Covid-19: Recession for world economy; India, China likely exceptions: UN

The report did not give a detailed explanation as to why and how India and China will be the exceptions as the world faces a recession and loss in global income that will impact developing countries.

The world economy will go into recession this year with a predicted loss of trillions of dollars of global income due to the coronavirus pandemic, spelling serious trouble for developing countries with the likely exception of India and China, according to a latest UN trade report.

With two-thirds of the world's population living in developing countries facing unprecedented economic damage from the COVID-19 crisis, the UN is calling for a $2.5 trillion rescue package for these nations.

According to the new analysis from United Nations Conference on Trade and Development (UNCTAD), the UN trade and development body titled 'The COVID-19 Shock to Developing Countries: Towards a 'whatever it takes' programme for the two-thirds of the world's population being left behind', commodity-rich exporting countries will face a $2 trillion to $3 trillion drop in investments from overseas in the next two years.

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The UNCTAD said that in recent days, advanced economies and China have put together massive government packages which, according to the Group of 20 leading economies (G20), will extend a $5 trillion lifeline to their economies.

"This represents an unprecedented response to an unprecedented crisis, which will attenuate the extent of the shock physically, economically and psychologically," it said.

It added that while the full details of these stimulus packages are yet to be unpacked, an initial assessment by the UNCTAD estimates that they will translate to a $1 trillion to $2 trillion injection of demand into the major G20 economies and a two percentage point turnaround in global output.

"Even so, the world economy will go into recession this year with a predicted loss of global income in trillions of dollars. This will spell serious trouble for developing countries, with the likely exception of China and the possible exception of India," the UNCTAD said.

China virus death toll reaches 1,110; world warned of 'very grave threat'

Coronavirus is believed to have emerged last year in a market that sells wild animals in Hubei's capital Wuhan, the city at the centre of the outbreak.

The number of fatalities from China's new coronavirus epidemic jumped to 1,110 nationwide on Wednesday after hard-hit Hubei province reported 94 new deaths.

In its daily update, Hubei's health commission also confirmed another 1,638 new cases in the central province, where the outbreak emerged in December. There are now more than 44,200 confirmed cases across China, based on previously released figures from the government.

The new virus is believed to have emerged last year in a market that sells wild animals in Hubei's capital Wuhan, the city at the centre of the outbreak. The virus was officially named "COVID-19" at a conference in Geneva held by the World Health Organization, where the body's chief said countries had a chance of stopping its global spread.

WHO head Tedros Adhanom Ghebreyesus said on Tuesday that although 99 percent of cases are in China, where it remains "very much an emergency," it also "holds a very grave threat for the rest of the world." He urged countries to share data in order to further research the disease.

Chinese authorities dismissed two senior health officials from Hubei on Tuesday, where tens of millions of people have been under lockdown since late last month, and tightened restrictions in its capital Wuhan.

Apple's woes go beyond China economy: End of easy money among the culprits

Apple last week cut its quarterly revenue forecast for the first time in almost two decades, blaming weak sales in Asia's largest economy.

A slowing economy and relatively high prices have been highlighted as chief culprits behind the slump in demand for Apple Inc.’s iPhones in China. There’s a third factor that’s been overlooked: the end of easy money.

Apple last week cut its quarterly revenue forecast for the first time in almost two decades, blaming weak sales in Asia’s largest economy. Cheaper devices from the likes of Huawei Technologies Co. and Xiaomi Corp. helped to erode the iPhone maker’s market share. But slowing consumer loan growth has also hurt appetite for high-priced phones.

Beijing has been cracking down on consumer lenders favored by the country’s more free-spending millennial generation. The peer-to-peer lending industry is shrinking as defaults rise and regulations are tightened. The impact on consumption shouldn’t be underestimated. For example, P2P loans to finance car purchases totaled about 17 billion yuan ($2.5 billion), or 9.4 percent of broader internet lending, as of June last year, according to industry site wdzj.com.

The availability of credit has helped some consumers buy more expensive cars — and other high-priced items — than they would otherwise have chosen.

Nasdaq-listed LexinFintech Holdings Ltd. offers iPhones and other consumer products via installment loans through its online e-commerce platform. The company’s iPhone sales rose in the fourth quarter from the third, and for the full year compared with 2017, according to a Lexin spokeswoman.

Take the iPhone XS Max, the top-of-the-range model that retails for 9,599 yuan ($1,400) on Apple’s China website. A customer on Lexin’s Fenqile platform can pay 758.25 yuan a month on a 12-month plan, or as little as 376.37 yuan under a 36-month plan. Fenqile’s gross merchandise volume rose 33.8 percent in the third quarter from a year earlier.

The Chinese consumer isn’t dead, but she has become a lot more price-conscious. She’ll still buy Tom Ford lipstick, though may hold off on big-ticket purchases like a handbag unless credit is available. As for iPhones, why splash out on a premium brand when much cheaper devices — with comparable technology quality — abound?

As my colleagues Sarah Halzack and Andrea Felsted noted, Nike Inc. posted a 31 percent increase in quarterly sales for its Greater China division last month, and demand in the country for Estee Lauder Cos. makeup continues to boom. On the other hand, Cie Financiere Richemont SA — the seller of luxury products from Cartier jewelry to Alfred Dunhill leather goods — is seeing China sales growth moderate.

When credit is freely on hand, consumers everywhere tend to favor higher-end goods. When money is harder to come by, they become pickier. China has just shown that it’s no exception.

Business Standard