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Daily Archives: May 5, 2022

Charts: The Bank of England Raised the Key Bank Rate in May 2022 Meeting

3 members voted for 50 bps increase

Source : Trading Economics

Music Video: First Of May

Chart: The Countries Committing the Most of Their GDP to Ukraine Aid

Source : Statista

Is China Bringing Back the Planned Economy?

Lu Ming wrote . . . . . . . . .

On April 10, the Central Committee of the Communist Party of China and the State Council — China’s Cabinet — jointly released a document titled, “Opinions on Accelerating the Construction of the National Unified Market.” Any document bearing the seal of two of China’s most powerful bodies tends to attract public attention, but it was the term “national unified market” that really got analysts debating the question: Was China plotting a return to the planned economy?

On the surface, that might seem like a leap of logic. In context, it’s more understandable. In recent weeks, as some of China’s largest cities battle COVID-19 outbreaks, just about everyone has felt the grip of government interference in their daily lives. Against this backdrop, the announcement’s timing seemed especially significant. Perhaps the central government intended to take a firmer hand, not just in disease control itself, but also in the market.

Further confusing matters, the Chinese word for “unified,” tongyi, has different connotations depending on one’s perspective. Used in the phrase “national unified market,” the term refers to “integration.” But placed next to words like “national” and “market,” it’s easy to see why it might conjure up images of the government forcibly implementing a top-down, one-size-fits-all approach to regulation and control nationwide.

That’s not necessarily the case, however. Indeed, in my view, the “Opinions” could have the opposite effect. What is a planned economy? It’s an economic system in which production, the allocation of resources, and the consumption of goods are all planned in advance. English-language coverage of the “Opinions” has focused on the central government’s efforts to break down local protectionism and regional market segmentation, both side-effects of government meddling. But there’s another, less obvious example of the new policy’s market leanings: labor.

China’s central government has spent the past several years attempting to improve what it terms “domestic circulation”; that is, the unimpeded circulation of goods on a truly national commodity market. A key sticking point to achieving domestic circulation is the continuation of limits on market allocation of production factors, many of which date back to the country’s planned economy days. Some, such as the above-mentioned market segmentation, are the result of local protectionism, as governments favor local enterprises at the expense of more efficient firms outside their jurisdictions. Even more pressing, however, is the difficulty labor faces in flowing between regions, and especially to large cites.

Contemporary Chinese society is characterized by an aging population alongside a falling birth rate. As this demographic trend progresses, the total supply of labor will continue to decline. This makes the efficient deployment of labor resources increasingly critical to the country’s economic development, yet workers remain constrained by policies first formulated during the planned economy period, most notably the hukou household registration system, which ties their access to social services to their officially registered residence.

Traditional restrictions on worker movement, while perhaps beneficial to protectionist local governments and firms, hinder labor flows into high-demand regions and industries. Although the hukou system has been relaxed in recent years, large cities continue to implement restrictions, and the social security system remains a regional patchwork.

Moving forward, China should allow workers to move freely, and the recent “Opinions” document, with its explicit call to “stimulate the flow of labor and talent across regional lines,” suggests the government is increasingly cognizant of this fact.

If labor is allowed to move freely, it will naturally concentrate in more economically developed areas — such as coastal regions and bigger cities — where it will foster economies of scale and generate increased productivity. As for the regions workers leave behind, industry there will likely move toward agriculture, tourism, and natural resources. A division of labor will gradually form across the whole country, with each area developing local industries according to its comparative advantages.

Of course, as the economy and population concentrate in a few areas, some regions will experience population outflows. This process is already underway: According to the results of the seventh national population census released last year, around 40% of China’s prefecture-level cities and municipalities experienced population decline over the prior decade.

This is not necessarily a bad thing. Population outflows mean that per capita resources are increasing, which helps raise the level of per capita income. Indeed, as China improves the circulation of production factors between regions, the trends point toward greater per capita balance, not less. China is already experiencing growing population concentration, especially in large cities, yet the per capita GDP gap between regions is narrowing.

Of course, even if the movement of labor is completely unrestricted, the per capita GDP gap will not fall to zero, nor will absolute equality be achieved. Because of the higher costs of living in more developed regions, however, China will eventually settle into a state of relative income equality between regions, as other countries have. In the meantime, the central and provincial governments should increase transfers to those areas with population outflows to balance the levels of public services and quality of life throughout the country.

It’s ironic that a policy aimed at increasing the role of markets in the allocation of production factors like labor has sparked fears of a return to the planned economy, but the misunderstanding is revealing. The planned economy period continues to cast a long shadow. It is incumbent on the government to reassure the people that their country is developing in a market-oriented direction.

Source : Sixth Tone

Chart: The World’s Biggest Shipping Hubs

Source : Statista

New Coronavirus Variants Emerge: BA.4, BA.5 Likely Reinfecting Omicron Survivors

Rong-gong Lin II and Luke Money wrote . . . . . . . . .

A pair of new Omicron subvariants has emerged, raising the possibility that survivors of earlier Omicron strains can get reinfected.

BA.4 and BA.5 have gained increasing attention in South Africa as weekly coronavirus cases tripled in the last two weeks, according to data from Johns Hopkins University.

“It really came out of the blue over the weekend. We were already settling down with BA.2.12.1, and then BA.4 and BA.5?” said Dr. Peter Chin-Hong, an infectious diseases expert at UC San Francisco. “It just seems like the latest chapter of a never-ending saga.”

The rapid growth of BA.4 and BA.5 in South Africa has implications for a potential future surge in California and the U.S. Until now, scientists had been reassured that people who survived the first Omicron variant over the winter, BA.1, were unlikely to be reinfected by the even more infectious subvariant BA.2, which is now dominant nationwide.

But the surge in cases in South Africa of BA.4 and BA.5 follows an earlier Omicron wave. An estimated 90% of South Africa’s population has immunity to the earlier Omicron variants either due to surviving a natural infection or through vaccination.

“If 90% of people are immune already, and they’re seeing a surge in cases, it means that this particular dynamic duo [BA.4 and BA.5] are causing more reinfections — even in people who already had Omicron,” Chin-Hong said.

Only a small number of cases of BA.4 and BA.5 have been documented in California. In April, one case of BA.5 was documented, and in March, one case of BA.4 was confirmed, according to the California Department of Public Health.

The Omicron subvariant BA.2 remains California’s dominant variant, accounting for 88% of nearly 3,600 analyzed cases in April, while the ascendant BA.2.12.1 and its relative, BA.2.12, accounted for 9% of cases.

BA.2.12.1 is estimated to be 25% more transmissible than BA.2.

Earlier in the pandemic, “it seemed like every few months we heard about a potential new variant of concern,” said Los Angeles County Public Health Director Barbara Ferrer.

But more recently, she said Tuesday, “within weeks of one variant of concern dominating, there are reports from other parts of the country or other parts of the world of other either subtypes or different strains, and this has been especially true with Omicron.”

“When folks ask why public health remains cautious, it is because every time there’s a new variant that is more infectious or potentially more infectious, that means it can spread more easily,” Ferrer said. “You have to be super careful about those that are most vulnerable in our communities. And here in L.A. County, that’s millions of people. It’s not a tiny number.”

Will BA.4 and BA.5 lead to another wave in the U.S.?

Some health experts say South Africa’s BA.4/BA.5 wave could repeat in the U.S. — but probably not immediately.

South Africa will begin its winter next month, while summer is coming for the U.S.

But will South Africa’s experience be a prelude to a surge in late summer or autumn in the U.S., as Americans’ immunity from a natural Omicron infection or their last vaccination weakens? Maybe, but “we don’t know,” Chin-Hong said.

Current data do not suggest that BA.4 and BA.5 cause people to get sicker than the earlier Omicron variants. But BA.4 and BA.5 do appear to be more transmissible, Chin-Hong said, and have a better shot at evading existing immunity, given the surge in South Africa.

People who are unvaccinated and haven’t been previously exposed to the coronavirus will have a higher chance of not doing well if infected, Chin-Hong said.

The emergence of BA.4 and BA.5 means “that Omicron is still very much alive and well, and seeking ways in which it can evolve to be even more transmissible,” said Dr. Robert Kim-Farley, epidemiologist and infectious diseases expert with the UCLA Fielding School of Public Health.

Fortunately, the available data so far have not suggested the coronavirus is evolving to give infected people a higher chance of hospitalization or death.

Still, people should be aware of where the pandemic is heading in their own communities, Kim-Farley said. When transmission is high — as it is in L.A. County — it’s time to be more vigilant about wearing masks in indoor crowded places, he said.

And people who are at higher risk for severe illness and death from COVID-19 may want to avoid risky situations entirely, Kim-Farley said.

“We’re in a better place, so we can remain hopeful, but we shouldn’t lose all of our caution,” Ferrer said. “We can remain hopeful because lots of people have a lot of protection. Lots of people are fully boosted. Lots of people are vaccinated. Lots of people were recently infected and have some natural immunity — not sure how durable that is and how long it will last, but it certainly will offer some protection.”

But, she continued, “it is time for people to go get boosted. Go get your first doses of the vaccine if you haven’t yet been vaccinated. And be careful, particularly if you’re around others who are higher risk or you’re at higher risk yourself.”

Chin-Hong said it’s important for people to know ways to reduce risk. Besides getting up to date on vaccinations and booster shots and wearing a mask in indoor public settings, people also can reduce risk by learning where to get Paxlovid, an anti-COVID pill that can reduce the risk of hospitalization by 90%.

For the immunocompromised, Evusheld is available to prevent COVID-19 among people who haven’t been exposed to the coronavirus and either have a weakened immune system because of a medical condition or cannot get vaccinated for medical reasons.

Kim-Farley said it’s likely there will be increased cases during the summer in California. “However, I’m optimistic that we will not see these translate into high levels of hospitalizations or deaths, just due to the fact that the variants that are emerging appear to be more transmissible but less causing of severe disease and death.”

The more worrisome wild card would be a totally new variant more likely to cause severe illness and death, and against which vaccinations and natural immunity would be less effective.

“The important take-home message for everyone is, still, to be vaccinated, and, if eligible, boosted because these are life-saving vaccines,” Kim-Farley said.

Source : Los Angeles Times