🇨🇳 China jitters

Plus: Bitcoin bounce | Wednesday, January 18, 2023

Open in app View in browser   Presented By Circle   Axios Markets By Matt Phillips and Emily Peck · Jan 18, 2023 Inflation may have peaked. But that just means prices aren't rising as fast as last year. Many things — looking at you, eggs — remain crazy expensive. Scroll to the bottom for a related rant about matzo balls. And what about you, dear reader: Have you run into any particularly egregious prices recently? Email and tell me about: matt.phillips@axios.com 🎧 Out now: "Elon Musk vs. Twitter Part V: Cracks in the Empire." The season finale examines Musk's first months as CEO of Twitter. Listen. Today's newsletter is 600 words, 2.5 minutes.     1 big thing: China's giant downshift A long, slow sunset? Photo: Liu Mancang/Xinhua via Getty Images   China's economy posted its second-slowest year of economic growth since 1976, another indication the post-COVID world economy could be vastly different from the decades that preceded the pandemic, Matt writes. Why it matters: Since it burst onto the world economic stage in the early 1990s, China's economy has been a central driver of business decisions in virtually every part of the world economy, including Australian and Brazilian miners; oil producers in the Gulf; British and American bankers; Argentinian farmers; and German automakers. Driving the news: New numbers from China's National Bureau of Statistics showed its economy expanded by just 3% for the full year, down from 8.1% in 2021. What they're saying: "It is very surprising in our view that the reported numbers for December were not worse, given the large Covid wave in the month," Goldman Sachs economic analysts wrote in a note to clients. Context: Analysts tie the country's recent economic ills to its harsh "Zero COVID" lockdown policies, which wreaked havoc last year. Yes, but: China's economic problems go beyond the virus. Years of a speculative frenzy in housing have caught up with the country. Home prices are now deflating, and major homebuilders appear dangerously over-indebted. The government's sudden confrontation with its formerly high-flying tech sector spooked global investors, prompting foreign investors to pull capital from the country. The impact of the virus, as well as growing political tensions with major trading partners such as the U.S., are driving diversification away from Chinese supply chains. What's next: Now, a long-predicted demographic downturn in the country has also arrived. Numbers released by China on Tuesday showed its population shrank for the first time since the 1960s, as deaths outpaced births. While birthrates have long been slowing in China — a typical phenomenon as countries become more affluent — it marks a major tipping point. The bottom line: The combination of geopolitical tensions, domestic disarray and demographic decline mean it's all but impossible that China's economy regains its previous vigor. Go deeper     2. Chart: China GDP Data: FactSet; Chart: Alice Feng/Axios     3. Catch up quick 🇨🇳 Yellen plans her first trip to China as Treasury secretary. (Axios) 🚘 Here's what's at stake for Elon Musk in a shareholder trial over 2018 Tesla tweets. (Axios) 💸 FTX discloses shortfall of funds, due to hack. (MarketWatch) 🧑‍🍳 How restaurant workers fund lobbying to keep their pay low. (NYT)     A message from Circle Discussion in Davos: New opportunities for global businesses     Large corporations can benefit from digital currency and blockchain — and Circle builds the infrastructure that helps make it possible, now. What this means: Major global businesses can use this infrastructure to handle retail payments, payroll and more. Circle discusses this and more at WEF23.     4. Americans spend more than they make Data: Morning Consult; Chart: Axios Visuals Overall consumer spending fell 4.3% in December from the previous month, according to a Morning Consult survey released this morning, with an increasing share of Americans spending more money than they're earning, Emily writes. Why it matters: Inflation may be easing, but high prices are still a big problem for individuals, particularly after a year of spending down savings. It's not a great sign for economic growth. Details: Shoppers are increasingly making tradeoffs. To afford rising food prices at home — up 12%, per the latest CPI — households cut back on restaurant spending by 8%, Morning Consult found. Yes, but: This is just one data point. The drop in December could be attributed in part to folks doing their holiday shopping a little earlier than usual. What to watch: More data on retail sales at the end of 2022 will be out later this morning. Read more   Share Axios and earn rewards If you like this newsletter, your friends may, too! Refer your friends and get free Axios swag when they sign up. Be a good friend and share   5. Bitcoin bounce Data: CoinGecko; Chart: Axios Visuals Bitcoin's on a hot streak, passing $21,000 this week, up more than 25% for the year. A bit of whiplash after a punishing 2022, Emily writes. Much of the surge came after the December CPI showed inflation easing. Despite the high-profile meltdowns of the last year, "bitcoin was never dead," Brady Dale, who cowrites Axios' crypto newsletter, tells us. But he cautions, this latest rally is "probably temporary."     A message from Circle Discussion in Davos: New opportunities for global businesses     Large corporations can benefit from digital currency and blockchain — and Circle builds the infrastructure that helps make it possible, now. What this means: Major global businesses can use this infrastructure to handle retail payments, payroll and more. Circle discusses this and more at WEF23.   1 thing Matt recently heard: My sister and her husband recently reported visiting a well-known deli on Manhattan's Upper East Side, and ordering two large — one quart — matzo ball soups. They cost ... $29.95...each! (I subsequently confirmed with a call. I trust my sister's reporting, but as the journalism adage goes, if your family says they love you, check it out.) The bill came to more than $56! For matzo ball soup! A relatively simple dish comprised mostly of unleavened bread crumbs, egg and broth! Luckily, my sister reports that the soup — a traditional Passover dish that has become a beloved favorite for non-Jews as well — was delish. Though she seemed chastened by her profligate ways and says, "we will not repeat the order." Was this email forwarded to you? Sign up here to get Axios Markets in your inbox. Today's newsletter was edited by Javier E. David and copy edited by Mickey Meece. Why stop here? Let's go Pro. 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