China goes big on affordable housing to fix economic headaches. Crude oil prices ease on economic and demand concerns. An analysis of Trump's economic plans and their feasibility. China's wealthy individuals shy away from flaunting their wealth amid economic jitters. Stay informed with Simply Economics as we delve into these key economic stories.
Sources:
https://www.firstpost.com/world/to-fix-economic-headaches-china-goes-big-on-affordable-housing-13793549.html
https://www.qcintel.com/article/oil-futures-crude-prices-ease-on-economic-demand-concerns-26959.html
https://www.whio.com/news/trumps-economic/QYDXGMA7QZBGBMI3457XAWIPEE/
https://www.cnbc.com/2024/07/16/chinas-rich-shy-away-from-flaunting-wealth-amid-economic-uncertainty.html
Outline:
(00:00:00) Introduction
(00:00:42) To fix economic headaches, China goes big on affordable housing
(00:02:56) Oil futures: Crude prices ease on economic, demand concerns
(00:05:31) Trump's economic plans include proposed tariffs, tax cuts and no taxes on tips. Details are scarce
(00:06:14) 'Luxury shame': China's rich shy away from flaunting their wealth amid economic jitters
Simply Economics
China’s Affordable Housing Initiative, Oil Prices Ease on Economic Concerns, Trump’s Economic Plans Analyzed, and China’s ’Luxury Shame’
China goes big on affordable housing to fix economic headaches. Crude oil prices ease on economic and demand concerns. An analysis of Trump's economic plans and their feasibility. China's wealthy individuals shy away from flaunting their wealth amid economic jitters. Stay informed with Simply Economics as we delve into these key economic stories.Sources:https://www.firstpost.com/world/to-fix-economic-headaches-china-goes-big-on-affordable-housing-13793549.htmlhttps://www.qcintel.com/article/oil-futures-crude-prices-ease-on-economic-demand-concerns-26959.htmlhttps://www.whio.com/news/trumps-economic/QYDXGMA7QZBGBMI3457XAWIPEE/https://www.cnbc.com/2024/07/16/chinas-rich-shy-away-from-flaunting-wealth-amid-economic-uncertainty.htmlOutline:(00:00:00) Introduction(00:00:42) To fix economic headaches, China goes big on affordable housing(00:02:56) Oil futures: Crude prices ease on economic, demand concerns(00:05:31) Trump's economic plans include proposed tariffs, tax cuts and no taxes on tips. Details are scarce(00:06:14) 'Luxury shame': China's rich shy away from flaunting their wealth amid economic jitters
- Duration:
- 10m
- Broadcast on:
- 16 Jul 2024
- Audio Format:
- mp3
Good morning and welcome to Simply Economics. It's Tuesday, July 16th. On today's show, China takes big steps to fix economic headaches with a focus on affordable housing, while crude prices ease due to economic and demand concerns. Plus, Trump's economic plans include proposed tariffs, tax cuts and no taxes on tips, but details are scarce. Let's coverage in more up next. I'm David and you're listening to Simply Economics. We start off with a look at how China is taking a new approach to tackling its protracted property crisis. In May, Chinese leaders ordered cities to purchase newly completed apartments and convert them into affordable housing. Now, the first steps are being taken to implement this directive in ways that go beyond just helping low-income households. For more on this, we turn to our correspondent. What are some of the key things Chinese cities are doing in response to this new policy? Well, David, an analysis of public statements from 20 Chinese cities shows that local officials are thinking bigger than just providing housing for the poor. Most have distributed questionnaires to doctors, teachers and other groups beyond the usual low-income targets to gauge demand for subsidized rents and purchases. Some cities are even calling on migrant factory workers from rural areas or scientific researchers to express interest. Interesting. So it seems they are using this housing policy to address other economic and social issues as well. What are some examples of that? Most say the announcements show cities are trying to tackle brain drain and net population outflows to mega cities like Shanghai or Shenzhen. By easing labor shortages in factories and strengthening healthcare and education through affordable housing, smaller cities could boost economic activity and broaden their tax base. This consumer-oriented move promises to transfer resources from local governments to households, which many have long called for as a means to bolster domestic demand. But attracting residents is one thing, keeping them as another. What challenges might cities face in making this affordable housing appealing long-term? Right. While surveys are expected to return strong initial interest, many would-be renters or buyers might change their minds if the apartments purchased for the scheme are in poor condition or inconvenient locations. The quality and specifics of what's being offered remains to be seen. Few cities have indicated the size of planned subsidies, though some are offering rent discounts of at least 20%. Thanks for the update on China's property market. It will be interesting to see if the government's new approach and funding can help turn things around. Shifting gears to another key market, crude oil futures eased in Asian trading hours Tuesday as concerns over broader economic growth offset increasing prospects for a September US rate cut. Front month September ice-brent futures were trading at 84.25 cents per barrel compared to Monday's settle of 84.45 cents. At the same time, August 9xWTI was trading at 81.29 versus Monday's settle of 81.91 cents. For more on this, we turn to our markets correspondent Celeste. It's driving this pullback in oil prices despite the rising likelihood of a fed rate cut. There are a few key factors weighing on crude prices right now. First, disappointing GDP figures out of China, the world's largest oil importer, are stoking demand concerns. Data showed Chinese oil refiners processed 14.19 million barrels per day in June, a continued slide as thin margins impact utilization rates across the country. This comes after Chinese oil import data last week also showed softness in the first half of the year. In the US, the world's largest oil consumer. There are worries that demand may have peaked during the July 4th holiday. So while Fed Chair Jerome Powell's comments Monday boosted prospects for a September rate cut which could juice economic growth and oil demand, jitters about the current demand picture are winning out for now. Biopolitical tensions like the conflict in Gaza and Houthi militant attacks on oil tankers are also being closely watched by oil traders. Powell's exact comments were that the Fed doesn't need to see inflation all the way down at 2 percent before cutting rates, implying they may have already tightened too much. But it seems the oil market needs to see more concrete signs of demand picking up before getting too excited. What are you seeing in terms of actual oil flows and pricing? The physical oil market is signaling some weakness as well. In the key North Sea market, the flagship 40s crude traded in Monday's window at a much smaller premium to the underlying Brent benchmark than it had late last week. 40s traded just 60 cents above dated Brent on a free onboard basis Monday, whereas last Wednesday it commanded a $1 per barrel premium. So the easing of that premium points to a bit less physical tightness and robust demand than just a few sessions ago. Thanks for the update on the global crude market celeste. It's certainly a complex situation. Moving on, I'm afraid we'll have to leave it there for now as we don't have enough verified information from reliable sources to responsibly report on the next story we had lined up. We'll continue to monitor the situation and bring you updates as we're able to confirm the facts. I completely agree, David. In a developing story like this with many unknowns, it's critical that we rely only on confirmed facts from trusted news outlets before engaging in any commentary or analysis to avoid potentially spreading misinformation. The responsible thing is to refrain from speculation that could fuel unsafe rumors. We'll continue monitoring official statements and reputable reports as that story unfolds. In the meantime, let's turn our attention to the luxury market in China. There are emerging signs of so-called luxury shame amid a challenging macroeconomic environment, sluggish GDP growth, and weak consumer confidence, factors that are making the wealthy more cautious about flaunting their riches and putting pressure on the country's luxury sector. For more on what's contributing to this luxury shame phenomenon, we turn to our correspondent. All factors are at play here. The Chinese economy has been under pressure post-COVID, with expectations of slowing growth and lackluster consumption. The country continues to grapple with high youth unemployment and troubles in its real estate market. In the face of this economic uncertainty, some Chinese shoppers are turning away from ostentation. Even people who can afford to buy luxury products have less willingness to do so, in order not to be seen as really buying or wearing very expensive items. How are Chinese consumers' luxury purchasing habits changing in response to this? What trends are emerging? Chinese consumers are increasingly going for the quiet luxury style, investment pieces, and luxury goods that are more subtle and less visible. Across the board, Chinese consumers have become more rational. They really want to see a correlation between price and value, and are thinking twice before buying the most expensive items. The Chinese consumer is becoming more sophisticated, while they used to be more willing to pay a premium for foreign brands. Today, many are making purchases based on a product's quality, or the value proposition a brand has to offer. China's political positioning has also played a role in this luxury shame. Can you explain how government policies and messaging are impacting consumer behavior? The Chinese government has been pushing for common prosperity, a campaign first mentioned in the 1950s by Mao Zedong, and reintroduced in 2021, with the goal of creating moderate wealth for all. As part of this, authorities have discouraged money worshipping, and in May began cracking down on wealth-flaunting, even banning a couple of online influencers known for their lavish lifestyles from Chinese social media sites. This government posture has created a psychological impact, making the wealthy more hesitant to flaunt their riches in front of the public during a time of economic uncertainty. Despite China being home to the second highest number of ultra-wealthy individuals in the world after the US, it seems the luxury market there is struggling in the current climate. What is the outlook for this sector in China going forward? Even though the global personal luxury goods sector is expected to grow modestly, up to 4% or as much as $420 billion, China's luxury market is struggling and overall contracting according to a report by consultancy Bain & Company. Some of China's wealthy have even started moving money out of the country. However, it's important to note that it's not that the rich are not willing to spend on luxury at all. Some of the top luxury players continue to see very strong performance in China. But in general, aspirational consumption is what people are getting more cautious around, and this trend will likely continue in the near term given the economic headwinds and political environment. Fascinating insights on the evolving luxury landscape in China. Thanks for that analysis, and with that we wrap up our stories for today. Thanks for listening to Simply Economics, we'll see you back here tomorrow. in the next video. Thanks for watching. (gentle music) [BLANK_AUDIO]