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News from China
Powell stomps on inflation fears, pledges continued stimulus
29th April 2021

Temporary price jumps will not spook the Federal Reserve into pulling back on the stimulus it has pumped into the US economy during the COVID-19 pandemic, the central bank's chair Jerome Powell said on Wednesday.

While the world's largest economy is coming back from the depths of last year's crisis, the recovery has ways to go and it is too soon to even talk about easing off the gas, Powell said as the policy-setting Federal Open Market Committee concluded its two-day meeting.

He highlighted the Fed's commitment to keeping the benchmark lending rate near zero, where it has been since the start of the crisis, and to continue its massive bond buying program until employment recovers and inflation exceeds the 2 percent threshold "for some time."

Responding that policymakers could let inflation get out of control, Powell snapped back: "We understand our job. We will do our job."

Speaking at a press briefing, he again acknowledged that inflation will increase in the coming months as business ramps up, but he stressed that the main factors pushing it higher will dissipate.

"An episode of one-time price increases as the economy reopens is not the same thing as, and is not likely to lead to, persistently higher year-over-year inflation," Powell said.

After falling sharply in the early months of the pandemic as demand tanked when the economy shut down to contain the virus, prices of many goods and services have spiked in recent weeks, including gasoline as travelers and commuters return to roads and airports.

But those recent increases — including a 2.6 percent year-on-year jump in consumer prices in March — are caused largely by the bounceback from last year's declines and will go away shortly, he said.

However, he acknowledged the resolution of supply bottlenecks, which also is contributing to the inflation pressures, is "harder to predict."

'Out of hand'

Noted Harvard economist and former Treasury secretary Lawrence Summers has been the leading voice flagging concerns about what he sees as the Fed's complacent attitude toward price increases.

In a seminar last week, Summers cited the old Fed maxim that its goal is to "take away the punch bowl before the party gets out of hand," and lamented that "what we are now saying is we are not going to do anything until we see a bunch of drunk people staggering around."

He has pointed to the example of the 1960s and 1970s when US inflation spiraled, requiring the Fed to sharply raise interest rates to bring it under control even though that caused a recession.

Powell said the current situation is far different from past decades, and these price increases are "not calling for a change in monetary policy, since they're temporary and expected to resolve themselves."

Still, the central bank remains firm in its commitment to fight inflation if it appears to be persistent, and has the firepower to do so, he added.

"No one should doubt that we will be prepared to use our tools," Powell said, stressing that "a transitory raise above 2 percent this year would not meet this standard."

In addition, the central bank chief noted that in the decade following the 2008-2010 global financial crisis — a time when the Fed's policy interest rate was mostly near zero — inflation struggled to hit the 2 percent target.

"The Fed has decided it is more willing to risk a bit of overheating than derail a burgeoning boom. We need a boom to recover what was lost to the crisis, and get back to our pre-pandemic trend," Economist Diane Swonk of Grant Thornton said.

Source: Shanghai Daily, April 29, 2021
Powell stomps on inflation fears, pledges continued stimulus
29th April 2021

Temporary price jumps will not spook the Federal Reserve into pulling back on the stimulus it has pumped into the US economy during the COVID-19 pandemic, the central bank's chair Jerome Powell said on Wednesday.

While the world's largest economy is coming back from the depths of last year's crisis, the recovery has ways to go and it is too soon to even talk about easing off the gas, Powell said as the policy-setting Federal Open Market Committee concluded its two-day meeting.

He highlighted the Fed's commitment to keeping the benchmark lending rate near zero, where it has been since the start of the crisis, and to continue its massive bond buying program until employment recovers and inflation exceeds the 2 percent threshold "for some time."

Responding that policymakers could let inflation get out of control, Powell snapped back: "We understand our job. We will do our job."

Speaking at a press briefing, he again acknowledged that inflation will increase in the coming months as business ramps up, but he stressed that the main factors pushing it higher will dissipate.

"An episode of one-time price increases as the economy reopens is not the same thing as, and is not likely to lead to, persistently higher year-over-year inflation," Powell said.

After falling sharply in the early months of the pandemic as demand tanked when the economy shut down to contain the virus, prices of many goods and services have spiked in recent weeks, including gasoline as travelers and commuters return to roads and airports.

But those recent increases — including a 2.6 percent year-on-year jump in consumer prices in March — are caused largely by the bounceback from last year's declines and will go away shortly, he said.

However, he acknowledged the resolution of supply bottlenecks, which also is contributing to the inflation pressures, is "harder to predict."

'Out of hand'

Noted Harvard economist and former Treasury secretary Lawrence Summers has been the leading voice flagging concerns about what he sees as the Fed's complacent attitude toward price increases.

In a seminar last week, Summers cited the old Fed maxim that its goal is to "take away the punch bowl before the party gets out of hand," and lamented that "what we are now saying is we are not going to do anything until we see a bunch of drunk people staggering around."

He has pointed to the example of the 1960s and 1970s when US inflation spiraled, requiring the Fed to sharply raise interest rates to bring it under control even though that caused a recession.

Powell said the current situation is far different from past decades, and these price increases are "not calling for a change in monetary policy, since they're temporary and expected to resolve themselves."

Still, the central bank remains firm in its commitment to fight inflation if it appears to be persistent, and has the firepower to do so, he added.

"No one should doubt that we will be prepared to use our tools," Powell said, stressing that "a transitory raise above 2 percent this year would not meet this standard."

In addition, the central bank chief noted that in the decade following the 2008-2010 global financial crisis — a time when the Fed's policy interest rate was mostly near zero — inflation struggled to hit the 2 percent target.

"The Fed has decided it is more willing to risk a bit of overheating than derail a burgeoning boom. We need a boom to recover what was lost to the crisis, and get back to our pre-pandemic trend," Economist Diane Swonk of Grant Thornton said.

Source: Shanghai Daily, April 29, 2021
China to launch monthlong effort in May to boost consumption
27th April 2021

 China will launch a series of promotional activities, including a new consumer goods expo in Hainan Province, in May to boost spending as the Chinese retail sector recovers from COVID-19-induced consumer caution.

Expanding domestic consumption is a priority in China’s “dual circulation” economic strategy first highlighted by President Xi Jinping in May last year, which also called for a reduced dependence on foreign markets.

China’s retail sales surged 34.2 percent year-on-year in March, surpassing a 28 percent gain expected by analysts and stronger than the 33.8 percent jump in January-February. More significantly, retail revenues were 12.9 percent higher than March 2019 — before the pandemic.

As China enters a five-day Labor Day holiday, it will kick off the monthlong spending campaign on May 1 in Shanghai with activities including a car show, Gao Feng, a commerce ministry spokesman, said on Sunday.

Other major cities such as Beijing, Chongqing and Suzhou will also hold sales activities in May, he added.

E-commerce platforms will also offer deals on food, travel, and cultural and sporting products by “good quality brands” for half a month.

Events planned in other cities include a food fair in Yangzhou City in Jiangsu Province from Thursday and a fair from May 12 in Guangzhou in Guangdong Province that showcases well-known brands.

Haikou in the subtropical island of Hainan will hold the inaugural consumer goods expo from May 7-10.

Besides domestic products, the expo will showcase consumer brands from 69 countries and regions including Japan, Britain and the United States, with over 10,000 merchandisers and more than 200,000 visitors anticipated

Source: Shanghai Daily, April 27, 2021
China to launch monthlong effort in May to boost consumption
27th April 2021

 China will launch a series of promotional activities, including a new consumer goods expo in Hainan Province, in May to boost spending as the Chinese retail sector recovers from COVID-19-induced consumer caution.

Expanding domestic consumption is a priority in China’s “dual circulation” economic strategy first highlighted by President Xi Jinping in May last year, which also called for a reduced dependence on foreign markets.

China’s retail sales surged 34.2 percent year-on-year in March, surpassing a 28 percent gain expected by analysts and stronger than the 33.8 percent jump in January-February. More significantly, retail revenues were 12.9 percent higher than March 2019 — before the pandemic.

As China enters a five-day Labor Day holiday, it will kick off the monthlong spending campaign on May 1 in Shanghai with activities including a car show, Gao Feng, a commerce ministry spokesman, said on Sunday.

Other major cities such as Beijing, Chongqing and Suzhou will also hold sales activities in May, he added.

E-commerce platforms will also offer deals on food, travel, and cultural and sporting products by “good quality brands” for half a month.

Events planned in other cities include a food fair in Yangzhou City in Jiangsu Province from Thursday and a fair from May 12 in Guangzhou in Guangdong Province that showcases well-known brands.

Haikou in the subtropical island of Hainan will hold the inaugural consumer goods expo from May 7-10.

Besides domestic products, the expo will showcase consumer brands from 69 countries and regions including Japan, Britain and the United States, with over 10,000 merchandisers and more than 200,000 visitors anticipated

Source: Shanghai Daily, April 27, 2021

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