China’s hidden crisis

In today’s big story, we’re looking at why China’s decision to limit publishing certain data on its struggling economy might be its biggest red flag.

What’s on deck:

• Markets: The hottest up-and-coming fintechs to keep tabs on.
• Tech: A leaked memo details how Microsoft is handling performance reviews amid a salary freeze.
• Business: Billionaire CEOs U-turn on remote work.

China’s unknown economy

At least, it seems that way from the data we can see.

The world’s second-largest economy is struggling and has kept some critical data close to the vest (more on that later).

But before we get into that, here’s why there is cause for concern regarding China.

• The post-pandemic rebound that never was. A big piece to consider with the Chinese economy is how high expectations were heading into the year. Plenty of economists and investors penciled in China for a big 2023 with the lifting of its zero-COVID policy.
• Deflation sows doubt. But it wasn’t long before the data wasn’t indicating an economy on the rise. China’s economic data for July showed the country slipped into deflation, which amounts to the price of things decreasing, for the first time in two years. Meanwhile, year-to-date figures for imports and exports decreased.
• Housing market headaches. Real estate also hasn’t been pretty for homebuyers or developers, which is bad news considering it makes up roughly 30% of China’s GDP. New-home prices have fallen for two consecutive months, and some economists are predicting zero price growth this year. It’s not easier for big players, as massive Chinese property developer Country Garden missed interest payments on two bonds, while Evergrande saw its shares plummet 87% when trading resumed after a 17-month halt on the once-$50 billion property developer.
• No jobs for youngsters. Youth unemployment is another pain point, but to what extent no one truly knows. In July, China reported a record-high unemployment rate for ages 16 to 24 at 21.3%. The following month, Chinese government officials omitted youth unemployment statistics, with a spokesperson saying the government was reassessing its methodology.

According to Linette, it’s an example of how Chinese President Xi Jinping continues to put ideology before economic growth.

Ironically, the lengths to which China has gone to hide its economic woes are only exacerbating its problems in the long run. As Linette points out, investors aren’t likely to invest heavily in China’s recovery unless they have better data to understand when that’s likely to occur.

3 things in markets

1. BRICS’ bummer. The group of countries hoping to challenge Western-led coalitions added new members to its ranks. But establishing a new dollar-challenging currency still seems a ways away.
2. Fintechs to watch. We surveyed 34 top investors to highlight the up-and-coming fintechs. Here’s the full list of startups set to upend everything from trading and banking to financing electric vehicles.
3. A bounceback for Apple. The upcoming launch of the iPhone 15 next month will likely help Apple’s share price rally after a difficult August, according to a top analyst. The Big Tech company could also surpass Samsung as the world’s biggest smartphone brand.

1. Amazon CEO says it’s “past the time” to commit to the company’s return to office mandate. Andy Jassy said during an internal fireside chat that “it’s past the time to disagree and commit.” He added that working at Amazon likely won’t work out for employees who disagree with the policy.
2. Leaked memo: Microsoft managers should not discuss salary freezes or budget cuts during performance reviews. Instead, the internal guide told managers to highlight how people’s work impacts the fiscal year and tie it to their rewards.
3. The 34 most promising AI startups, according to investors. The companies are creating products like intelligent video editing, tools for detecting AI-generated text, and work assistants.

1. Shrinkflation: New US homes are decreasing in size, but cost per square foot increased. New homeowners are getting less bang for their buck. By one measure, home affordability is at its lowest since 2006, so they’re settling for smaller homes within their price range.
2. Billionaire remote work bait-and-switch. At the height of the pandemic, CEOs like Mark Zuckerberg lauded remote setups as the future of work. But now, some want to fire employees who don’t return to the office.
3. Being lazy is good for you. Naps. Skipping vigorous exercise. And not doing exceptionally difficult work. A researcher found these common traits in the world’s “Blue Zones” — areas where people typically live past 100 years old.

Storm, American Airlines, & more

• Tropical Storm Idalia is on track to hit Florida’s Gulf Coast on Wednesday.
• Leaked video reveals how Shopify plans to attract larger companies.
• American Airlines was fined a record-breaking $4.1 million for delays of over three hours.
• Former President Donald Trump’s election interference trial is set to start on March 4, 2024.
• Authorities believe the Jacksonville shooting was purposefully done on the anniversary of another mass shooting.

Earnings, golf, & more

• Earnings today: HP, Best Buy, and other companies.
• US Ryder Cup captain announces his picks for the team. The golf tournament between Europe and the US happens every two years. And captain Zach Johnson will announce the six remaining players to round out the team.
• Happy birthday, Liam Payne! Michael Jackson and Lea Michele were also born on this day.
• Skype celebrates 20 years post-launch. It’s been under the ownership of Microsoft since 2011.

Rescue helicopter