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Treasury’s Yellen: Biden stimulus at most a ‘small contributor’ to inflation

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Treasury's Yellen: Biden stimulus at most a 'small contributor' to inflation
© Reuters. FILE PHOTO: reasury Secretary Janet Yellen pauses while testifying before a Senate Banking Committee hybrid hearing on oversight of the Treasury Department and the Federal Reserve on Capitol Hill in Washington, U.S., November 30, 2021. REUTERS/Elizabeth F

By Andrea Shalal and David Lawder

WASHINGTON (Reuters) – U.S. President Joe Biden’s $1.9 trillion stimulus package in March contributed to stronger demand but is only a small factor in current higher rates of inflation, U.S. Treasury Secretary Janet Yellen told lawmakers on Wednesday.

Yellen told the House Financial Services Committee that the stimulus package clearly boosted demand but said it was not a “fair assumption” to say it overshot the need and fueled current spikes in inflation.

“It’s certainly true that the American Rescue Plan put money in people’s pockets … and contributed to strong demand in the U.S. economy, but if you look at the amount of inflation that we have, and its causes, that is at most a small contributor,” she said.

High inflation, now running at more than twice the Federal Reserve’s flexible target of 2% annually, is expected to ease in the second half of 2022, Fed Chair Jerome Powell told lawmakers at Wednesday’s hearing.

Yellen, grilled by Republican lawmakers about the inflationary impact of Biden’s response, insisted there was a “very good reason” to proceed with the stimulus package to deal with a shortage of demand that could have resulted in long-lasting joblessness and high unemployment.

“It’s been successful,” she said. “It did boost demand, and that is one of several factors that are involved in inflation.”

Yellen said the main driver of inflation was the COVID-19 pandemic and its impact in diverting demand away from services and “massively” toward goods, resulting in supply chain problems as well as a lasting effect on labor supply.

She said the pandemic had delivered an “unusual shock” to the workforce, and concerns about health issues were keeping many low-income workers from returning to their jobs, but that should recede as the pandemic was brought under control.

Biden’s plan for $1.75 trillion in further social and climate spending over the next decade was a small amount relative to the size of the U.S. economy, was paid for, and would lead to improvements that lowered deficits, Yellen said.

“It puts in place investments that will continue to bring down deficits,” she said. “It will improve the supply side of the economy, which is, in the long run, a factor that will tend to mitigate ongoing inflationary pressures.”

Yellen sparred for a second day with Republican lawmakers who cited a Congressional Budget Office estimate the “Build Back Better” legislation would add $367 billion to U.S. deficits over a decade.

She stuck to her argument that the CBO estimate does not include the effects of increased Internal Revenue Service enforcement, which the Biden administration has estimated would boost revenues by $400 billion over a decade.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.

Economy

China central bank says to promote healthy development of property market

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China central bank says to promote healthy development of property market
© Reuters. FILE PHOTO: People wearing face masks walk past the headquarters of Chinese central bank People’s Bank of China (PBOC), April 4, 2020. REUTERS/Tingshu Wang

SHANGHAI (Reuters) – China’s central bank said on Saturday it will safeguard the legal rights of home buyers and better satisfy their reasonable living needs, vowing to promote healthy development of the country’s real estate market.

The statement from the People’s Bank of China (PBOC), made following its fourth-quarter monetary policy committee meeting, is the latest sign that Chinese regulators are marginally easing curbs on the property sector to prevent a hard-landing.

Echoing China’s annual Central Economic Work Conference held in early December, the PBOC said it will prioritise economic stability, amid an increasingly severe external environment and the unrelenting global pandemic.

The PBOC said it will keep its monetary policy flexible and appropriate, and liquidity reasonably ample. It will strengthen support to the real economy, with a bias toward small companies.

The central bank reiterated that it will deepen reforms of the forex market and increase the flexibility of the yuan’s exchange rate while guiding companies and financial institutions to be “risk neutral”.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.

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Economy

China’s offshore listing rules seen easing market uncertainty

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China's offshore listing rules seen easing market uncertainty
© Reuters. FILE PHOTO: People are seen on Wall Street outside the New York Stock Exchange (NYSE) in New York City, U.S., March 19, 2021. REUTERS/Brendan McDermid/File Photo

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By Kane Wu and Julie Zhu

HONG KONG (Reuters) – China’s plan to tighten scrutiny over mainland companies’ overseas share sales is likely to ease the regulatory uncertainty that roiled financial markets this year and stalled offshore listings, bankers and analysts said.

But the securities regulator’s new filing-based system, designed to rein in once freewheeling Chinese listings in the U.S. market and elsewhere, leaves open questions about rule enforcement and compliance criteria, they added.

“The new rules represent a comprehensive, systemic and market-oriented regulatory upgrade,” investment bank China International Capital Corp (CICC) said in a note, but added they contain “some items that need further observation, and clarification”.

The China Securities and Regulatory Commission published draft rules https://www.reuters.com/markets/europe/china-securities-regulator-says-vie-compliant-companies-can-list-overseas-2021-12-24 late on Friday requiring filings by companies seeking offshore listings under a framework to ensure they comply with Chinese laws and regulations.

Companies using a so-called variable interest entity (VIE) structure will still be allowed to seek offshore listings as long as they are compliant, removing uncertainty for investors who feared China would block such listings.

That risk loomed large after Didi Global Inc’s U.S. listing in July sparked a major regulatory backlash from Chinese officials, who were concerned over national security.

The VIE structure has been used by most overseas-listed Chinese tech companies, such as Alibaba (NYSE:) and JD (NASDAQ:).com, to skirt Chinese restrictions on foreign investment in certain sectors.

Uncertainty over the future of VIE structures, coupled with China’s regulatory crackdowns in major sectors such as e-commerce and tutoring, has bashed shares in offshore-listed Chinese companies this year.

And while Chinese firms raised $12.8 billion in the United States this year, the value of deals ground to a halt after Didi’s July listing. In Hong Kong, the value of IPOs in 2021 fell to $26.7 billion from the previous year’s $32.1 billion, according to Refinitiv data.

REGULATORY COORDINATION

Reaction to the new rules will be seen Monday when the U.S stock market resumes trade after closing on Friday for the Christmas holiday. Hong Kong stocks will resume trading on Tuesday.

The planned filing-based system is also expected to ease uncertainty by calling for closer coordination between the securities regulator and various industry regulators, such as the cyberspace watchdog.

“The issuance of the draft rules shows that major communication obstacles have been removed between different regulatory bodies,” said Ming Jin, managing partner at Chinese boutique investment bank Cygnus Equity.

But it remains unclear how the rules would be enforced and compliance determined, especially when a VIE structure is used to circumvent foreign investment restrictions, the CICC note said.

The investment bank added that even if a company plans a Hong Kong listing, which would pose no risk to national security, “we still suggest the issuer voluntarily contact the Cyber Administration of China () for its nod” before going to the securities regulator.

The new rules cover all types of offshore share sales, including initial public offerings, secondary listings, backdoor listings, and flotation via Special Purpose Acquisition Companies (SPACs).

Winston Ma, adjunct professor at NYU Law School, stressed that cross-border data security had become critical in the global digital economy and was a main driver for the latest move.

“As such, under the proposed new rule, cybersecurity review must be completed before the (security regulator’s) clearance process,” Ma said.

Public consultation on the draft rules will remain open until Jan. 23.

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Economy

More than 10,000 Russian troops returning to bases after drills near Ukraine -Interfax

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More than 10,000 Russian troops returning to bases after drills near Ukraine -Interfax
© Reuters. FILE PHOTO: A satellite image shows Russian armored units training in Pogonovo Training Area near Voronezh, Russia, November 26, 2021. Picture taken November 26, 2021. Satellite Image ?2021 Maxar Technologies/Handout via REUTERS

MOSCOW (Reuters) – More than 10,000 Russian troops have been returning to their permanent bases after month-long drills near Ukraine, Interfax news agency reported on Saturday, citing the Russian military.

Interfax said the drills were held in several regions near Ukraine, including in Crimea, which Russia annexed in 2014, as well as in the southern Russian regions of Rostov and Kuban.

Russia’s deployment of tens of thousands of troops to the north, east and south of Ukraine had fuelled fears in Kyiv and Western capitals that Moscow was planning an attack.

Russia denies any such plans, saying it needs pledges from the West – including a promise from NATO not to expand the alliance eastward towards Russian borders – because its own security is threatened by Ukraine’s growing ties with the Western alliance.

Moscow also says that it can deploy its troops on its territory as it sees fit.

Estimates for the number of Russian troops recently moved closer to Ukraine vary from 60,000 to 90,000, with one U.S. intelligence document suggesting that number could be ramped up as high as 175,000.

“A stage of combat coordination of divisions, combat crews, squads at motorized units… has been completed. More than 10,000 military servicemen… will march to their permanent deployment from the territory of the combined arms’ area of drills,” Interfax quoted the army as saying.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.

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