China's cleanse 🙊
By Justin Pyvis – Delivered on 31 Aug 2021

Good morning! It was another unwanted record for NSW yesterday after 1,290 new cases were reported. Premier Gladys Berejikian has given up on getting case numbers down, stating that "vaccination is the key in terms of our freedom and reducing the spread of the virus".

Down in Victoria 73 new cases were reported, just 24 of which were in isolation while infectious. Still no word on how long the lockdown will be extended but safe to say it'll be a while yet.

In the ACT, Chief Minister Andrew Barr pushed back a little against the national reopening plan and some of the freedom rhetoric coming out of NSW, remarking that people should "stop talking about 70%, because it's not safe. It will be a gentle step forward [at 70%]. It will be 80%, and I hope when the nation is at 80 we're at 90/95%".

Across the ditch Auckland will remain in full lockdown for at least another two weeks, with everywhere south of the Auckland-Waikato border moving to 'level 3' at 11.59pm Tuesday for at least a week.

Markets

Daily % change

 

AUD/USD

73.0

+0.8%

 

 

10Y Bond

1.15

-2.5%

 

 

ASX200

7,505

+0.2%

 

 

Brent (bbl)

73.3

+0.8%

 

 

Gold (oz)

1,812

-0.5%

 

 

Iron ore (t)

156.3

+0.0%

 

 

Bitcoin

48,566

-0.5%

 

Note: Brent oil, gold bullion and iron ore prices are the second futures contract.

The US S&P500 reset its record high last night, adding 0.43% as Big Tech all gained over 2% led by Apple (+3.2%), which hit an all-time high.

Locally, the ASX200 gained 0.22% on a big day for the iron ore miners, particularly Fortescue Metals Group (+6.6%), which more than doubled its final dividend from last year after a 117% increase in net profit. That means founder and 36% owner Andrew "Twiggy" Forrest will take home a cool $A2.35 billion. 😲

Economy

Humming along: Australian company gross profits and wages both increased in the June quarter by 7.1% and 2.0%, respectively. A big contributor to both was the volatile mining sector (+18.4% profits, +2.3% wages) on the back of record iron ore prices, which have since come off the boil somewhat. These data were also for a period before Sydney and then Melbourne entered full lockdown, so could be quite a bit weaker this quarter.

Gold rush: Mineral exploration expenditure hit an eight-year high in the June quarter with spending in Western Australia alone nearly $A600 million, the highest since 2012 and around 65% of the national total. Nearly half of all spending was for gold, which surged 19.3% over the quarter.

Weimar watch: 'Harmonised' consumer price inflation in Germany hit a 13-year high of 3.4% in August, while the national inflation rate reached 3.9% – the highest since 1993. Germans tend to be inflation hawks because, well, history, so it will be interesting to see if this flows through to voter sentiment – Chancellor Merkel's party is up for election again in just 26 days – or pressure on the European Central Bank to tighten monetary policy.

Retail recovery: Japan's retail sales increased for a fifth consecutive month in July, rising 2.4% (1.1% from the prior month). The result was above-expectations and was likely boosted by the Tokyo Olympics being in town, meaning it's unlikely to be sustained, especially as state of emergency restrictions have since increased to the point where they now cover around 80% of Japan's population.

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Feature
China's cleanse 🙊

In a statement quietly released late on Friday, the Cyberspace Administration of China announced a crackdown against platforms and individuals that "bad mouth" the Chinese economy:

"For financial information, a number of websites and platforms with serious problems have been strictly dealt with in accordance with laws and regulations, and a number of 'self-media' accounts that act as 'bad mouths', extortion and have strong social reaction have been banned.
...
The sustained and healthy development of society creates a good online public opinion environment."

Stepping back: China's government has never truly permitted free speech but the situation has deteriorated rapidly under the leadership of Xi Jinping, who believes China's development has become "unbalanced and inadequate", but not for the reasons you might think (e.g. excessive government-directed investment in infrastructure).

No, for Xi it's the private sector that's at fault as its success has undermined the values he holds dear: Marxism-Leninism, socialism and the Chinese Communist Party.

Why this matters: China is the world's second largest economy and Australia's biggest trading partner. This "special rectification" is fuel to the fire for China sceptics, as the first thing a failing regime does is forbid people from talking about the regime.

Mao Zedong, an idol of Xi's, would send "counter-revolutionaries" out to the Laogai, concentration camps that killed tens of millions of people. Some of their crimes included the suggestion they were starving in defiance of the government's official harvest numbers, which Mao was using to justify exporting the fictitious surplus to finance the government.

Xi hasn't revived the Laogai, but 're-education' is certainly taking place. Billionaire tech entrepreneur Jack Ma? Missing, having questioned China's regulators. Billionaire actress Zhao Wei? Erased from history for hiring a Taiwanese actor. The disappearing acts will no doubt intensify if the economic situation in China deteriorates.

Looking forward: China's official data are notoriously suspect and now any remaining impartial voices on China's economy will be silenced. As the sole arbiter of truth, Xi Jinping's government will now "severely punish" anyone who makes "unreasonable comments, distorts or misinterprets our financial policies or macroeconomic data, maliciously sings about our financial markets, or slanders China's economy". Even reprinting or distributing such material "without judgement" is strictly forbidden.

If the next global crisis starts in China, you surely won't hear about it from China or Hong Kong-based commentators.

The Wrap Up
  • 🎮 Good luck with enforcement – China's government banned anyone aged under 18 from playing video games except between 8-9pm on Friday, Saturday and Sunday.
  • ✈️ Virgin Australia will require all employees to be vaccinated against COVID-19 starting with frontline workers on 15 November.
  • 🌀 Hurricane Ida smashed into the US yesterday, knocking out power to all of New Orleans and reversing the flow of the Mississippi River.
  • 🏉 Fijian Drua and Moana Pasifika will take part in a new 12-team Super Rugby competition kicking off on 18 February 2022.
  • 👐 Singapore is reopening with 74% of its total population vaccinated, as the Delta variant means COVID-zero is "impossible" and the country must now "change gears" toward a new normal.
  • 🥊 Controversial YouTuber Jake Paul defeated former UFC champion Tyron Woodley by split decision in a boxing exhibition.
  • 🕊️ Labor senator for South Australia, Alex Gallacher, died yesterday after a battle with lung cancer, having being diagnosed in January 2020.
  • 🙄 Queensland's government somehow found enough quarantine space for the family members of 100 NRL players who fled Sydney, despite a ban on travel from the city due to a supposed lack of quarantine capacity...
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