’s comment to Punchbowl that House Republicans would not write a “blank check” to Ukraine if they are in the majority.
“It is something that we’re going to have to find balance on next year,” she said, due to the threat of a recession and Republican promises to cut government spending.
A packed legislative to-do list awaits Congress when it returns to session after the midterms – and Democrats, who currently control both chambers, will face a ticking clock to enact key priorities if Republicans win back the House or manage to flip the Senate in the upcoming elections.
Senate Majority Leader Chuck Schumer has predicted an “extremely busy” lame duck session – the period of time after the midterms and before a new Congress begins in January.
“We still have much to do and many important bills to consider,” Schumer said in remarks on the Senate floor at the end of September. “Members should be prepared for an extremely, underline extremely, busy agenda in the last two months of this Congress.”
Democrats are still limited in what they can achieve, however, given their narrow majorities in both chambers. With a 50-50 partisan split in the Senate, Democrats lack the votes to overcome the filibuster’s 60-vote threshold – and do not have the votes to abolish the filibuster. As a result, major priorities for liberal voters – like the passage of legislation protecting access to abortion after the Supreme Court overturned Roe v. Wade – will still remain out of reach for the party for the foreseeable future.
Government funding is the most pressing priority that lawmakers will confront during the lame duck. The current deadline for the expiration of funding is December 16 after the House and Senate passed an extensionto avert a shutdown at the end of September.
Since the funding bill is viewed as must-pass legislation it will likely become a magnet for other priorities that lawmakers may try to tack on to ride along with it. It’s possible that further aid for Ukraine could come up as Ukraine continues to counter Russia’s invasion of the country. While that funding has bipartisan support, some conservatives are balking at the pricey contributions to Ukraine and may scrutinize more closely additional requests from the administration, a dynamic that is dividing Republicans on this key issue.
Democrats also want more funding for pandemic response, but Republicans have pushed back on that request.
One issue that may come up during the government funding effort is money for the Department of Justice investigation into the January 6, 2021, attack on the Capitol.
A House Democratic aide told CNN that final fiscal year 2023 funding levels have yet to be determined. Justice Department needs and resources are part of this ongoing conversation, but under the leadership of Rep. Matt Cartwright, chairman of the House Appropriations subcommittee on commerce, justice, science, and related agencies, the House bill included $34 million that would allow DOJ to fund these prosecutions without reducing their efforts in other areas.
House Appropriations Committee Chairwoman Rosa DeLauro told CNN in a statement, “I look forward to working with my colleagues on the House and Senate appropriations committees and passing a final 2023 spending package by the December 16th deadline.”
Meanwhile, the Senate has begun work on the NDAA, and is expected to pass the massive piece of legislation during the lame duck. Consideration of the wide-ranging bill could spark debate and a push for amendments over a variety of topics.
Republican Sen. Chuck Grassley of Iowa has called forpunishing OPEC for its production cut by passing legislation that would hold foreign oil producers accountable for colluding to fix prices – and the senator has said he believes the measure can pass as an amendment to the NDAA. The legislation would clear the way for the Justice Department to sue Saudi Arabia and other OPEC nations for antitrust violations.
Senate Democrats will also continue confirming judges to the federal bench nominated by President Joe Biden, a key priority for the party.
A Senate vote to protect same-sex marriage is also on tap for the lame-duck session. In mid-September, the chamber punted on a vote until after the November midterm elections as negotiators asked for more time to lock down support – a move that could make it more likely the bill will ultimately pass the chamber.
The bipartisan group of senators working on the bill said in a statement at the time, “We’ve asked Leader Schumer for additional time and we appreciate he has agreed. We are confident that when our legislation comes to the Senate floor for a vote, we will have the bipartisan support to pass the bill.” The bill would need at least 10 Republican votes to overcome a filibuster.
Schumer has vowed to hold a vote on the bill, but the exact timing has not yet been locked in. Democrats have pushed for the vote after the Supreme Court overturned Roe v. Wade, sparking fears that the court could take aim at same-sex marriage in the future.
The Senate could take up legislation during the lame duck in response to the January 6, 2021, attack by a mob of pro-Trump supporters attempting to overturn the results of the 2020 presidential election.
“I strongly support the modest changes that our colleagues in the working group have fleshed out after literally months of detailed discussions,” McConnell said at the end of September. “I’ll proudly support the legislation, provided that nothing more than technical changes are made to its current form.”
If the bill passes the Senate, it would also need to clear the House, which in September, passed its own version of legislation to make it harder to overturn a certified presidential election in the future by proposing changes to the Electoral Count Act.
Passing a bill to to restrict lawmakers from trading stocks is a priority for a number of moderate House Democrats – who may continue to push for the issue to be taken up during the lame duck, though whether there will be a vote is still to be determined and other pressing must-pass items like government funding could crowd out the issue. The House did not vote on a proposal prior to the midterm elections.
“It’s a complicated issue, as you can imagine, as a new rule for members they have to follow, and their families as I understand, so I think it deserves careful study to make sure if we do something, we do it right,” House Majority Leader Steny Hoyer told CNN last month.
Meanwhile, it’s not yet clear when exactly the nation will run up against the debt limit and it appears unlikely for now that Congress will act to resolve the issue during the lame-duck session, especially as other must-pass bills compete for floor time. But political battle lines are already being drawn and maneuvering is underway in Washington over the contentious and high-stakes issue.
A group of House Democrats recently sent a letter to House Speaker Nancy Pelosi and Schumer calling for legislation to “permanently undo the threat posed by the debt limit” during the post-election lame-duck session. The letter, led by Pennsylvania Rep. Brendan Boyle, was signed by several prominent House Democrats, including Caucus Chair Hakeem Jeffries of New York.
Biden on Friday gave a window into how he’s preparing for a looming political showdown over the debt ceiling, stating unequivocally that he will not relent to Republican lawmakers threatening to send the nation into default if he doesn’t meet their demands, but adding that he doesn’t support efforts from within his own party to abolish the debt limit entirely.
It’s weird when wrestling superstar Randy Orton, Netflix’s romance “Bridgerton,” TikTok, a tattoo artist, Instagram, NFTs and Andy Warhol’s portrait of Prince all show up in the same law school textbook.
A series of hot-button lawsuits have linked all those unlikely creators and platforms in litigation that goes as high as the US Supreme Court. The litigation dealswith issues of intellectual property, copyright infringement and fair use in a rapidly changing new-media landscape.
For decades, so-called “copycat” lawsuits boiled down to ‘you stole my song/book/idea.’ Now, as the number of platforms to showcase artistic content have multiplied, these court cases are testing the rights of fans, creators and rivals to reinterpret other people’s intellectual property.
At issue, particularly in social media or new technology, is exactly how much you have to transform something to profit and get credit for it, literally, to make it your business.
Three weeks ago, in a first-of-its-kind case, a jury in an Illinois federal court ruled that tattoo artist Catherine Alexander’s copyright was violated when the likeness of her client, World Wrestling Entertainment star Randy Orton, was depicted in a video game. Alexander has tattooed Orton’s arms from his shoulders to his wrists.
She won, but not much: $3,750, because the court ruled that, though her copyright had been violated, her tattoos didn’t impact game profits. Nonetheless, it set a precedent.
The ruling calls into question the abilities of people with tattoos “to control the right to make or license realistic depictions of their own likenesses,” said Aaron J. Moss, a Hollywood litigation attorney specializing in copyright matters.
Blame the rise of remix culture. For most of the twentieth century, mass content was created and distributed by professionals,” said Moss. “Individuals were consumers. Legal issues were pretty straightforward. But, now, most of the time, the content is being repurposed, remixed or repackaged.”
“It’s all new and it’s all a mess,” said Victor Wiener, a fine-art appraiser who’s consulted for Lloyd’s of London and serves as an expert witness in art-valuation court cases. Over the past several decades, the distinctions between professionals and amateurs, artists and copycats and between production and consumption have blurred. In such gray areas, said Wiener, “it can come down to who the judge, or the tryer of fact, believes.”
In January 2021, a month after the Netflix show premiered, singer Abigail Barlow teamed up with musician Emily Bear to create their own interpretation of the hit series. In a souped-up version of fan fiction, the two women began to write and to perform songs they had written, often using exact dialogue from the series.
It was a huge hit on TikTok,in part because the duo invited feedback and participation, making ita crowd-sourced artwork.
At first Netflix applauded the effort and even okayed the recording of an album of songs. But when the creators took their show on the road and sold tickets, Netflix sued.
Producer and series creator Shondra Rhimes, in a statement released when the suit was filed in July, said “what started as a fun celebration by [fans] on social media has turned into the blatant taking of intellectual property.”
Cases like this turn on “fair use,” matters such as how much of another work someone appropriates. Or whether it dents the original creator’s ability to profit. In the case of “Bridgerton,” neither side has commented on the resolution of the suit, but a planned performance of the musical at Royal Albert Hall scheduled for last month was cancelled.
“Today, a 15-year-old can copy your work and spread it across the Internet like feral cat pee at no cost and with little effort. The intellectual capital of an artist can be appropriated on a massive, global scale unimaginable by the people who wrote copyright laws,” said John Wolpert, co-founder of the IBM blockchain and of several blockchain projects.
And the relatively new phenomenon of trading art NFTs with cryptocurrency “has created a perverse new incentive to misappropriate an artist’s work and to claim it as your own and charge people to purchase it,” he added.
In one of several NFT suits finding their way to the courts, fashion giant Hermes sued L.A. artist Mason Rothschild after he created 100 NFT’s that depicted Hermes Birkin bags wrapped in fake fur.
Hermes filed a lawsuit in January in the court of the Southern District in New York charging trademark infringement and injury to business reputation, not to mention “rip off,” with Hermes requesting a quick summary judgment.
But in the past, courts have often bent over backward to give an artist leeway in critique and parody. Rebecca Tushnet, a Harvard Law professor and expert on copyright and trademark law who represents the artist, has argued his “MetaBirkins” art project is essentially protected as it comments on the relationship between consumerism and the value of art.
Last month, the Central District court of California ruled on a doozy of a copyright lawsuit that arose via Instagram: Carlos Vila v. Deadly Doll.
In 2020, the photographer had taken an image of model Irina Shayk. She was wearing sweatpants from fashion company Deadly Doll that featured a large illustration of a woman carrying a skull. The photographer subsequently licensed his image of the model for reproduction. Deadly Doll posted Vila’s photo on their Instagram account and he sued. They counter-sued, arguing he was the infringer. The suit, detailed by litigator Moss in his Copyright Lately blog, is moving forward in California.
Perhaps the most important case has nothing to do with new media – it concerns Andy Warhol’s altered photograph of the late artist Prince that ran in Vanity Fair magazine years ago. But it is expected to set a precedent.
Right now, the US Supreme Court is hearing this landmark case regarding Warhol’s alleged misappropriation of photographer Lynn Goldsmith’s work in his silkscreens of Prince. The court is set to determine how, and how much, an artist or creator must transform a work to make it their own – guidelines that will surely create as much of a buzz as the intellectual property itself.
GIFs — those short, animated images that were a staple of internet memes and culture in the 1990s and 2000s — may be going out of fashion now as social media users have largely moved on to emojis and video.
But a long-running legal battle over who can control access to them, culminating this week in a rare defeat for Meta (META), the parent of Facebook, could have major ramifications for Big Tech regulation. While the stakes of the case itself were relatively small, policy experts say the outcome is certain to embolden antitrust regulators around the globe and could chip away at the image of Big Tech as an invincible juggernaut.
On Tuesday, UK regulators forced Meta to unwind its 2020 purchase of Giphy, one of the largest searchable internet libraries of GIFs.
Meta had fought the breakup effort. But after an appeals tribunal this past summer largely upheld the government’s decision, Meta said this week it would sell Giphy in response to the final order from the UK requiring a spin-off.
The concession marks a key moment in the global tug-of-war between governments and tech giants. It’s the first time any government — and one outside the United States at that — has successfully forced Meta to accept a breakup, albeit a partial one, since regulators worldwide began scrutinizing its economic dominance.
“The Citadel may have been breached,” said Joel Mitnick, an antitrust attorney at the law firm Cadwalader, Wickersham & Taft.
Meta, more than any other tech company, has drawn the attention of regulators for its acquisitions, which to critics have often looked like attempts to kill off potential competitive threats before they can flourish. In particular, they’ve pointed to its deal for Instagram in 2012 and WhatsApp in 2014, both of which were far pricier than the $400 million it reportedly paid for Giphy.
Meta is currently defending against a US government antitrust suit seeking to force the company to spin off Instagram and WhatsApp, and another that would block a more recent proposed acquisition of a virtual reality startup known as Within Unlimited.
The company said this week that it will continue to explore acquisitions despite the UK ruling. In issuing its decision, the UK’s competition regulator said Meta’s Giphy acquisition risked eliminating a competitor in digital advertising and cutting off third-party access to Giphy’s GIFs.
GIFs aren’t a core part of Meta’s business; the company has sought to reposition itself instead as a leader in virtual reality technology. Even when Meta’s deal was first announced, it was widely regarded as a headscratcher and not an obvious threat to competition, according to Adam Kovacevich, CEO of the Chamber of Progress, an industry advocacy group funded partly by Meta.
“Almost no one thought Meta was securing some kind of major coup with this deal,” Kovacevich tweeted, arguing that the case primarily served as a political exercise for UK regulators to demonstrate their post-Brexit relevance.
Paul Gallant, an industry analyst at Cowen Inc., said that that only emphasizes how closely regulators are watching tech mergers now, and underscores how much of a wake-up call the UK ruling is.
“Successfully blocking this deal will catch the eyes of the biggest tech companies in the world,” Gallant said. “The biggest tech companies have grown significantly through mergers and acquisitions, so this decision has the potential to complicate that strategy.”
In many ways, the UK’s success in rolling back the Giphy merger reflects the cooperation and consensus that has emerged among antitrust agencies around the world, said William Kovacic, former chairman of the Federal Trade Commission and a law professor at George Washington University.
The ruling will give non-UK regulators greater confidence that their own attempts to block tech industry consolidation may be achievable or, at the very least, not be viewed as radical, he added.
“It gives you the ability to resist the argument that you are a rogue agency or a rogue jurisdiction,” Kovacic said. “It is more comforting to travel in a group than alone.”
Emboldened regulators could seek to block more deals, or perhaps bring more cases alleging anticompetitive behavior. But just because the Giphy case could inspire more enforcement, that doesn’t necessarily mean they’ll be successful. That’s because, in major markets such as the United States, antitrust cases first must be proven in court before any penalties can be imposed. And US courts don’t typically take foreign antitrust rulings into account; their job is to interpret US law.
In that respect, said Mitnick, US antitrust officials face a tougher challenge than their counterparts in Europe and in other places where regulators face lower procedural hurdles.
A successful US breakup prosecution, Mitnick said, “remains a very high wall to scale.”
There’s really nothing nice to say about inflation when it comes to your bottom line.
It’s hard on your wallet. It’s hard on your savings because it reduces the buying power of the dollars you socked away. And it’s hard on your paycheck, because chances are your last raise did not keep pace with headline inflation, which the latest reading puts at 8.2%.
But that same high inflation has led to a couple of changes that might offer youa little relief. And every little bit helps.
Starting next year, your paycheck could be a little bigger thanks to inflation adjustments that the Internal Revenue Service will make to 2023 federal income tax brackets and other provisions.
The net effect of those adjustments is this: More of your 2023 wages will be subject to lower tax rates than they were this year. And you may be able to deduct higher amounts of income.
When you save money in a tax-deferred workplace retirement plan like a 401(k) or 403(b), you can reduce your taxable income because you get a deduction for your contribution the year you make it. The more you save, the more you cut your tax bill.
Starting next year, you will be allowed to contribute up to $22,500into your 401(k), 403(b), most 457 plans or the Thrift Savings Plan for federal employees.
That’s $2,000 – or roughly 9.8% – more than the current $20,500 federal contribution limit, a direct result of higher inflation. Those are the biggest adjustmentsmade to the contribution limit in decades.
More about those changes and changes to IRA contribution limits can be found here.
Social Security recipients will receive an annual cost-of-living adjustment of 8.7% next year, the largest increase since 1981.
The spike will boost retirees’ monthly payments by $146 to an estimated average of $1,827 for 2023.
No one will be living large on that amount, but the extra cash will offset some of the higher prices for everyday expenses that seniors incur.
Here’s more on the coming boost to Social Security checks, along with welcome news that there will be a drop in Medicare Part B premiums next year.
China’s economy is faltering. Unemployment is skyrocketing. Endless Covid lockdowns are wreaking havoc on businesses and people’s lives. The property sector is in crisis. Ties between Beijing and major global powers are under strain.
The list of problems faced by the world’s second-largest economy goes on – and many of those long-term challenges have only worsened under a decade of Xi Jinping’s rule. Yet the Chinese leader’s grip on power is unwavering.
In the past decade, Xi has consolidated control to an extent unseen since the era of Communist China’s strongman founder, Mao Zedong. He’s the head of the Chinese Communist Party, the state, the armed forces, and so many committees that he’s been dubbed “chairman of everything.” And now, he is poised to step into a norm-breaking third term in power, with the potential to rule for life.
But absolute power can often mean absolute responsibility, and as problems mount, analysts warn Xi will have less room to avoid blame.
“I think the worst enemy of Xi Jinping’s longevity in ruling China is Xi Jinping himself,” said Steve Tsang, director of the SOAS China Institute in London. “It is when he makes a huge policy mistake that causes havoc in China that could potentially start the process of unraveling Xi Jinping’s hold to power.”
Mao’s rule from 1949 until 1976 was marked by rash policy decisions that led to tens of millions of deaths and destroyed the economy. After those decades of turmoil, the Communist Party developed a system of collective leadership designed to prevent the rise of another dictator who could make arbitrary and dangerous decisions.
China’s next leader, Deng Xiaoping, set an unwritten rule and precedent that the Communist Party’s General Secretary – the role from which China’s leader derives true power – would step down after two terms.
From Mao to Xi: A history of China’s leadership
When Xi assumed power in 2012, China’s economy was booming as it integrated more closely with the rest of the world. Just four years before, China had stunned the world with the extravagant Beijing Summer Olympics. But to Xi, the party was in a state of crisis: overrun by corruption, infighting, and inefficiencies.
Xi’s solution was to return to dictatorial and personalistic rule. He purged political enemies in a sweeping anti-corruption campaign, silenced internal dissent, abolished presidential term limits and enshrined “Xi Jinping Thought” into the party’s constitution.
According to analysts, many dictatorships fall into a pattern of abuse of power and poor decision-making when a lack of critical advice reaches the leader. They point to Vladimir Putin’s increasingly costly war against Ukraine as a concern that Xi’s similarly unquestionable power to the Russian President could one day lead to equally disastrous consequences.
Putin and Xi “suffer from the same strongman-syndrome problem, which is that they turned their policy advice circles into echo chambers, so people are no longer able to speak their mind freely,” Tsang said. “We are seeing big mistakes being made because that internal policy debate has been reduced or indeed eliminated in terms of its scope.”
In recent history, no country has modernized as rapidly as China. The Communist Party claims its leadership helped lift hundreds of millions out of poverty, turning backwater villages into stunning megacities. But that growth miracle has slowed. And many longstanding challenges in China’s economy have only been exacerbated by Xi’s policies.
Xi has made it his mission to strengthen the party and its control over business and society. He unleashed a crackdown on the once-vibrant private sector that’s led to mass layoffs. Beijing claims the tougher regulations restrict overly powerful corporations and protect consumers, but the measures have suffocated private businesses, sending chills through the economy and sparking fears about future innovation.
China’s once vibrant private sector suffocating under Xi’s crackdown
Beijing started clamping down on easy credit for property firms in 2020, which led to cash crunches and defaults for many developers, including giant conglomerate Evergrande. Housing projects have stalled and desperate homebuyers across the country are refusing to pay mortgages on unfinished homes. Disruptions in the property sector have an outsized impact on China’s broader economy, as it accounts for as much as 30% of the country’s GDP.
But during Xi’s leadership, nothing has rocked China’s economy and society as much as zero-Covid. In year three of the pandemic, China has clung to the harsh policy, which relies on mass testing, extensive quarantines and snap lockdowns to stamp out infections at all costs, even as the rest of the world has learned to live with the virus.
The country continues to lock down entire cities over a handful of infections, while sending all positive cases and close contacts to government quarantine facilities. Lining up for Covid tests and scanning a tracking health code to enter any public space have become normalized. Beijing argues the policy has prevented China from spiraling into a health care disaster like the rest of the world, but zero-Covid is wielded at enormous and growing costs.
Artist wears 27 hazmat suits to protest China’s policies
Constant lockdowns have dramatically shrunk the pace of growth in China’s economy. Record youth unemployment has reached nearly 20%. Pocketbooks are shrinking. Heavily indebted local governments are forced to spend on mass Covid testing. Experts say resources would be better spent on increasing vaccination rates rather than building costly testing sites and quarantine facilities. China has still not approved any foreign mRNA vaccines proven to be more effective against the highly contagious Omicron variant than the inactivated vaccines used in China.
At the start of the pandemic, Beijing censored – and in some cases punished – doctors, experts, and citizen journalists who tried to warn of a deadly in virus in Wuhan.
Nearly three years on, as most international experts advise China to find a way to live with the virus, Beijing has doubled down. Earlier this year, Shanghai – a metropolis with a population more than three times that of New York City – was locked down for two months. People struggled to get enough food and basic necessities. Desperate residents broke out of home confinement and clashed with enforcement workers in rare street protests. Many patients were denied life-saving health care.
When the World Health Organization criticized the zero-Covid policy as “not sustainable,” China censored the statement on social media.
Susan Shirk, director of the 21st Century China Center and author of “Overreach,” a book on Xi’s leadership, says China’s leaders “compete with one another to prove how loyal they are to him because Xi promotes loyalists, not the most competent people.” That leads to subordinates going over the top in executing policies to try to please Xi, she said.
Shirk said this has played out with zero-Covid, as Xi has directly tied his leadership to the strategy, so local officials have zealously followed it to show loyalty to the leader and protect their careers.
“A lot of the pain in China’s economy has been self-inflicted by China’s leader,” Shirk said.
“So what this suggests, and this is a pretty disturbing idea, is that the Chinese Communist Party no longer brands itself as a developmental party, putting economic development as its primary objective. But instead, it’s Xi Jinping’s hold on power.”
A version of this story first appeared in CNN Business’ Before the Bell newsletter. Not a subscriber? You can sign up right here. You can listen to an audio version of the newsletter by clicking the same link.
London CNN Business
—
Twelve days from now, the Federal Reserve will meet again, and expectations for the central bank’s next moves are firming up. The consensus among investors: Persistently hot inflation means the Fed will need to continue with its string of aggressive interest rate hikes, which is unprecedented in the modern era.
What’s happening: Markets see a 99% probability that rates will rise by another three-quarters of a percentage point, reaching a range of 3.75% to 4%.
A hike of that magnitude is now “a given,” Quincy Krosby, chief global strategist for LPL Financial, told clients on Wednesday. “Concern is now focused on December, and whether the Fed is prepared to transition to smaller rate hikes.”
That’s up from a 60% probability one month ago. So what changed?
Inflation, mainly. The US Consumer Price Index rose 8.2% in the year to September after rising 8.3% annually in August. While CPI peaked at 9.1% in June, that reading was still uncomfortably elevated and higher than economists had expected.
The 6.6% annual uptick in shelter costs was of particular concern. It takes longer for housing expenses to come back down than some other categories, since renters tend to sign leases for 12-month periods. The monthly rise in core services costs (excluding energy) was the largest gain in three decades.
The data underscored the need for the Federal Reserve to stay tough — while a strong jobs report for September will deliver confidence the central bank can do so without causing undue harm to the US economy.
Fed officials have said as much. In an interview with Reuters on Friday, St. Louis Fed President James Bullard said inflation had become “pernicious,” which means that “frontloading” larger rate hikes is logical.
The market impact: The S&P 500 kicked off the week with a 3.8% rally before dropping 0.7% on Wednesday. It’s still plodding along in a bear market, about 23% below its January peak. So long as the Fed signals its intention to keep the pressure on, boosting the odds of a US recession, volatility is expected to persist.
Even relatively solid corporate earnings may not be sufficient to change the direction.
“So far, the results are decent, but they’re being compared to consensus estimates that have been persistently lowered since early summer,” noted strategists at Charles Schwab.
Tesla
(TSLA) posted a solid quarter of earnings and record revenue, but now says it will likely fall short of its target for a 50% growth in the number of cars it sells this year.
Quick rewind: As recently as July, the company said it was still aiming for a target of 50% growth from the 936,000 cars it delivered in 2021.
But with two quarters of disappointing deliveries caused by supply chain issues and Covid-related shutdowns in China, that goal has looked increasingly out of reach, my CNN Business colleague Chris Isidore reports.
CEO Elon Musk said that the electric carmaker is not struggling with demand.
“We expect to sell every car that we make, for as far in the future as we can see,” he said on a call with analysts on Wednesday.
Instead, the company said it would “just” miss its target due to complications with delivery of cars from its factories to customers at the end of the year.
Shares are down 5% in premarket trading on Thursday. They’ve dropped 37% year-to-date, compared to a 22.5% fall in the S&P 500.
“This quarter was not roses and rainbows,” said Dan Ives, tech analyst for Wedbush Securities. “Competition is increasing. There are some logistical challenges.”
America’s business leaders are becoming more pessimistic. The Conference Board recently reported a slide in its CEO confidence index, which it said had hit levels not seen “since the depths of the Great Recession.”
Of the 136 CEOs who were surveyed, 98% said they were preparing for a US recession over the next 12 to 18 months — and 99% said they were bracing for a recession in Europe.
Notably, the business community is not being quiet about its concerns.
Amazon founder Jeff Bezos tweeted Tuesday that “the probabilities in this economy tell you to batten down the hatches.”
He was responding to a clip of an interview with Goldman Sachs CEO David Solomon, who told CNBC that “it’s a time to be cautious.”
“You have to expect that there’s more volatility on the horizon now,” Solomon said. “That doesn’t mean for sure that we have a really difficult economic scenario. But on the distribution of outcomes, there’s a good chance that we have a recession in the United States.”
American Airlines
(AAL), AT&T
(T), Dow, Nucor
(NUE) and Quest Diagnostics
(DGX) report results before US markets open. CSX
(CSX), Snap
(SNAP) and Whirlpool
(WHR) follow after the close.
Also today:
Initial US jobless claims for last week post at 8:30 a.m. ET.
Existing home sales for September follow at 10 a.m. ET.
Coming tomorrow: Earnings from American Express and Verizon.
Republican Gov. Brian Kemp and Democrat Stacey Abrams sparred over health care, crime and punishment, and voting rights in a Monday debate as they made their closing arguments to voters in a reprise of their fiercely contested 2018 race for the same job.
The stakes for this night were arguably higher for Abrams, who has trailed in most recent polling of the race. Kemp, one of the few prominent Republicans to resist former President Donald Trump’s lies about a stolen election in 2020, has positioned himself as a more traditional, pro-business conservative – a tack that his gentle resistance to Trump reinforced with swing voters. Abrams has argued that Kemp shouldn’t get any special credit for doing his job and not breaking the law.
Kemp and Abrams were joined by Libertarian nominee Shane Hazel, who took shots at both his opponents and plainly stated his desire to send the election to a run-off. (If no one receives a clear majority on Election Day, the top two finishers advance to a one-on-one contest.) But it was the two major party candidates, who ran tight campaigns four years ago with Kemp emerging the narrow victor, who dominated the debate stage. Their disagreements were pointed, as they were in 2018, their attacks and rebuttals well-rehearsed and, to a large degree, predictable.
Here are the four main takeaways from the Georgia governor’s debate:
Like Republican Senate candidate Herschel Walker did in his debate with Democratic Sen. Raphael Warnock last week, Kemp took every opportunity – and when they weren’t there, tried anyway – to connect Abrams to Biden, who, despite winning the state in 2020, is a deeply unpopular figure there now.
“I would remind you that Stacey Abrams campaigned to be Joe Biden’s running mate,” Kemp said, referring to the chatter around Abrams potentially being chosen as his running mate two years ago.
During an exchange with the moderators about abortion, Kemp pivoted to the economy – and again, invoked Biden and Democrats on Capitol Hill.
“Georgians should know that my desire is to continue to help them fight through 40-year high inflation and high gas prices and other things that our Georgia families are facing right now, quite honestly, because of bad policies in Washington, DC, from President Biden and the Democrats that have complete control,” he said.
Abrams, unlike so many other Democrats running this year, has not sought to distance herself from the President and recently said publicly that she would welcome him in Georgia. First lady Jill Biden visited last week for an Abrams fundraiser, where she criticized Kemp over his position on abortion as well as his refusal to expand Medicaid and voting rights.
Early on in the night, Kemp was questioned about remarks he made – taped without his knowledge – at a tailgate with University of Georgia College Republicans in which he expressed some openness to a push to ban contraceptive drugs like “Plan B.”
Asked if he would pursue such legislation if reelected, Kemp said, “No, I would not” and that “it’s not my desire to” push further abortion restrictions, before pivoting to an attack on Biden, national Democrats and more talk about his economic record.
Pressed on the remarks, Kemp suggested he was just humoring a group of people he didn’t know.
On the tape, Kemp, though he didn’t seem enthusiastic, said, “You could take up pretty much everything, but you’ve got to be in legislative session to do that.”
When asked if it was something he could do, Kemp said, “It just depends on where the legislators are,” and that he’d “have to check and see because there are a lot of legalities.”
Georgia in 2019 passed and Kemp signed a so-called “heartbeat” bill, which bans abortions at around six weeks, and went into effect soon after the Supreme Court overturned Roe. v. Wade. Before the ruling, abortion was legal in the state until 20 weeks into pregnancy.
Abrams has promised to work to “reverse” the law, though she would face significant headwinds in the GOP-controlled state legislature, and called the state law “cruel.”
One of the first questions posed to Abrams centered on her speech effectively – but not with the precise language – conceding the 2018 election to Kemp.
In those remarks, Abrams made a symbolic point in arguing that she was not conceding the contest, because Kemp, as the state’s top elections official, and his allies had unfairly worked to suppress the vote. Instead, Abrams said then, she would only “acknowledge” him as the winner.
Some Republicans have tried to make hay over the speech, in a measure of whataboutism usually attached to Trump’s refusal to accept the 2020 results. Abrams, apart from a court challenge, never tried to overturn the outcome of her race.
Still, she was asked on Monday night whether she would accept the results of the coming election – and said yes – before again accusing Kemp of, through the state’s new restrictive voting law, SB 202, seeking to make it more difficult for people to cast ballots.
“Brian Kemp was the secretary of state,” Abrams said, recalling her opponent’s old job. “He has assiduously denied access to the right to vote.”
Kemp countered by pointing to high turnout numbers over the past few elections and, as he’s said before, insisted the law made it “easy to vote and hard to cheat.”
When the candidates were given the chance to question one another, Kemp asked Abrams to name all the sheriffs who had endorsed her campaign.
The answer, of course, was that most law enforcement groups in the state are behind the Republican – a point he returned to throughout the debate.
“Mr. Kemp, what you are trying to do is continue the lie that you’ve told so many times I think you believe it’s true. I support law enforcement and did so for 11 years (in state government),” Abrams said. “I worked closely with the sheriff’s association.”
Abrams also accused Kemp of cynically trying to weaponize criminal justice and public safety issues by pitting her against police. The reality, she said, was less cut-and-dry.
“Like most Georgians, I lead a complicated life where we need access to help but we also need to know we are safe from racial violence,” she said, before turning to Kemp. “While you might not have had that experience, too many people I know, have.”
Kemp, though, kept the message simple. “I support safety and justice,” he said, often pointing to his anti-gang initiatives – especially when he was pressed on the effect of his loosening gun laws on crime.
China has abruptly delayed the publication of key economic data, one day before its scheduled release, as the ruling Communist Party gathers at a major political meeting against the backdrop of a faltering economy.
The country’s National Bureau of Statistics updated its schedule on Monday, with the dates for a series of economic indicators – including the closely-watched GDP growth – marked as “delayed.” The indicators, which had been scheduled for release on Tuesday, also include quarterly retail sales, industrial production and monthly unemployment rates.
The bureau did not give a reason for the delay or set a new publication date.
Separately, the country’s customs authority also postponed the release of monthly trade data, which were initially scheduled to come out on Friday.
The delay of the highly anticipated data coincides with the week-long 20th Communist Party National Congress in Beijing, where Chinese leader Xi Jinping is expected to secure a norm-breaking third term in power. Priorities presented at the gathering will also set China’s trajectory for at least the next five years.
“The delay suggests that the government believes that the 20th Party Congress is the most important thing happening in China right now and would like to avoid other information flows that could create mixed messages,” said Iris Pang, chief economist for Greater China at ING Group, in a research note on Tuesday.
Other analysts believe it could be because the data sets are not pretty.
“My forecast is for a further decline of 1.2% [on a quarterly basis for China’s GDP]. This would mean China had joined the US in a technical recession,” said Clifford Bennett, Chief Economist at ACY Securities.
The delay would make sense “from an image management perspective,” he said. Some economists call two consecutive quarters of contraction a technical recession.
China’s GDP declined 2.6% in the second quarter from the previous one, reversing a 1.4% growth in the January-to-March period. On a year-on-year basis, the economy expanded 0.4% in the second quarter.
Analysts have widely expected third-quarter growth to remain weak, as strict Covid curbs, an intensifying crisis in real estate, and slowing global demand continue to pressure the economy.
Economists polled by Reuters have expected China’s GDP to expand by 3.4% in the third quarter from a year earlier. That would fall far short of the government’s full-year growth target of around 5.5%.
Many international organizations, including the IMF and World Bank, have recently downgraded China’s GDP growth forecasts for this year.
Bennett expected the third-quarter GDP data to be released after the Party Congress.
“Whenever the release occurs, we should all be prepared for some global financial market reaction if the world’s two largest economies are both in recession this year, ” he said.
China’s economy is facing mounting challenges. Growth has stalled, youth unemployment is at a record high, and the housing market is in shambles. Constant Covid lockdowns have not only wreaked havoc on the economy, but also sparked rising social discontent.
In the 20th Party Congress report released on Sunday, Xi renewed his pledge to grow China into a “medium developed country” by 2035.
That would mean China needs to grow at an average growth rate of around 4.7% a year from 2021 to 2035, according to Larry Hu, chief China economist for Macquarie Group.
Hu added that the target might be hard to meet, as the economy faces several structural headwinds, such as the property downturn, an aging population, and rising US-China tensions.
Even though China’s economy is beset by problems ranging from a real estate crisis to youth unemployment, Xi Jinping did not offer any grand ideas to set the country back on track during his two-hour opening speech at the Communist Party Congress on Sunday.
The Chinese leader is expected to secure an unprecedented third term in power at the week-long congress. Priorities presented at the political gathering of more than 2,000 party members will also set China’s trajectory for the next five years or even longer.
In his speech Sunday, Xi struck a confident tone, highlighting China’s growing strength and rising influence under his first decade in power. He also repeatedly underscored the risks and challenges the country faces, including the Covid pandemic, Hong Kong and Taiwan — all of which he claimed China had come away from victorious.
But experts are concerned that Xi offered no signs of moving away from the country’s rigid zero-Covid policy or its tight regulatory stance on various businesses, both of which have hampered growth in the world’s second-largest economy.
“Yesterday’s speech confirms what many China watchers have long suspected — Xi has no intention of embracing market liberalization or relaxing China’s zero-Covid policies, at least not anytime soon,” said Craig Singleton, senior China fellow at the Foundation for Defense of Democracies, a DC-based think tank.
“Instead, he intends to double down on policies geared towards security and self-reliance at the expense of China’s long-term economic growth.”
China is the world’s last major economy still enforcing strict zero-Covid measures, which aim to stamp out chains of transmission through border restrictions, mass testing, extensive quarantines, and uncompromising snap lockdowns.
And China’s economy is in bad shape. Growth has stalled, youth unemployment is at a record high, and the housing market is in shambles. Constant Covid lockdowns have not only wreaked havoc on the economy, but also sparked rising social discontent.
Last week, two large banners were hung on an overpass of a major thoroughfare in Beijing, protesting against Xi’s Covid policy and authoritarian rule. It was a rare protest against the top leadership in the country, signaling the frustration and anger among the public.
Many international organizations, including the IMF and World Bank, have recently downgraded China’s GDP growth forecasts for this year, citing zero-Covid as one of the major drags.
Xi, however, praised the government’s adherence to zero-Covid, saying it has “achieved significant positive results.”
Xi’s speech — a summary of the Communist Party’s work report, or action plan — was similarly short on concrete solutions to other challenges facing the economy in the near term.
“We believe the ongoing Party Congress may not be an inflection point for major policy changes,” Goldman Sachs analysts said on Sunday, adding that they believe China may not loosen its Covid restrictions until at least the second quarter of 2023.
On the property sector, Xi emphasized the need to provide affordable housing and dampen speculative demand — but there was no specific mention of the slump in real estate, whichhas mushroomed into a major crisis over the past few years, threatening both economic and social stability.
“We maintain our view that a comprehensive solution to the beleaguered property sector might not be introduced until after March 2023, when the political reshuffle is fully completed,” said Nomura analysts on Monday.
Nor did Xi mention record youth unemployment, which is mainly a result of his year-long crackdown on the tech industry set against the backdrop of punishing zero-Covid policies.
In the full version of the official 20th Party Congress work report,which was publishedshortly after his speech, Xi emphasized the need to continue the party’s “anti-monopoly” crackdown and regulate “excessive incomes,” a sign that he will continue to get tough on big businesses and wealthy individuals.
Beijing’s sweeping crackdown on the country’s private sector, under the banner of Xi’s “common prosperity” campaign, has pummeled several companies in sectors ranging from tech and finance to gaming and private education.
The government has defended the campaign as necessary for “social fairness” and narrowing income gaps.
In his speech, Xi also made clear that development was the “top priority” and stressed continued focus on “high-quality growth.”
That may dispel some market concerns that the government no longer cared much about economic growth, UBS analysts said.
However, to achieve Xi’s target of making China a “medium developed country” by 2035, the country’s annual real GDP growth needs to average around 4.7% a year from 2021 to 2035, the UBS analysts said. That could be “quite challenging,” they noted, adding they expect China’s potential growth to average between 4% to 4.5% a year this decade, and fall lower after 2030.
Meantime, a comparison between this year’s speech and the last one delivered by Xi in 2017 at the 19th party congress revealed a potentially worrying trend.
The frequency of words such as “security,” “people,” and “socialism” used in 2022 had increased compared to 2017, while that of “economy,” “market” and “reform” declined, Goldman analysts said.
The change was also noticed by Nomura analysts, who said it could point to “a shift in the party’s mandate.”
White House economic adviser Cecilia Rouse on Sunday defended the limited progress the Biden administration has had on tamping down inflation, responding to comments from President Joe Biden last week that tried to put a positive spin on the high rate.
“We’re starting to see signs that the actions they are taking is having an effect,” Rouse said of the Federal Reserve, which she said is focused on bringing down inflation.
Rouse pointed to data from last month that employers are posting fewer job openings and the housing market is tapering off during an interview with CNN’s Dana Bash on “State of the Union.”
“So we’re starting to see signs that our red-hot economy is starting to cool. And so we know that because of that strength … we’re better positioned than most other countries for the Fed to achieve its goals,” Rouse said.
Data from the Bureau of Labor Statistics released earlier this week showed that annual inflation rose by 8.2% in September, a slower increase than the 8.3% rise seen in August. Economists had projected that the pace of price increases would slow to 8.1% last month, CNN reported last week. On a monthly basis, overall consumer prices increased by 0.4% from August.
Asked by Bash about the high prices of food Americans are paying, Rouse pointed to the Inflation Reduction Act’s ability to lessen costs for Americans for prescription medicine – though she acknowledged it does nothing for food prices.
But pushed on when it would start lowering inflation, Rouse said, “Many parts of the bill will start to take effect next year.”
Rouse spoke about the energy tax credits in the law as having one of the most immediate tangible impact in lowering costs.
“There are tax credits for energy to help people weatherize their homes and also bring down other forms of energy costs. So, we are focused on helping to make that transition to clean energy in a way that brings down energy costs for families,” Rouse said.
“This is tough. There’s no question about it. This is a challenge,” she added about bringing down inflation generally.
Editor’s Note: A version of this story appeared in CNN’s Meanwhile in China newsletter, a three-times-a-week update exploring what you need to know about the country’s rise and how it impacts the world. Sign up here.
Hong Kong CNN
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When Xi Jinping came to power in 2012, he inherited a country at a crossroads.
Outwardly, China seemed an unstoppable rising power. It had recently overtaken Japan as the world’s second-largest economy, the country still basking in the afterglow of the dazzling 2008 Beijing Summer Olympics.
But deep within the high walls of Zhongnanhai, the leadership compound where Xi spent time as a child visiting his late father Xi Zhongxun, a liberal-minded vice premier, China’s new leader saw a country in crisis.
Rampant corruption plagued the Communist Party and stoked popular discontent, chipping away at the legitimacy of a regime Xi’s father helped bring to power. The quest to get rich over decades of economic reform created a gaping wealth gap and hollowed out the official socialist ideology, fueling a crisis of faith. And as the Arab Spring toppled dictators in the Middle East, the rise of social media in China offered a rare space for public dissent, amplifying calls for social justice and political change.
Xi took these perceived challenges head on. Born a “princeling” – the offspring of revolutionary heroes who founded Communist China – the Chinese leader saw himself as savior, entrusted by the party to steer it away from threats to its survival.
But instead of following in the reformist footsteps of his father, Xi opted for a path of total control. Combining the old authoritarian playbook and new surveillance technology, he has eliminated his rivals, tightened his grip on the economy and made the party omnipresent in China – embedding his own cult of personality in daily life.
Xi also touted the “Chinese dream” of national rejuvenation, offering a tempting vision to restore China to its past glory and reclaim its rightful place in the world.
“Xi Jinping sits on top of the party, the party sits on top of China, and China sits on top of the world. That’s basically the program,” said Richard McGregor, a senior fellow at the Lowy Institute in Australia.
Ten years on, Xi’s China is richer, stronger and more confident than ever, yet it is also more authoritarian, inward-looking and paranoid than it has been in decades. It has bolstered its international clout, at the expense of its relations with the West and many of its neighbors.
At a key party congress beginning on Sunday, Xi is poised to be appointed to a norm-breaking third term. It will be his coronation as China’s most powerful leader since Chairman Mao Zedong, paving the way for potential lifelong rule.
But as Xi grapples with a sharp economic downturn, growing frustration with his uncompromising zero-Covid policy and surging tensions with the United States and its allies, the sense of crisis that beset his rise to power has continued to haunt him, and is set to shape his rule in the years – if not decades – to come.
Xi saw the party’s crisis up close during his ascent to the top in 2012, when a sensational scandal brought down a prominent political rival and threatened to derail the leadership handover.
Bo Xilai, a fellow “princeling” and charismatic leader of the mega city of Chongqing, was vying for promotion into the top leadership when his police chief attempted to defect to a US consulate, accusing Bo of trying to cover up his wife’s murder of a British businessman. Party leaders feuded over how to deal with the fallout. Eventually, Bo was investigated and expelled from the party weeks before the five-yearly power reshuffle. Bo and his wife are today both serving life in prison.
Having risen through the ranks in the bustling coastal provinces during China’s reform and opening up, Xi would have seen no shortage of local corruption. But the blatant abuse of power and deep rifts at the very top of the leadership exposed in Bo’s scandal likely aggravated Xi’s sense of peril for the party’s survival.
“Our party faces many grave challenges and there are many pressing problems within the party that need to be solved, in particular corruption,” Xi said in his first speech hours after being appointed the top leader.
Within weeks, he launched the most brutal and long-lasting “war on graft” the party had ever seen. The sweeping purges targeted not only the corrupt, but also Xi’s political enemies, including powerful leaders who were accused of plotting a coup with Bo to seize power.
The crackdown instilled discipline, loyalty and a culture of fear, stifling opposition as Xi moved to amass power into his own hands. He styled himself as a strongman, eschewing the collective rule that was alleged to have exacerbated factionalism under his comparably weak predecessor Hu Jintao. In just four years, Xi asserted himself as the “core” of the party leadership, demanding its 96 million members to “unify their thinking, willpower and action” around him.
“(Xi) thinks the only instrument with which he can rule China at home and make gains abroad is a unified, strong, and powerful Communist Party. So he has made it his mission to strengthen the party under his rule,” said McGregor at the Lowy Institute. “He’s both strengthened himself, and he’s strengthened the party as a vehicle for himself.”
Consolidating the party from within was only part of his plan. Xi also set out to fortify the party’s grasp over the country. “Government, the army, society and schools, east, west, south, north and center – the party leads them all,” he said at the party congress in 2017.
Under Xi, the party reasserted itself in all aspects of life. It revitalized once-dormant grassroots party cells and set up new branches in private and foreign companies. It tightened its grip on the media, education, religion and culture, strangled civil society, and unleashed harsh crackdowns on Xinjiang and Hong Kong.
Xi also ramped up the party’s control of the economy, especially its once-vibrant private sector. His sweeping regulatory crackdown brought tycoons to heel and wiped out trillions of dollars of market value from Chinese firms.
In the online sphere, extensive censorship and real-life retaliation tamed social media. Instead of serving as a catalyst for social and political reforms, it became an amplifier for party propaganda and a breeding ground for nationalism.
The pervasive social control reached new heights during the pandemic. In the name of fighting Covid, 1.4 billion Chinese citizens lost their freedom of movement to the whims of the party and the prowess of the surveillance state. Cities across China are trapped in rolling, draconian lockdowns, sometimes for months on end, with millions of people confined to their homes or massive quarantine camps.
For Xi, safeguarding the party’s primacy is a painful lesson drawn from the Cultural Revolution, when the Communist establishment was attacked by Mao’s “red guards” and lost control over society.
Hundreds of thousands died in the turmoil, including Xi’s half-sister who was persecuted to death. Xi’s father was purged and tortured. Xi himself was incarcerated, publicly humiliated and sentenced to hard labor in an impoverished village at age 15.
“Arguably, his emphasis on party authority, and stopping individuals who disagree with the party from criticizing (it), is a result of his phobia of chaos because of what he saw happened to himself, his mother, his father and siblings,” said Joseph Torigian, an expert on Chinese politics at American University and author of an upcoming biography on the elder Xi.
Many Chinese who survived the Cultural Revolution – including some party elites – came away with a conviction to prevent a similar catastrophe from happening again, China needed the rule of law, constitutionalism and protection of individual rights. But Xi arrived at a very different conclusion.
“(He) believed that to achieve political order you needed to have a powerful leader, a powerful party, not creating a system in which people had rights that went too far, because they would only abuse them and hurt other individuals,” Torigian said.
So instead of turning against the party, Xi devoted himself to it. In interviews with state media, Xi spoke of how his seven years as a “sent-down youth” toughened him up and strengthened his resolve to serve the party and the people. “I was distilled and purified, and felt like a completely different man,” he told the People’s Daily in 2004.
Xi’s obsession for control was also shaped by the trauma of the collapse of the Soviet Union, which he has repeatedly cited as a cautionary tale for the Chinese Communist Party.
“Why did the Soviet Union disintegrate? Why did the Soviet Communist Party collapse? An important reason was that their ideals and beliefs had been shaken,” Xi told senior officials in a speech months after taking the helm of the party.
To address China’s own crisis of faith, Xi cracked down on religion, reinvigorated the party’s official Marxist ideology and promoted his own eponymous philosophy. “Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era” is enshrined in the party charter and dominates party speeches and meetings. It also permeates billboards, newspaper front pages and cinema screens, and is taught in classrooms across the country – to children as young as 7.
At the center of “Xi Jinping Thought” is the notion of the Chinese dream: the “great rejuvenation of the Chinese nation” – a vision Xi unveiled just weeks after coming to power.
It has since become a hallmark of his rule, shaping many of his policies at home and abroad.
“Xi Jinping is a man with a mission. He believes that he knows the ways to take China to the promised land of national rejuvenation,” said Steve Tsang, director of the China Institute at SOAS University of London.
“He is going back to his mythical visions of Chinese history, when China was the greatest civilization and country in the world. And the rest of the world (should) just respect, admire and follow the leadership of China.”
To be sure, many Chinese are proud of their country’s achievements. Under Xi, China declared an end to extreme poverty, modernized its military, emerged as a leader in next-generation technology and greatly expanded its global influence. It is striving to become the dominant power in space, commands the world’s largest navy, and makes its weight felt as an emerging superpower.
For others, Xi’s Chinese dream has turned into their living nightmare. In the country’s far west, Muslim minorities are arbitrarily incarcerated, forcibly assimilated and closely surveilled. In Hong Kong, pro-democracy supporters saw their freedom and hope crushed in a city changed beyond recognition. Across the country, numerous rights lawyers, activists, journalists, professors and businessmen are languishing in jail, or silenced by fear. In Xi’s eyes, they are all perceived threats to his quest for a strong and unified nation, and thus must be remolded or eliminated.
But increasingly, the sheen of the Chinese dream is coming off for ordinary people, too – young professionals who chose to “lie flat” in the face of intense pressure, depositors who lost their life savings in rural banks, homebuyers who refused to pay mortgages on unfinished homes, as well as business owners, laid-off workers and residents pushed to the brink by Xi’s relentless zero-Covid lockdowns. Some of them might have previously rooted for Xi and his vision, but are now paying the price for his policies.
The most disillusioned are seeking a way out. “Run philosophy” has become a Chinese buzzword, advocating emigration to escape what some see as a doomed future under Xi’s rule. Xi has repeatedly touted that China is rising and the West is in decline – a conviction strengthened by America’s political polarization, and his belief that China’s superior political model has enabled it to fight Covid better than Western democracies. But the growing number of disciples of “run philosophy” is an outright rejection of that narrative, showing many Chinese have no faith in his promise to make China great again.
Underpinning Xi’s Chinese dream is a bitter sense of resentment toward the West, rooted in the nationalistic narrative that before the party took power, China suffered a “century of humiliation” at the hands of foreign powers and was invaded, carved up, occupied and weakened.
In recent years, American measures to counter China’s rising influence has only reinforced its sense of being under siege from Western powers, McGregor said.
“It has a visceral, emotional appeal in China. It’s very powerful. I think Xi understands that and he intends to harness that to his own ends,” he said.
As a leader-in-waiting, Xi had already shown a strong disdain for foreign criticism of China. “There are some foreigners with full bellies who have nothing better to do than point fingers at us,” Xi told members of the Chinese community in Mexico on a visit as vice-president in 2009. “China does not export revolution, hunger or poverty. Nor does China cause you headaches. Just what else do you want?”
But Xi’s starkest warning to the West came last summer, when he presided over a grand celebration marking the party’s centenary. Standing on top of Tiananmen, or the Gate of Heavenly Peace, the towering entrance to the Forbidden City palace of imperial China, Xi declared the Chinese nation will no longer be “bullied, oppressed or subjugated” by foreign powers. “Anyone who dares to try, will find their heads bashed bloody against a great wall of steel forged by over 1.4 billion Chinese people,” he said to thundering applause from the crowd.
Since coming to power, Xi has repeatedly warned against the “infiltration” of Western values such as democracy, press freedom and judicial independence. He has clamped down on foreign NGOs, churches, Western movies and textbooks – all seen as vehicles for undue foreign influence.
Abroad, Xi embarked on an aggressive foreign policy. “Xi thinks this is China’s moment. And to seize that moment, he has to be assertive and take risks,” McGregor said.
Under Xi, China has openly competed for global clout with the United states, leveraging its economic heft to gain geopolitical influence. Its ties with the West are at their most fraught since the 1989 Tiananmen Square massacre – and they were further soured by Beijing’s tacit support for Moscow following the Russian invasion of Ukraine.
Xi and his Russian counterpart Vladimir Putin share a deep suspicion and hostility toward the US, which they believe is bent on holding China and Russia down. They also share a vision for a new world order – one that better accommodates their nations’ interests and is no longer dominated by the West.
But it remains to be seen how many countries are willing to join that alternative perspective. Views of China have grown more negative during Xi’s decade in power across many advanced economies, and in some, unfavorable views reached record highs in recent years.
Beijing’s sweeping claims of sovereignty have also antagonized many of its neighbors in the region. China built and militarized islands in the South China Sea, raised military tensions over a disputed island chain with Japan, and engaged in bloody border conflicts with India. It has also ramped up military intimidation of Taiwan, a self-governing democracy Xi has vowed to “reunify” with the mainland.
For its part, the US has awakened to the competition with China, and is working with allies and like-minded partners to take a raft of measures against Beijing on geopolitics, trade and technology.
That difficult international environment, along with the toll of zero-Covid and the economic headwinds, poses a big challenge for Xi in the years ahead.
But for the coming week, the party congress will be all about celebrating Xi’s victory. According to the party’s most updated official history, Xi has brought China “closer to the center of the world stage than it has ever been.”
Mao may have founded Communist China. But according to the party’s narrative, it is Xi who will lead the country to its rebirth as the new global superpower. Whether he can succeed will have a profound impact on the world.
