BEIJING – Chinese government advisers will recommend economic growth targets for next year ranging from 4.5% to 5.5% to an annual policymakers’ meeting, as Beijing seeks to create jobs and keep long-term development goals on track.

Five of the seven advisers who spoke with Reuters said they favoured a target of around 5%, matching this year’s goal. One adviser will propose a 4.5% target, while the other suggested a 5.0-5.5% range.

The proposals will be made next month at the ruling Communist Party’s annual Central Economic Work Conference that discusses policy plans and the outlook for the world’s second-largest economy.

Reaching such targets would require Beijing to step up fiscal stimulus, the advisers said, given that this year’s growth has been flattered by last year’s low-base effect of COVID-19 lockdowns.

“We need to adopt expansionary fiscal and monetary policy to stimulate aggregate demand,” Yu Yongding, a government economist who advocates for a growth target of roughly 5%, told Reuters.

“Corporate investment demand will not be strong as the confidence of companies has not recovered, so we need to expand infrastructure investment,” added Yu, who also favours a budget deficit topping 4% of economic output.

The other advisers spoke on condition of anonymity due to the closed-door nature of the discussions. Top leaders are expected to endorse the target at the December meeting, although it will not be announced publicly until China’s annual parliament meeting, usually held in March.

In October, China unveiled a plan to issue 1 trillion yuan ($139 billion) in sovereign bonds by the end of the year, raising the 2023 budget deficit target to 3.8% of gross domestic product (GDP) from the original 3%.

Chinese leaders have pledged to “optimize the structure of central and local government debt”, suggesting the central government has room to spend more as its debt as a share of GDP is just 21%, far lower than 76% for local governments.

“We are stepping up fiscal policy support,” said another adviser, to make the “difficult” 2024 target “achievable.”

Monetary stimulus is expected to play a more limited role as the central bank remains concerned a widening interest rate differential with the West may further weaken the yuan and encourage capital outflows.

“The space for monetary policy could be bigger if we have greater tolerance for exchange rate fluctuations,” said Guan Tao, global chief economist at BOC International and a former official at the State Administration of Foreign Exchange (SAFE).

REFORMS VS STIMULUS

China’s economy grew only 3% in 2022, one of its worst performances in nearly half a century. A Reuters poll in October showed that economists expect it to grow 5.0% in 2023 and 4.5% in 2024, although some have since raised their forecasts.

In 2022, President Xi Jinping laid out a long-term vision of “Chinese-style modernisation” at a key party meeting, with a goal of doubling China’s economy by 2035 that government economists say would require average annual growth of 4.7%.

The stuttering post-COVID recovery has prompted many analysts to call for structural reforms that tilt the drivers of economic growth away from property and infrastructure investment and towards household consumption and market-allocation of resources.

Absent that, these economists warn, China may begin flirting with Japan-style stagnation later this decade.

Beijing has been trying to reduce economic reliance on property, channelling more resources into high-tech manufacturing and green industries, but has struggled to boost consumer and investor sentiment.

Policy insiders believe more fundamental changes, especially a revival of market-oriented reforms, are unlikely due to the political environment, under which the state has increased its control over the economy, including the private sector.

“If there is no consensus on reforms, we will have to use stimulus to drive growth, even though it will not be sustainable,” a third adviser said. — Reuters

The widespread adoption of returning and reusing plastic packaging could help to cut greenhouse gas emissions by up to 69%, a study by the Ellen MacArthur Foundation showed on Wednesday.

Such schemes not only lower companies’ emissions but can also drive down costs for some items, according to the study covering over 60 organizations including national governments and consumer goods companies such as Danone, Nestlé , PepsiCo, and Unilever.

The foundation, known for promoting a circular economy, carried out the study in partnership with Systemiq, a UK-based firm focused on sustainable businesses, and environmental consultancy Eunomia.

The study, published at a time when the United Nations’ attempts to deliver the world’s first treaty to control plastic pollution show little sign of progress, called for a systemic change to stem and reverse plastic waste across beverages, personal care, fresh food, and food cupboard sectors.

Under its most ambitious scenario – called System Change – reuse schemes could reduce greenhouse gas emissions by 35% to 69%, water usage by 45% to 70%, and material usage by 45% to 76%, the foundation said.

However, deposit schemes are likely to be key to achieving such targets by driving high return rates, it added.

In the System Change scenario, if consumers received 20 euro cents back when they return packaging to seller, it would lead to significantly lower net costs for returnable beverage and personal care bottles compared with single-use options.

But to reach high return rates and make reuse schemes competitive, shared collection infrastructures, standardized packaging and pooling – the use of shared packaging by several players – are needed, the research showed.

“Now the pressure is on policymakers … and on business leaders in the fast-moving consumer goods sectors to change their practices,” Jean-Pierre Schwetizer, the circular economy manager at the European Environmental Bureau, said in the study. — Reuters

NEW DELHI – India on Tuesday asked private firms to ramp up investments in new coal-fired power plants to meet a dramatic rise in electricity demand and bridge nearly 30-gigawatts of additional requirement by 2030, despite international pressure to stop building such facilities.

India’s power and renewable energy minister R K Singh in New Delhi asked private companies to invest in coal projects and “not miss the growth opportunity,” according to three sources present in the meeting.

The Indian government meeting with private investors comes weeks before the U.N. climate conference, at which France, backed by the United States, plans to seek a halt to private financing for coal-based power plants, according to a Reuters report.

India’s power ministry did not immediately respond to requests for comment.

The private investment share in the Indian power sector started dwindling after 2018, when it was more than, or at par with, government investments. Currently, it stands at 36% of the country’s total installed capacity.

Most of the coal-based capacity under development is being set up by state-owned companies, with Adani Power and JSW Energy the only private companies building such plants.

Many private companies stopped building new coal-based plants in India over a decade ago due to a lack of financing in the absence long-term power supply bids from consumers.

In recent years, however, energy demand has outpaced expectations in India, the world’s most populous country, as economy activity picked up.

Since August, the South Asian nation’s energy demand rose 18% to 20% year-on-year. The government expects it to rise by at least 6% annually till end of this decade.

During the meeting, Singh said new estimates see India’s peak power demand reaching 335-gigawatts by 2030 versus the present 240-gigawatts, according to the three sources.

Private power companies were told that the majority of the peak-hour electricity demand in India can be met by coal-based power stations, since storage technologies are costlier to support solar and wind-based energy generation, officials said.

A total coal-based capacity addition of 58 gigawatts is in the pipeline, leaving an expected gap of over 30-gigawatts, they said.

“The Minister assured that the government may look at funding support to such projects (from private firms) from state-run financiers such as Power Finance Corp and REC Ltd,” one of the sources said.

All three sources at the meeting asked not to be identified as they were not authorized to speak to media.

Singh told the meeting that despite adding coal-based capacity, India will still meet its climate goals of shifting to 50% non-fossil-based power capacity since the country is also adding renewable energy projects. — Reuters

TORONTO – Canada introduced tax measures on Tuesday to ease a severe rental housing shortage by limiting income tax deductions on short-term rentals on services such as Airbnb Inc and VRBO, joining many countries that are enacting similar laws.

The new rules apply as of Jan. 1 in provinces and municipalities that bar short-term rentals, and affect deductions such as interest expenses, the federal government said in its fall economic statement.

In Montréal, Toronto and Vancouver alone, an estimated 18,900 homes were being used as short-term rental properties in 2020, the report added, noting that the number “has almost surely increased in recent years.”

Airbnb, however, said listings in Toronto and Montreal have dropped since 2020.

Similar legal restrictions, including in Australia and Italy, could further hurt the profits of companies such as Airbnb as they face a backlash from hotels.

“Home-sharing regulations are not the solution to Canada’s housing crisis. The reality is the majority of Airbnb Hosts in Canada share one home to supplement their income and listings represent less than 1% of the country’s housing stock,” said Nathan Rotman, Airbnb’s policy lead for Canada, by email.

“Many Canadians earn extra income through home sharing to make ends meet at a time of increasing inflation, interest rates and cost of living.”

Starting in 2024, the government will spend C$50 million ($36 million) over three years to enable municipal enforcement of restrictions on short-term rentals.

Housing supply has failed to keep up with Canada’s immigration-fueled population growth, and housing prices soared during the COVID pandemic as low mortgage rates encouraged higher offers from buyers working from home.

Canadian homebuilders cannot keep up with the demand, while U.S. cities are adopting regulations including requiring hosts to obtain licenses and pay registration fees.

Gabriel Giguère, public policy analyst at Montreal Economic Institute, criticized the government’s decision to modify the tax treatment of the expenses of owners of short-term rental apartments.

“It’s not as if we’re a handful of Airbnbs away from solving Canada’s housing shortage. Any solution that does not involve a massive increase in the housing supply is unfortunately just a distraction,” Giguère said.

Florence, Italy, has banned new short-term home rentals, while Australian tourist destination Byron Bay will limit the availability of some properties for short-term holiday stays.

British Columbia requires hosts to register with the province, and has increased fines for breaking local rules and restricted rentals to only a portion of the principal residence. The rules go into effect next year. — Reuters

LONDON – Finance minister Jeremy Hunt will announce tax cuts for businesses on Wednesday – and possibly some for voters too – as he tries to speed up Britain’s sluggish economy and help his struggling party before an election expected next year.

Buoyed by a fall in inflation, Hunt plans to use his Autumn Statement budget update speech to parliament to shift the government’s focus to fixing the long-running weak growth problem of the world’s sixth-biggest economy.

Another, more immediate concern of Hunt and Conservative Prime Minister Rishi Sunak will be the big opinion poll lead of the opposition Labour Party with an election likely within the next 12 months.

Hunt is due to announce ways to boost business investment by 20 billion pounds ($25 billion) a year over the next decade, cut taxes and get more people into work, according to excerpts of his speech shared with media.

“After a global pandemic and energy crisis, we have taken difficult decisions to put our economy back on track,” Hunt is due to tell parliament. “But the work is not done.”

Other measures will increase investment into high-growth industries, cut red tape, get debt falling and bring inflation down to 2% from 4.6% in the most recent data, the speech excerpts showed.

The Times reported that Hunt would cut the headline rates of national insurance for around 28 million people and make tax incentives for business investment permanent.

Hunt and Sunak have a bit more fiscal room for manoeuvre than they thought earlier this year after government borrowing came in lower than predicted in recent months, thanks to high inflation pushing up tax revenue.

But the problems they face still represent a major challenge.

The public finances are under strain after the government’s huge spending to protect households from the energy price surge last year and prop up the economy during the COVID pandemic, as well as a big rise in borrowing costs.

Furthermore, Britain’s budget forecasters will probably cut sharply their economic growth predictions on Wednesday due to high inflation, labour shortages and Brexit’s after-effects.

That more sombre outlook will add to the challenge for Hunt to stay on course to meet his target to start reducing Britain’s debt burden in five years’ time.

Public debt has trebled as a share of gross domestic product over the last 20 years to almost 100%.

After the meltdown in British financial markets last year, triggered by the huge tax cut plans of former prime minister Liz Truss, Hunt and Sunak have promised to move carefully.

Any big tax cuts would also prove counter-productive if they stoked inflation and forced the Bank of England into raising interest rates, which are already at a 15-year high.

HOLD FIRE

With only limited fiscal firepower, many analysts think Hunt and Sunak will wait for a full budget statement, due in March, to announce big tax cuts for voters and announce only a small-scale easing of the tax burden for individuals on Wednesday.

That could anger some Conservative lawmakers who are alarmed that taxes are due to go up under the current parliament by the most since World War Two, based on calculations by the Institute for Fiscal Studies think tank.

Hunt and Sunak announced major tax-raising measures a year ago to assuage bond investors after Truss’s mini-budget.

Many analysts say that in the coming years whoever runs Britain will have to raise taxes further, not cut them.

Sunak has said that as well as cutting taxes “carefully and sustainably” he wants to change welfare benefits for working-age adults to get more of them into work, a move which could help to ease a shortage of workers that is weighing on employers but leave the government open to charges of unfairness.

He has said building a sustainable energy network and a “world-class” education system are key to his growth plans too. — Reuters