Among the 20 countries that reported the number and value of these payments to the BIS, the United States had by far the highest per capita use of checks per year in 2021: 30 checks. Only six countries reported more than two per capita (chart below), another 12 between zero and two. Belgium and South Africa reported zero.
Given the high per capita use in the United States, it makes sense that our year-over-year decline from 2012 has been slower than that for other countries. The per-year decline in the number of U.S.checks from 2012 to 2021 was slower than the decline for all the other high-use countries listed in the chart. The United States was down 6.7 percent per year from 2012 to 2021, compared to down 8.8 percent per year for Canada at the slow end and down 17.4 percent per year for Austria at the quick end.
No way around it: we love our checks, and our response to innovation has been tepid compared to that of other countries.
GDPNow is not an official forecast of the Atlanta Fed. Rather, it is best viewed as a running estimate of real GDP growth based on available economic data for the current measured quarter. There are no subjective adjustments made to GDPNow—the estimate is based solely on the mathematical results of the model. In particular, it does not capture the impact of COVID-19 and social mobility beyond their impact on GDP source data and relevant economic reports that have already been released. It does not anticipate their impact on forthcoming economic reports beyond the standard internal dynamics of the model.
On April 5, the GDPNow model estimate for real GDP growth in the first quarter of 2023 is 1.5 percent, down from 1.7 percent on April 3.
The next GDPNow update is Monday, April 10.
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Similarly, the West’s uncertainty and fear towards China’s rise stem from a lack of understanding and even fear of the country, and their ingrained ideology would lead to misconceptions.
China is the world’s second-largest economy. The externalities and influence of its economy on the West are obvious. Upon joining the WTO, some Chinese people also felt unsettled by the externalities of the West. Some said, “the wolf is coming.” Now it is the West that is experiencing such worries.
It is crucial to recognize the significant impact of the Western hypocritical narratives against China, even if they are based on ideology rather than facts. We must also acknowledge that ideology-based public opinion from the West can exert a powerful influence on their policies toward China.
Second, to make rational responses to the Westernideology-based criticisms, we should draw lessons from the history of the world economy, such as the lessons of the Soviet Union, as well as our practices, such as the rhetorical battle with the West in the past few years. Coming up with an externally-facing public opinion based on a different ideology is not the most effective in addressing public opinion attacks based on an ideology. Empirically, tit-for-tat is ineffective and can worsen the situation. Again, the failure of the Soviet Union is a prime example, as its battle with a Westernideology failed. When faced with China-demonizing based on ideology from the West, we need to do the simplest thing, namely resorting to facts, science, and reason.
Third, and most importantly, China needs to prioritize its sustainable development, which ultimately benefits the country itself. It is important to recognize that the foundation of the government’s governance lies in its citizens, not Western praise. The support from its people is crucial for both the nation’s longevity and stability., China’s sustainable development also benefits the world economy by boosting its growth. As mentioned above, China has been the largest contributor to the growth of the world economy since it joined the WTO.
It is crucial to prioritize the building of a knowledge system based on China’s practical experiences. Regarding global soft power, we need a knowledge system based on our experiences rather than a certain ideology. While there has been a proposal for an autonomous knowledge system, continuous effort is still required.
Fourth, given the substantial externalities of our economy, we must further communicate and coordinate with other countries on economic policies, regardless of their respective sizes. Our duty is to fulfill the responsibility as a major player in the international community, which also benefits China.
Fifth, we must be open, open, and more open. Despite China’s efforts, there remains a persistent ideological camp in the West that views China through an ideological lens, a situation made worse by the past three years of the pandemic. The pandemic was so severe that it hindered travel across borders; as a result, some Western media and scholars tend to assess China through ideology since they couldn’t come here to see the facts with their own eyes.
The assessment of China through a uniform ideological lens appears to have strengthened the original Westernideological camp. However, the United States and the West have more than one ideology, and not all people believe in the prevailing ideology in the public opinion sphere. China’s openness provides a “seeing is believing” opportunity for different groups in the West. China should increase its openness to Western groups, including businesses, investors, media, universities, and research institutions. The changes in their understanding could render those ideological-based public opinions less effective.
Conflict, supply disruption, rising prices, and shortages are all impacting food supplies globally. Just as we are nearing some form of recovery from the pandemic, we are now facing another global challenge in the form of a food crisis – and it’s likely to get worse.
This is a regional problem that cannot be solved by individual economies acting on their own. It must be looked at with a wider lens, such as through bodies, like APEC, that promote regional economic cooperation. APEC members acknowledge that all areas of the agri-food value chain are interdependent and that there is a need for a whole-system approach.
In my capacity as the Chair of APEC’s Small and Medium Enterprises Working Group, I’d like to stress the importance of the latter: inclusivity and small business. MSMEs account for over 97 percent of all business in APECeconomies and employ over half of the workforce. Any strategy for reducing food wastage will have to involve the wholesale participation of the region’s smaller businesses.
Amid these challenges are an abundance of opportunities to help MSMEs reduce food waste. Training, policies and guidelines can aid them in improving profits by reducing costs and increasing the value added of food. They can reduce their carbon footprint, which enhances consumerdemand, and divert waste to new products or bioenergy.
A November study by the APEC Small and Medium Enterprises Working Group presents case studies, identifies the best available data on food waste for MSMEs, and identifies several best practices for economies in dealing with food waste through MSME policy.
In one section, the study’s authors analyze a case study of a successful MSME, and identify four key factors contributing to its successful reduction of food waste: 1) creating a network of people — e.g., a community surrounding a farm; 2) using innovation and technology to facilitate farming and save time; 3) producing knowledge and providing it through several channels — e.g., a learning and training center, friendly guide books; and 4) considering the environment at every step of the process.
How to respond to the growing political divide between China and the West marked by partial decoupling, security alliances, and the risk of sanctions, amongst other things, continues to be a major topic of discussion among China’s intellectual elite. As already evidenced in previous editions of this newsletter, opinions vary considerably. Those presented here so far have ranged from Da Wei (达巍) stressing the importance of preserving if not strengthening ties with the West and Shen Wei (沈伟) arguing in favor of reforming the WTO and building up a network of free trade agreements to Ye Hailin (叶海林) emphasizing the need for China to demonstrate its military might to demobilize U.S. allies and Lu Feng (路风) calling for self-reliance and greater assertiveness in the field of tech. A certain amount of overlap certainly exists among these perspectives but the differences are nonetheless striking.
Today’s edition of Sinification looks at a speech made last month by Yang Ping (杨平), head and editor-in-chief of the highly regarded Beijing Cultural Review (文化纵横, hereafter BCR). Yang is also director of the Longway Foundation (修远基金会) which publishes BCR. The foundation describes its publication as “the most influential magazine of intellectual thought and commentary in China” and sees itself as having a key role in helping shape the direction of intellectual debates in China (“议题的设置就是意识形态斗争成功的一半”). Indeed, BCR often republishes old articles at key junctures as so often highlighted by David Ownby’s wonderful Reading the China Dream.
The following are excerpts from an edited transcript of a speech by Yang made at an event hosted by Renmin University’s Chongyang Institute for Financial Studies, which was attended by China’s Vice-minister of foreign affairs Xie Feng (谢锋). In his speech, Yang advocates building a new international system led by countries in the Global South (which, of course, includes China) rather than the West. His ideas are not particularly novel but are nevertheless noteworthy in that they represent yet another viewpoint in the ongoing debate over how China should respond to the increasing tensions that characterize its relations with the U.S. and other Western countries. Next week, I will be sharing a somewhat longer piece that proposes a way of protecting China from the growing threat of Westernsanctions.
China is being pushed out of the U.S.-led international system
“The information I have seen so far is that the number of Chinese companies included in the U.S.’s ‘entity list’ has risen from 132 under Trump to over 530 now. The scope of such point-to-point [点对点] precision strikes is constantly expanding. With such a political impact on the economy, we can feel the [world’s] economic order being disrupted across the board. The world is moving inexorably in the direction of decoupling. The phenomenon of politics affecting the economy and the capitalistpolitical order no longer upholding the capitalisteconomic order are extremely striking.
“In such a context, the challenges now facing China are extremely serious and varied. We have the pressures of dealing both with containment in the Indo-Pacific and with the U.S.-led politics of alliances across the world. More importantly and fundamentally China faces the strategic task of building a new type of international system [新型国际体系] … The existing Western-dominated international system used to be one in which we tried hard to blend [so as] to become one with it. During this process, we [sought to] absorb the West’s advanced technologies and management [practices] and thus complete our mission of industrialisation and modernization.
“But once you enter the existing international system, he [who is already inside] does not want to play with you, and even wants to drive you back out. He wants to divide both supply chains and the economic system into two parts [搞成两套] and desperately wants to contain and suppress you. This is not something that can be determined by your own subjective preferences. He has made up his mind: you have already become his ‘fated opponent’ [命定的对手]. He has to suppress you and drive you out of the existing system.”
Building a new international system with the Global South
“It is at this point that China is faced with the task of constructing a new type of international system that is not dominated by the West. In today’s so-called strategic quadrangle consisting of the U.S., Europe, Russia and China, how to construct such an international system appears particularly difficult [逼庂 literally means ‘narrow’ or ‘cramped’ rather than ‘difficult’].
“But if we look a little further south, we will find a vast number of developing countries, the Third World and the countries of the global South. They should be our strategy’s depth [我们的战略纵深]. That is to say, [we should] build a new type of international relations and a new type of international system that has strategic depth and in which China and the countries of the global South are jointly integrated. [This] is, in my view, an important strategic task for China’s international relations in the coming decades.”
BRI projects: Strategy trumps profitability
“For China today, especially for businesses and governments at all levels [within China] that are currently working hard to develop BRI trade, there is a very important point to which they should be alerted or reminded about: the development of the BRI has to go beyond mere business, beyond the general export of [China’s excess] production capacity, beyond the partial thinking of industry and the partial thinking at the regional level, or the simple economic way of thinking of business. The development of the BRI should be considered at the strategic level. That is, it should be included into China’s strategy when thinking about Africa, South America, Southeast Asia and Central Asia.
“If you raise [the development of the BRI] to the strategic level, there are countries where you won’t be able to make money and will have to lose money, and there are countries where you will be free to make money. You have to unite the two within your organic strategy.
“The strategic task of building a new type of international system is, in my view, a strategic proposition that Chinesethink tanks and research institutes should pay very close attention to with regards to international relations.
“Time is limited today. I just wanted to make a start here. I hope to receive your corrections and criticisms. Thank you!”
“We’ve had a time of red-hot housing market all over the country… Shelter inflation is going to remain high for some time. We’re looking for it to come down, but it’s not exactly clear when that will happen. Hope for the best, plan for the worst.”
The rapid run-up of shelter costs—both house prices and rents—during the recovery from the pandemic has raised questions about how inflation pressures might affect housing affordability. Since March 2022, the Federal Reserve has rapidly lifted its federal funds rate target from near zero to over 4%, and policymakers have signaled that they are open to keeping the monetary policy stance sufficiently restrictive to return inflation to the longer-run goal of 2% on average. The tightened financial conditions following those policy changes, especially the surge in mortgageinterest rates, have helped cool house price growth. However, rentinflation remains elevated.
Economic theory suggests that some common forces such as changes in housing demand can drive both rents and house prices. For example, the expansion of remote work since the COVID-19 pandemic has increased demand for housing, raising both house prices and rents (Kmetz, Mondragon, and Wieland 2022). To the extent that the stream of current and future rents reflects the fundamental value of a house, house prices can be a leading indicator of future rentinflation (Lansing, Oliveira, and Shapiro 2022). Thus, monetary policy can affect both house prices and rents by cooling housing demand.
Housing demand responds to changes in financial conditions, such as increases in mortgageinterest rates. However, theory suggests that house prices are more sensitive than rental prices to changes in financial conditions, because home purchases typically require longer-term mortgage financing. In addition, unlike rents, house prices can be partly driven by investor sentiments or beliefs, which explains the observed larger swings in house prices than in rents over business cycles (Dong et al. 2022). Long-term rental contracts can also contribute to slow adjustments in rentinflation.
Rentinflation is an important contributor to overall inflation because housing costs are an important component of total consumption expenditures. On average, housing expenditures represent about 15% of total PCE and 25% of the services component of PCE. In CPI, shelter costs represent an even larger share, accounting for about 30% of total consumption of all urban consumers and about 40% of core consumption expenditures excluding volatile food and energy components.
The contribution of rentinflation to overall PCEinflation has increased since early 2021. As Figure 2 shows, in the first quarter of 2021, rentinflation accounted for about 22% of the four-quarter change in the PCE services price index, excluding energy: 0.5 of the 2.3 percentage points increase in service prices was attributable to rentinflation. By the third quarter of 2022, the contribution of rentinflation had climbed to about one-third, or 1.5 of the 4.7 percentage point increase in service prices.
Figure 2: Rising contribution of rent inflation to services inflation
For our analysis, we use a measure of monetary policy surprises constructed by Bauer and Swanson (2022). Their measure focuses on high-frequency changes in financial marketindicators within a short period surrounding the Federal Open Market Committee (FOMC) policy announcements. If the public fully anticipates a policy change, then the financial market would not react to new policy announcements. However, if the market does react to an announcement, then the policy change must contain a surprise element. Thus, changes in financial marketindicators, such as the price of Eurodollar futures, in a narrow window around an FOMC announcement can capture policy surprises. In practice, however, the data constructed this way are not complete surprises because they can be predicted by some macro and financial variables shortly before FOMC announcements. We follow the approach of Bauer and Swanson (2022) to purge the influences of those macro and financial variables from the measure of policy surprises. We use the resulting quarterly time series to measure monetary policy shocks, with a sample period from 1988 to 2019.
In the final step, we compute the responses of rentinflation relative to its preshock level over a period up to 20 quarters after the initial increase in the federal funds rate.
Gradual impact of policy tightening on rent inflation
Figure 3 shows the response of rentinflation during the first 20 quarters after an unanticipated tightening of monetary policy (solid blue line). The shaded area shows the confidence band, indicating the statistical uncertainty in estimating the responses. Under the assumption that the model is correct, the shaded area contains the actual value of the rentinflation responses to the monetary policy shock roughly two-thirds of the time. The policy shock is normalized such that it is equivalent to a 1 percentage point unanticipated increase in the federal funds rate.
Figure 3: Response of rent inflation to monetary policy tightening
The figure shows that monetary policy tightening has significant and gradual effects on rentinflation. On impact, a 1 percentage point increase in the federal funds rate reduces rentinflation about 0.6 percentage point relative to its preshock level. Over time, rentinflation declines gradually, falling about 3.2 percentage points in the 10 quarters following the impact. The slow adjustment in rentinflation partly reflects the stickiness in nominal rents due to long-term rental contracts. Since housing expenditures account for about 15% of total PCE, this estimate translates to a reduction in headline PCEinflation of about 0.5 percentage point, stemming from the decline in rentinflation over a period of 2½ years.
The rent component of PCE is measured based on average rents, including those locked in long-term rental contracts, which are slow to adjust to changes in economic and financial conditions. Rents on new leases, however, are more flexible. For example, the 12-month growth in Zillow’s observed rent index, which measures changes in asking rents on new leases, has slowed significantly since March 2022 (see Figure 4). Asking rents are typically a leading indicator of future average rents. Thus, the slowdown in asking rent growth could portend lower future rentinflation.
Figure 4: Year-over-year observed rent growth starting to slow
Rents are an important component of consumer expenditures. Recent surges in rentinflation have led to concerns that overall inflation might stay persistently high despite tightening of monetary policy. We present evidence that monetary policy tightening is effective for reducing rentinflation, although the full impact takes time to materialize. A policy tightening equivalent to a 1 percentage point increase in the federal funds rate can reduce rentinflation up to 3.2 percentage points over the course of 2½ years. This translates to a maximum reduction in headline PCEinflation of about 0.5 percentage point over the same time horizon. Although average rents are slow to respond to policy changes, growth of asking rents on new leases has started to slow following recent monetary policy tightening. Our finding suggests that this tightening will gradually bring rentinflation down over time, thereby helping to reduce overall inflation.
The Atlanta Fed’s Wage Growth Tracker was 6.1 percent in January, the same as in December. For people who changed jobs, the Tracker in January was 7.3 percent, compared to 7.7 percent in December. For those not changing jobs, the Tracker was 5.4 percent, compared to the 5.3 percent reading in December.