Chinese factories face headwinds in post-lockdown recovery

Chinese factories could struggle to keep up momentum as pent-up demand wanes and exports struggle. (AFP)
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Updated 09 July 2020

Chinese factories face headwinds in post-lockdown recovery

  • China’s passenger car retail sales fell 8 percent in June from a year earlier

BEIJING: Orders for infrastructure materials and equipment have helped industrial output recover faster in China than most places emerging from COVID-19 lockdowns, but further expansion will be hard to attain without stronger broad-based demand and exports.

Prices of copper and steel have surged and share prices for Chinese blue chips struck five-year highs, as state-funded infrastructure projects drove up production of cement, steel and non-ferrous metals.

Railway investment, for example, soared 11.4 percent in April-June from a year earlier versus a 21 percent drop in the first quarter.

Industries gained from pent-up demand for autos and electronics. The property sector, a pillar of growth, also showed signs of rebounding, with real estate investment expanding and sales quickening.

China’s factory-gate prices, still in deflation territory this year, may have turned positive on a monthly basis in June, said Yating Xu, senior economist at IHS Markit, in a sign of recovering demand for manufactured goods.

The optimism also led investment bank ING to forecast no more policy interest rate cuts from the central bank for the rest of the year. “We started to return to thin profit in May and became a bit better in June,” said an official at a state-owned steel mill in central China, declining to be named due to company policy.

“Our demand mainly comes from infrastructure so far this year, especially for steel rebar and medium plates,” he said. Steel rebars are mostly used in construction, and medium steel plates in ships and excavators.

Underpinned by robust infrastructure demand from China, the Baltic dry index, which tracks rates for ships ferrying dry bulk commodities and reflects rates for capesize, surged 257 percent in June from a low struck in May due to the freeze in global trade as a result of the lockdowns.

The rosy outlook stands in stark contrast to the dismal industrial landscapes of other economies still fighting COVID-19. Factory output plunged further in May from a year earlier in Japan, South Korea and the US. Euro zone manufacturing output fell by a record 28 percent in April.

The industrial recovery is expected to help China’s economy post a positive growth rate in the second quarter after contracting for the first time in decades due to COVID-19.

But analysts warn that factories could struggle to keep up momentum even as early as this quarter as pent-up demand wanes, exports struggle and heavy floods take their toll on industries and businesses in the Yangtze Delta.

The surge in demand for automobiles has been released and the auto market entered a traditional lull in June, said the China Passenger Car Association (CPCA) last week. China’s passenger car retail sales fell 8 percent in June from a year earlier.

In May auto sales rose for the first time after a two-year slump, fanning expectations of a strong V-shaped recovery in a pillar industry, supporting the broader economy. Auto deliveries to dealers also rose for the second straight month in May.

Exports, a sector that provides about 200 million urban jobs, are forecast to come under pressure in the third quarter, analysts say, as sales of COVID-19-related medical supplies slow and global demand stays soft.


Palantir listing may shine light on secretive Big Data firm

Updated 21 September 2020

Palantir listing may shine light on secretive Big Data firm

  • Palantir’s filing suggests a valuation of some $10 billion, down from a private value as high as $25 billion, according to Renaissance Capital

WASHINGTON: Perhaps the most secretive firm to emerge from Silicon Valley, Palantir Technologies is set for a stock market debut this month that may shed light on the Big Data firm specializing in law enforcement and national security.

Palantir platform has been used in the controversial practice of “predictive policing” to help law enforcement, detect medical insurance fraud and fight the coronavirus pandemic.

While Palantir’s data practices and algorithms are secret, the company claims it follows a road map which is, if anything, more ethical than its tech sector rivals.

It moved its headquarters to Denver this year, partly in an effort to set itself apart from its Silicon Valley rivals.

“Our company was founded in Silicon Valley. But we seem to share fewer and fewer of the technology sector’s values and commitments,” Palantir says in its prospectus. “From the start, we have repeatedly turned down opportunities to sell, collect or mine data.”

Palantir is opting for a direct listing, expected on Sept. 29. This will not raise capital but will allow shares to be traded on the New York Stock Exchange.

Palantir’s filing suggests a valuation of some $10 billion, down from a private value as high as $25 billion, according to Renaissance Capital.

The company posted a loss of $580 million last year on revenue of $743 million. But it sees prospects improving as it offers solutions to what it calls “fractured health care systems, erosions of data privacy, strained criminal justice systems and outmoded ways of fighting wars,” its regulatory filing says.

Palantir’s biggest shareholder is Peter Thiel, an early Facebook investor and one of the rare tech executives who backed Donald Trump’s campaign in 2016.

“We are in a deadly race between politics and technology,” Thiel wrote in a 2009 essay for the libertarian Cato Institute.

Activists argue that Palantir’s technology — which scoops up financial records, social media posts, call records and internet records — enables unprecedented opportunities for mass surveillance with little oversight on privacy and fundamental rights.

Human rights activists have staged protests against Palantir after US agencies used its technology to hunt down illegal immigrants in the United States.

The immigration rights activist group Mijente claims Palantir technology is used in operations to track and arrest thousands of people “just for being undocumented.”

Palantir is a major player in “predictive policing,” a technology which critics say can amplify bias in law enforcement.

A 2017 research paper by University of Texas sociologist Sarah Brayne found the Palantir platform can connect seemingly unrelated bits of data for investigators, but can also lead to “a proliferation of data from police” collected without a warrant.

Palantir does not apologize for its work in national security and law enforcement.

Palantir points out that it created a privacy and civil liberties board in 2012, ahead of most tech rivals. It also rejects working with China as “inconsistent with our culture and mission.”