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- 😬 China rolls out biggest stimulus since pandemic
😬 China rolls out biggest stimulus since pandemic
PLUS: Visa sued by the DOJ ; The U.S. is going after foreign EVs.
Jacob Goldschein & Steven Van
September 25, 2024 • Estimated Reading Time: 9 minutes
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TOP STORY
😬 China rolls out biggest stimulus since pandemic
📸 Reuters
China’s central bank is launching a massive stimulus package, the largest since the pandemic.
China will cut interest rates, lower bank reserves, and reduce mortgage rates and downpayment requirements to support the property market and households.
There will also be programs to boost capital markets, including funding for stock purchases and buybacks.
📉 The CSI 300 Index, which tracks the top 300 companies on China’s Shanghai and Shenzhen stock exchanges, is down -7.89% in the past year.
This is what it’ll look like, numbers-wise:
The Reserve Requirement Ratio (RRR), which dictates the amount of reserves banks must hold, could be lowered by 0.25-0.5%, allowing banks to lend more money.
The seven-day reverse repo rate, the short-term interest rate at which the central bank borrows from commercial banks, will be cut by 0.2% to 1.5%, reducing borrowing costs.
The property market support includes a 50 bps (0.5%) reduction in mortgage interest rates, which will make home loans cheaper.
The minimum downpayment for homes will also drop to 15%, making it easier for people to afford homes.
📸 Reuters
Why now? Because China’s economy is slowing down and needs a boost.
According to analysts, China should have acted sooner.
With 70% of Chinese household savings tied up in real estate and the property market declining, it was only a matter of time before they realized they needed to act ASAP to stabilize the economy.
💬 China's GDP growth fell to 0.7% in Q2 2024, down from 1.5% in the previous quarter, marking one of its weakest performances since 2022.
Retail sales growth only rose by 2.1% in August, well below expectations.
💬 Soon after the news, Chinese stocks and bonds rallied, and Asian stocks hit 2 1/2-year highs.
The Chinese yuan currency jumped to a 16-month high against the dollar.
FINANCIALS
💳️ Visa sued by the DOJ
📸 Axios
Earlier this week, the Department of Justice sued credit card giant Visa for illegally monopolizing the consumers’ payments market, driving up prices for both businesses and consumers.
What did the big bad credit card company do wrong?
Like any good monopoly, they’ve made it difficult for people to avoid using them to process payments.
💬 The lawsuit says Visa handles more than 60% of debit card transactions in the U.S. and collects more than $7 billion in annual processing fees
Here are some examples of what they’ve allegedly or blatantly done:
Used tactics to block competitors and maintain its dominance, such as charging higher fees to merchants who routed transactions through other payment networks.
Allegedly paid companies like Apple to limit their efforts to create cheaper alternatives.
Allegedly imposed high fees on fintech companies like PayPal and Square to prevent them from offering alternative payment options.
The lawsuit could take several years to resolve, though, so it’s not like things will change anytime soon.
💬 “Visa has unlawfully amassed the power to extract fees that far exceed what it could charge in a competitive market.”
“Visa’s unlawful conduct affects not just the price of one thing—but the price of nearly everything.”
📈 Visa ($V) stock is up 54.86% in the past 5 years.
ELECTRIC VEHICLES
🚗 The U.S. is going after foreign EVs.
📸 Business Insider
Earlier this week, The US Commerce Department proposed a ban on selling or importing smart vehicles that use specific Chinese or Russian technology.
Why? It’s a matter of national security, you fool.
It began in February when the US began investigating foreign-made smart car components and discovered numerous potential national security risks, including embedded software and hardware from China and Russia in US vehicles.
💬 In May, the U.S. announced a 100% tariff on Chinese Electric Vehicles
📸 Curbed LA
What kind of threat does this technology pose? Well, according to Secretary of Commerce Gina Raimondo, the risks include the possibility of remote sabotage through hacking and the collection of personal data on drivers.
I wouldn’t want the KGB controlling my Tesla, that’s for damn sure.
It does sound smart, in theory, to prevent our adversaries from causing even more traffic on the 405.
“In extreme situations, a foreign adversary could shut down or take control of all their vehicles operating in the United States, all at the same time, causing crashes (or) blocking roads.”
When will it be implemented?
The software ban will take effect for 2027 models, and the hardware ban will start with 2030 models.
So don’t worry; you still have time to hug your foreign cars before it’s too late.
💬 “The proposed rule applies to all vehicles on public roads, including trucks and buses, connected to the internet or navigation systems—i.e., most modern cars and all autonomous vehicles.”
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