The 48th G7 summit was held in Schloss Elmau, Krün, Bavarian Alps, Germany, on June 26-28, 2022. Seven of the world’s richest countries meet annually to discuss security, economic, and environmental issues. Boris Johnson, Olaf Scholz, Justin Trudeau, Emmanuel Macron, Mario Draghi, Fumio Kishida, and Joe Biden attended. After annexing Crimea, Russia has been barred from the G8 since 1998. First summit for Olaf Scholz and Fumio Kishida.
The summit discussed key themes as usual. G7 summit supported Ukraine, threatened anti-Russian penalties, and discussed climate. The three-day G7 conference resulted in more definitive support for Ukraine, greater political and economic pressure on Russia, better climate protection, and a call to China to respect human rights.
Germany, Britain, France, Italy, Japan, Canada, and the USA decided to intensify sanctions against Russia by barring Russian gold imports. Russian energy raw material price capping is also at risk.
The G7 expects China not to help Russia dodge sanctions, said German Chancellor Scholz. The group also urged Beijing to act judiciously in its disagreement with Taiwan, respect human rights not just in Tibet, Hong Kong, or Xinjiang province, and not utilize forced labor against its opponents.
PGII is a counterweight to China’s New Silk Road megaproject. Western countries regard the Belt and Road Initiative as Beijing’s attempt to gain influence in Asia and other continents. Over the next five years, the G7 will invest $600 billion in global infrastructure. Biden said.
Another hot topic was food safety. The G7 blames Russia’s invasion of Ukraine and blockade of Ukrainian grain exports for the present surge in food and fertilizer prices and the global food crisis.
The G7 will impose more restrictions on Russia, reducing its income, particularly from gold sales. They may also cap Russian oil prices. G7 officials say Russia’s aggressive assault against Ukraine is also to blame for rising food and fertilizer costs and the world’s food crisis. Monday, June 27th, Ukrainian President Volodymyr Zelenskyy videoconferenced with the statement.
Argentina, India, Indonesia, Senegal, and South Africa were also invited. Leaders decided to boost global collaboration. They will pursue new partnerships for a just energy change with Vietnam, Indonesia, India, and Senegal.
G7 sanctions, energy, and food agreements
G7 communique: “We will explore further measures to prevent Russia from profiting from its war of aggression. We will further reduce reliance on civil nuclear and related goods from Russia, including working to assist countries seeking to diversify their supplies. For oil, we’ll investigate a number of alternatives, including a possible global ban on transporting Russian seaborne crude oil and petroleum products unless it’s purchased at or below an agreed-upon price with foreign partners.”
“In coordination with the IEA, we will explore additional measures to reduce price surges and prevent further impacts on our economies and societies, in the G7 and global,” the communiqué read.
“We commit to an additional $4.5 billion to protect the most vulnerable from hunger and malnutrition, amounting to a total of over $14 billion as our joint commitment to global food security this year,” the G7 said. G7 summit communique: “We invite all like-minded countries to consider joining us in our actions.”
Antiglobalists protested at prior G7 summits. 20 000 police were ready, but protests were minimal.
Million-Dollar Mansions Lose Luxury Reputation As Purchasers Get Less Space: Shrinkflation
The issue known as “shrinkflation,” which occurs when the price of something stays the same or increases even as the item gets smaller, affects more people than just grocery shoppers.
Homebuyers must also be concerned about “shrinkflation.” According to new research from real estate website Zillow, the trend is affecting properties, especially those in the $1 million price category, where the size of the homes that purchasers are getting for their money is reducing.
According to Skylar Olsen, chief economist at Zillow, it’s one way that inflation is having an impact on the housing market.
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These five cities have expensive rents. Cheaper places carry additional costs. For homes of any price range, money won’t go as far, she claimed. But given the expectations buyers frequently have of it, the $1 million mark is particularly eye-catching.
Million dollar homes aren’t as luxurious as they once were, according to Olsen.
In California, the notion that $1 million is only sufficient to purchase a standard home has been around for a while. Currently, Olsen said, more and more markets are feeling the same way.
According to Zillow, more than twice as many properties worth $1 million or more were sold this spring as there were two years earlier. Austin, Texas; Portland, Oregon; and Riverside, California saw the largest rises.
However, according to Zillow listings floor plan data, shrinkflation can be applied to $1 million homes keep getting smaller. Midway through 2020, the size of these dwellings peaked at 3,021 square feet; by early this year, it had decreased to 2,530.
The size of a home at that price point has increased to 2,624 square feet, but it is still 397 square feet less than the peak in 2020.
There are fewer bathrooms in smaller million-dollar mansions.
According to Zillow’s data, the typical property selling for approximately $1 million has decreased since 2019 in almost all major metropolitan areas. According to the survey, $1 million homes nowadays are often older and have fewer bathrooms.
Homes at this price category saw the biggest size drops in Phoenix, where they decreased by about 1,116 square feet, and Nashville, Tennessee, where they fell by about 1,019 square feet.
Only two metropolitan regions had an increase in floor plan size for homes costing $1 million or more throughout that period. That includes St. Louis, which saw an increase of about 406 square feet, or roughly a room and a half, and Minneapolis, which had an increase of about 36 square feet, or about the size of a closet.
In Hartford, Connecticut, where the price per square foot is $205, potential house buyers willing to spend up to $1 million may get the most for their money.
Other mid-sized American towns including Indianapolis, with a price of $209 per square foot, Oklahoma City, with a price of $214, Kansas City, Missouri, with a price of $221, and Cincinnati, with a price of $222, came in second.
San Jose had the highest price per square foot out of all the big cities that Zillow was tracking, at roughly $715. As of July, the average single-family home in that city cost over $1.5 million.
How shrinkflation may be impacted by the market cooling
According to a new survey by Clever Real Estate, 72% of recent homebuyers regret their decisions because of the current heated real estate market. Buyer’s remorse was most frequently caused by overspending, according to 30% of respondents.
Nevertheless, there are indications that prices are declining as the market cools, with 1 in 5 sellers lowering their asking prices in August, according to Realtor.com. This could provide purchasers with additional opportunities to compare prices and acquire the greatest square footage for their money.
Danetha Doe, economist at Clever Real Estate, advised in a recent research to “surround yourself with specialists who truly care about your goals and your dreams and who are informed of the local area.”
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Why The Yuan Is Being Strengthened By China’s Central Bank
According to experts, China’s central bank has made it clear that it wants to prevent the Chinese yuan from falling too much versus the dollar.
The People’s Bank of China declared on Monday that it will lower the minimum amount of foreign currency that banks must keep for the second time this year.
Theoretically, such actions would lessen the downward pressure on the yuan, which has fallen more than 8% against the US dollar this year, reaching two-year lows.
Chinese authorities frequently highlight the yuan’s position in relation to a currency basket, against which it has risen by 1% over the past three months.
Beijing’s most recent steps, however, demonstrate how crucial the yuan-dollar exchange rate still is, according to a study released on Monday by Ting Lu, the senior China economist at Nomura.
They presented two arguments:
“First, Chinese officials particularly worry about RMB’s bilateral exchange rate with USD because they believe RMB/USD somehow indicates relative economic and political strength in a year of the once-in-a-decade leadership upheaval and with rising US-China tensions.”
Second, a significant decline in the RMB/USD exchange rate could harm domestic morale and hasten capital flight.
A new group of leaders will be chosen by China’s ruling Communist Party in October, thereby strengthening President Xi Jinping’s position of authority.
Over the past few years, tensions between the U.S. and China have risen, leading to tariffs and sanctions against Chinese IT firms.
As a result of the pandemic shock in 2020, China’s economic development has slowed during the past three years. Many experts have lowered their GDP projections to roughly 3% as a because of this year’s tighter COVID measures, which included a two-month closure of Shanghai.
The yuan has weakened as a result of the economic slowdown, which may help make Chinese products more affordable to customers in the United States and other nations.
The U.S. Federal Reserve aggressively tightened monetary policy this year, which led to a large increase in the value of the U.S. dollar.
The euro and the Japanese yen have also fallen to 20-year lows, which has helped the dollar as measured by the U.S. dollar index.
According to a report released on Monday by Goldman Sachs analyst Maggie Wei and colleagues, the PBOC “might have tolerance for further CNY depreciation against the USD, especially as the broad USD continues to strengthen. However, they might want to avoid continued and too fast one-way depreciation if possible.”
The researchers predicted that during the next three months, the yuan will weaken to 7 versus the dollar. By the end of the year, the foreign exchange specialists at Nomura expect a level of 7.2.
Data from Wind Information show that between May 2020 and September 2019, the yuan last traded at 7.2 to the dollar.
According to Julian Evans-Pritchard, senior China economist at Capital Economics, “I don’t think it will go far beyond , certainly sort of beyond the 7.2 that we saw during the trade war,” in a recent interview.
He said, “I think that threshold is the key.” “I believe that if it rises above that point, expectations for the value of the currency run the risk of being unanchored, which is why they are unwilling to let it happen. You run the chance of seeing substantially higher financial outflows.
According to Wind Information, the PBOC fixed the midpoint of the yuan versus the dollar on Tuesday at 6.9096, which is the lowest value since August 25, 2020. The yuan is moderately controlled by China’s central bank, which bases its daily trading midpoint on current price levels.
Avoid placing a wager on a single issue.
The next reduction in the PBOC’s foreign currency reserve ratio, from 8% to 6%, is scheduled to go into effect on September 15th, according to a statement posted on the website of the central bank on Monday.
Liu Guoqiang, deputy governor of the PBOC, stated earlier in the day that individuals “should not bet on a certain point” and that the currency should move in two directions in the short term.
According to a translation of a Chinese version of Liu’s comments made during a press conference on economic policy, this is the case.
Liu continued to support Beijing’s long-term goals of increased yuan use abroad. The yuan will continue to gain prominence around the globe, he predicted.
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China Can’t Live Without Wall Street. Rare US Agreement Shows Why
A new U.S.-China pact aims to end one of the largest commercial disputes: how to audit Chinese companies on Wall Street.
Last Friday, authorities from both countries announced an agreement that would allow US officials to inspect these firms’ audit files, meeting a long-running demand stateside and bringing relief to businesses and investors.
Over 160 Chinese companies may have avoided instant expulsion from the world’s largest stock market.
Regulators are testing the new deal quickly. Unidentified sources told Reuters on Wednesday that Alibaba, Yum China, and other companies will be inspected next month. The companies didn’t immediately comment.
Officials warn that the pact is simply the first step on a difficult topic, so Chinese enterprises aren’t out of the woods until access is guaranteed and a bigger agreement is reached. Experts think it won’t solve other US-China business flashpoints quickly.
US officials can scrutinize accounting firms in mainland China and Hong Kong that audit Chinese corporations’ books.
According to the US Public Company Accounting Oversight Board, this is the most comprehensive US-China transaction ever. Gary Gensler, head of the US Securities and Exchange Commission, says US investigators will visit China and Hong Kong “by mid-September” (SEC).
“Reaching an agreement on these pilot inspections was the fundamental test of whether the two sides could clinch a bigger deal,” said Lauren Gloudeman, Eurasia Group’s China director.
Drew Bernstein, co-chairman of Marcum Asia CPAs, believes the first key hurdle has been passed.
“China believes allowing certain of its enterprises to access US financial markets is in China’s interests, and regulators have made major concessions to reach an agreement,” he said.
Alibaba (BABA), Baidu (BIDU), and JD.com all at risk (JD).
US regulations state that corporations who don’t completely open their books will be banned from trading in 2024. This deadline is flexible.
Recent months have seen increased strain. This year, the SEC added more Chinese companies to its list of potential expulsions, and US lawmakers have called for an ultimatum.
China traditionally resisted letting foreign regulators review its accounting businesses, citing security concerns. Some Chinese enterprises have left US markets due to hostility.
Five state-owned companies left the NYSE this month, citing poor turnover and exorbitant prices. China Life Insurance, PetroChina, Sinopec, China Aluminum Corporation, and Sinopec Shanghai Petrochemical delisted voluntarily.
Alibaba, perhaps the best-known Chinese business among Western investors, aims to elevate its Hong Kong listing to main status by year’s end.
The company, whose shares have traded on the NYSE since 2014, wants two primary listings.
Hong Kong is a popular destination for firms worried about Wall Street.
The delisting risk of US-listed Chinese stocks cannot be totally mitigated in the immediate future, according to Bocom International, the investment banking arm of Bank of Communications.
Dual primary or secondary listings in Hong Kong are “desirable” for now, they wrote Monday.
The situation has forced corporations to reassess their strategies and slowed share issuing.
Eight Chinese companies have gone public in the US so far this year, compared to 37 in the same period last year.
Their value has plummeted. Dealogic data reveals US IPOs have raised $332 million so far in 2022, down from $13 billion a year ago.
The market collapse has produced a dismal IPO market for all companies.
Some Chinese gamers fear a regulatory crackdown.
Didi, China’s largest ride-hailing company, is a cautionary tale. The company went public in New York last year but delisted after the domestic crackdown.
If the US Congress sees China sticking to the audit accord, Chinese shares could rise.
“Chinese management teams remain highly intrigued and motivated to list in the US,” Bernstein added.
If the IPO market rebounds next year, Chinese listings could increase in 2023.
Analysts doubt the new audit deal will clear corporations.
Goldman Sachs analysts see a 50% possibility of delisting Chinese equities.
The SEC chairman warned last week that corporations face ejection if US officials can’t access their files.
“We’ll see,” he said.
Confirmation of planned inspections “makes it very probable, 90% likely, that the two sides reach a broad inspections deal before the end of the year or soon after,” Eurasia experts stated.
“The top US regulator won’t fly to Hong Kong if it doubts China’s promise”
Xiaomeng Lu, Eurasia’s director of geo-technology, warned Beijing might yet delist additional SOEs “These companies control national security-sensitive data.
“Rather than annual inspections, China may select this route “Her team reported.
Will this improve US-China relations?
Despite advances, the two superpowers will likely disagree on other topics.
“Though the deal is a favorable signal broadly, it does not have significant feed-through to the broader bilateral relationship,” Gloudeman, Eurasia’s China director, said.
“Geopolitical flashpoints like Taiwan and China’s alliance with Russia make a reset unlikely. Taiwanese and American elections could worsen the bilateral relationship.”
Bernstein said the purchase shows the limits of decoupling when links break.
“The US-China relationship reminds me of conflict-ridden marriages that can’t afford to terminate,” he remarked.
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