Its crude oil imports declined 2% in 2024, the first such decline. The implications are enormous.
If Chinese demand is reaching a plateau that would fulfil projections by the IEA of global oil demand peaking before 2030. The forecast sustains hope for the world to reach net zero carbon emissions by 2050. The milestone would also shake the global economy. Over the past three decades, China has accounted for half of all growth in the world’s oil demand — some 600,000 b/d. If that rate continues to level off, the $500bn that oil companies are spending every year on finding new sources of oil and gas may be far too high.
2. Europe's stunning reversal of economic fortunes between its core (northern) and peripheral (southern) economies, the so-called PIIGS.
In a stark reversal of fortune, the once-ailing “periphery” countries have stolen the lustre of its previously dominant “core”, including Belgium, the Netherlands, Austria and, at the centre, Germany. In the 15 years to the pandemic, German GDP on average grew by 1.5 per cent a year while the four southern states eked out just 0.3 per cent on average. Since 2020, Spain, Italy, Portugal and Greece have on average expanded by 1.3 per cent a year... on average, the four economies are nearly 6 per cent larger than they were at the start of the pandemic. Meanwhile, Europe’s largest economy Germany had no increase in economic activity at all over the past four years, and the Bundesbank has warned that this stagnation may drag on well into 2025. By contrast, the EU commission expects that Spain and Greece will grow by 2.3 per cent this year, Portugal by 1.9 per cent and Italy by 1 per cent.
Impressively, the much derided bureaucracy in Brussels may have contributed to this reversal for the PIIGS!
The newfound economic fortunes of Europe’s debt crisis countries can in part be traced right back to Brussels itself: A €800bn debt-funded investment programme that the EU launched during the pandemic. Through the so-called NextGenerationEU, member states are being provided with funds to invest in transportation and digital infrastructure, green energy generation, research and development among other areas, in exchange for undertaking productivity-enhancing structural reforms. Portugal, Italy, Spain and Greece are the main recipients. Though the four countries account for just 28 per cent of the Euro area’s GDP, they are expected to receive 78 per cent of all funds through the programme, according to ECB data. The scheme is currently set to run until mid-2026. In Italy, around €25bn of NextGenEU funds is being used for a major upgrade of the railway network, including new high-speed train lines into the country’s south, where travel is far slower than in the prosperous north. Billions of euros in infrastructure investment are generating much-needed employment in a region that has historically been short of jobs.
The money has come attached with reform conditionalities.
To unlock the funds, Italy has had to undertake major reforms of its public administration and judicial systems, with the aim of streamlining, simplifying and accelerating procedures and decision-making to boost efficiency and the country’s long-term competitiveness. The structural reforms demanded by Brussels are more important than the money itself, argues Yannis Stournaras, the governor of the Bank of Greece... Stournaras points to research by the Greek central bank suggesting that those measures alone could lift GDP up to 10 per cent by 2040.
3. German economy graphic of the day. Industrial output is falling and a quarter of manufacturing capacity is going unused.
There are several other graphics in the article that point to the decline in the country's economic fortunes under Olaf Scholz.
This graphic is both glass half full and half empty.
On the one hand, it's an impressive achievement that Germany was able to completely phase out a nearly 50% dependency on Russian gas in just over a year. On the other hand, Russian gas has not been substituted or offset by gas from LNG terminals.
This means that Germany has either managed to improve its energy efficiency or figure out alternative energy sources or foregone output. More likely a combination of all, and subsequent economic contraction appears to indicate that it has been more of the last.
Public investment is an area that Germany should focus.
Germany’s transport, energy and communications infrastructure suffers from years of under-investment, in part because of the country’s strict public deficit rules. The debt brake, a constitutional provision introduced under former chancellor Angela Merkel in 2009, prevents regional governments from taking on any new debt and the federal state from borrowing no more than 0.35 per cent of GDP in any given year. The result is an ageing railway network, crumbling highways and collapsing bridges. Deutsche Bahn, whose trains increasingly run late — if at all — has estimated it needs €45bn to modernise. The country’s adoption of new technologies has been slow. In a 2023 survey, 82 per cent of companies in Germany said they were still using fax machines. Germany also has one of the lowest penetration rates of fibre broadband in the OECD.
4. A peek at Donald Trump's commercial interests.
5. China routinely overstates its GDP growth rates by 2-4 percentage points, says Rhodium Group.
6. Good article that explains why it's not easy for ICE manufacturers to shift to EVs. This snippet illustrates the challenge,
In comparing their parts, the most important metric is weight reduction. For the electric business to keep growing, the cars need to better compete with gas-guzzlers on range. Therefore most every design decision must take into account whether it makes the car lighter. As a basic example, consider one component: Toyota part #55330-42410, a 20-pound steel bar, known by engineers as a cross-car beam. The beam holds the steering wheel and dashboard instruments in place and helps protect the cabin during a collision. This part is inside the bZ4X, the Toyota brand’s only global, mass-market fully electric car, because it’s of a tried-and-true design used in countless other models. Today’s standard cross-car beam is the product of incremental improvements made across decades, and most versions of it have wound up under the hoods of internal combustion cars. This is a testament to the Toyota Production System (TPS), which continuously refines even the tiniest details of individual auto parts.Over untold iterations, the beam has been designed to keep the vibrations of an internal combustion engine from making their way to the passengers. But electric motors don’t vibrate, and steel is heavy. These are among the reasons why Tesla Inc. and BYD Co., the top makers of battery-electric vehicles, manufacture similar beams out of plastic. Theirs weigh only about 14 pounds, according to Caresoft, and they’re cheaper and easier to install, too... researcher Yole Group, which notes that BYD makes 40% of its parts. “It’s like, holy cow, these guys make everything,” says Woychowski, the Caresoft president. “They make their own batteries. They make their motors. They make their own body. They make their front and rear fascia, their headlights, their door trim panels, their console. It’s a quantum jump. That’s not conducive to kaizen.”
This is an important snippet
A typical electric car has about 11,000 parts, Goldman Sachs Group Inc. has estimated, about two-thirds fewer than its gas equivalent.
Many components are completely new.
7. Andy Mukherjee compares the real cost of doing business in India and Thailand.
All told, 19% of a $2.3 million factory in India is an extra burden of governance — or lack of it — that doesn’t exist in Thailand. This may not be an showstopper for a high-margin business that relies on skilled, productive labor and cutting-edge technology. But for a labor-intensive startup operating with slim profits in an industry like readymade garments, going into production from a weak financial position means fewer resources left to scale up. And therein, the entrepreneur tells me, lies the basic difference between India and its East Asian neighbors. No ordinary Thai businessmen fears bankruptcy because of something his government may do; in India, such a prospect is very real.
8. Good description of the fissures building up in the Trump coalition between the Tech Right and the Nationalist Right.
The core of the aspiring Trumpian aristocracy are still reactionaries and nationalists aching to restore an American way of life thought to be lost after decades of “globalist” technocracy. They are often deeply skeptical of the idea that the innovations promised by tech companies represent progress, and they describe America as “not just a country, not just an economy, but a people with a common history,” as Jeremy Carl, a deputy assistant secretary of the interior in the first Trump administration and a senior fellow at the Claremont Institute, told me. The tech figures who came to the movement in 2024 were often sympathetic to Trumpian nationalism. But they tended to be more interested in making money and launching a new era of “American dynamism.”... The coalition is achingly close to achieving a long-held conservative dream — of fashioning a high-low alliance powerful enough to supplant the liberal establishment and remake America. It is a project that might well collapse if one side or the other gets too much of what it wants, and ends up driving the other away... Mr. Bannon accused the tech barons of promoting “technofeudalism” and “transhumanism”— bending human life into technologized and unnatural new forms.
Another description of all the Republican factions that animate the Trump coalition.
9. A study by LCH Investments, an investor in hedge funds, shows that hedge funds have pocketed nearly half their returns since their inception in 1969!
Managers generated $3.7tn of total gains before fees, but fees charged to investors were $1.8tn, or about 49 per cent of gross gains... The figures... date back to 1969... “Up to the year 2000, the hedge fund fee take had been running at around a third of overall gains, but since then it has increased to a half,” said Rick Sopher, chief executive of Edmond de Rothschild Capital Holdings and chair of LCH Investments. “As returns came down, fees went up.” New research comes after the world’s 20 most successful hedge funds made their biggest profits on record in 2024... The top 20 managers in the $4.5tn hedge fund industry made total profits for investors of $93.9bn in 2024... up from the previous record of $67bn in 2023. Together the top 20 generated asset-weighted returns of 13.1 per cent, significantly outperforming the average hedge fund, which made 8.3 per cent...Hedge funds have historically been known for a “two and 20” fee model, where investors pay 2 per cent in management fees every year and a 20 per cent performance fee on investment gains... The increase in the overall fee take from 30 per cent to about 50 per cent of gross gains is largely due to higher management fees... Whereas management fees used to eat up less than 10 per cent of gross gains in the late 1960s and 1970s, they have represented almost 30 per cent in the past two decades... firms have a “pass-through” expenses model, where the manager passes on all costs to their end investors instead of taking an annual management fee. That can cover office rents, technology and data, salaries, bonuses and even client entertainment. It typically varies from 3 to 10 per cent of assets annually. A performance fee of 20-30 per cent of profits is usually charged on top.
This is the list of the biggest hedge funds and their life-term gains.
10. Important point to be considered in the context of US government restrictions on the sales of high-end semiconductor chips by its chip designers.
Indian firms that want more than 1,700 chips a year will require “National Verified End User” (“NVEU”) authorisation. The American side has been alarmed by events in India, eg reports of a company in India which imported 1,100 Nvidia chips from Malaysia and re-exported them to Russia for $300 million. Action by the Indian state blocking leakages of high technology to Russia, China, and Iran will help more Indian firms get to this NVEU status.
11. Important point about the trends in central government's assets.
The Central government’s assets as a proportion of its liabilities... rose from 67 per cent in 1950-51 to 100 per cent by the early 1960s and stayed at that level till the early 1980s because of the emphasis on investment in public sector industrial and infrastructure corporations. Since then, it has declined steadily to 75 per cent in 1990-91 and 42 per cent in 2023-24, with the shift towards subsidies and handouts. The growing role of freebies in electoral contests may well reduce the ratio of government assets to liabilities even further.
12. This captures the nature of the Indian market more than anything else
“India is a L1 (in the world of business contracts, L1 stands for the lowest bid in a tender)country. It is price that matters, not quality or source of imports," said N. Krishnamoorthy, deputy managing director, commercial, Chemplast Sanmar, a large PVC producer.
This is Uber CEO Dara Khosrowshahi
“Indian customers are so demanding and don’t want to pay for anything. I am so proud of the team. India is the gateway to the world for us. It has been the toughest market to succeed in. But if we succeed here, it sets the standards for us to succeed in other markets in the world.”
13. India state capacity fact of the day, Directorate General of Foreign Trade (DGTR) edition,
The time taken by DGTR to levy anti-dumping tariff measures is much longer than its peers. “It takes anywhere between 18 to 30 months from the start of dumping to imposition of duties," said A.K. Gupta, founder and director, TPM Consultants, a consultancy into trade remedies. Other countries do it in 9 to 12 months... That apart, the case should ideally be initiated within 15 days of the filing of the application. “In other countries, cases are initiated once there is prima facie evidence and then the investigation begins. But DGTR generally takes a couple of months or more to initiate a case as its officers first start a preliminary investigation, which takes weeks before they even accept the case. This is a typical Indian bureaucratic mindset," said Arora... DGTR has about 25 officers while its equivalent organization, in the US, has over 250. Each officer, at any given time, handles 10 to 20 cases. “In the US and EU, it is not more than two or three cases," said Arora.
14. Parking minimums come full circle.
When cars became the dominant mode of transportation after World War II, cities began adding parking requirements to ease road congestion. By 1969, nearly all municipalities with populations of at least 25,000 had minimum parking requirements for many buildings, including beauty salons and bowling alleys... Hundreds of cities and municipalities have rolled back or completely thrown out requirements on real estate projects since the nonprofit organization Strong Towns began keeping track a decade ago. In 2022 alone, 15 of them, including San Jose, Calif., Raleigh, N.C., and Lexington, Ky., repealed their parking rules. In late 2023, Austin became the largest U.S. city to eliminate parking minimums. And in December, New York City lawmakers put policies in place that reduced or eliminated parking requirements for new housing in some parts of the city... In November 2023, Austin, Texas, became the largest U.S. city to end parking mandates.
Its impact,
A 2022 study by the Regional Plan Association, a nonprofit group focused on the New York City area, found that more low-income housing was built in city neighborhoods where parking requirements were reduced... Seattle, considered a pioneer in parking policy, took an incremental approach. In 2012, the city relaxed minimums in central neighborhoods and areas served by public transit. Then in 2018, it expanded the approach to more locations and types of development. Roughly 60 percent of the housing developed in Seattle since the changes were put in place would not have been possible under the old rules, according to a 2023 study by Sightline Institute.
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