Since the Great Recession following the 2008 financial crisis, China and India have powered much of the world’s economic growth. Now, activity in both countries has plunged, raising the risk of a prolonged global slump.
What’s happening: China said Friday that it could not set a target for economic growth this year — a sign of how much uncertainty the coronavirus pandemic has caused the world’s second largest economy.
China has set such targets for decades. Last year, Beijing targeted growth in the range of 6% to 6.5%. GDP grew 6.1%, its slowest pace in nearly 30 years.
Meanwhile, Shaktikanta Das, the governor of the Reserve Bank of India, said Friday that the country’s economy wouldn’t grow at all in the current fiscal year, which ends in March 2021. The last time India’s economy shrank over the course of a year was in 1979.
These announcements cast further doubt on the ability of the global economy to recover from its deepest downturn since the Great Depression.
Bank of America continues to slash its economic forecasts, it told clients Friday. The bank now predicts that the global economy will shrink by 4.2% this year, down from a 2.7% contraction it forecast six weeks ago. The IMF predicted in April that global output would contract by 3% in 2020.
The deteriorating relationship between the United States and China is giving investors even more reason to worry.
Eye on Hong Kong: Global stocks tumbled Friday after news broke that Beijing would pass acontroversial national security law, the biggest blow to the city’s autonomy since its handover to China in 1997. Hong Kong’s Hang Seng Index notched its worst performance since July 2015.
The US State Department has condemned the move, warning that “any effort to impose national security legislation that does not reflect the will of the people of Hong Kong” would be met with an international response.
Tensions had already been running high, with Beijing and Washington trading criticism over the handling of the coronavirus pandemic.
Watch this space: Chinese stocks have become a flashpoint. On Wednesday, the US Senate unanimously passed a bill that would prevent companies that refuse to open their books from listing on Wall Street. The bill’s bipartisan cosponsors said the goal is to “kick deceitful Chinese companies off US exchanges.”
The Silicon Valley of the past decade may be on its way out as remote work becomes the new normal.
First came Twitter’s pronouncement earlier this month that some employees would be able to continue working from home “forever.”
The company said the experience of working from home during the pandemic has shown that it can be adopted at scale.
“If our employees are in a role and situation that enables them to work from home and they want to continue to do so forever, we will make that happen,” Twitter’s vice president of people, Jennifer Christie, in a statement to CNN Business. “If not, our offices will be their warm and welcoming selves, with some additional precautions, when we feel it’s safe to return.”
Facebook () CEO Mark Zuckerberg said Thursday that as many as 50% of employees could be working remotely within the next five to 10 years.
Zuckerberg pitched the idea as both a matter of keeping employees happy and creating “more broad-based economic prosperity.”
“When you limit hiring to people who live in a small number of big cities, or who are willing to move there, that cuts out a lot of people who live in different communities, have different backgrounds, have different perspectives,” Zuckerberg said on a livestream.
What it means: US tech companies have fared far better than most firms during the pandemic. Demand for cloud services has shot up, and employees were already used to working from home. Now tech leaders may reconsider all the money they spend maintaining their high-end campuses, which had been a key perk for employees — and a symbol of Silicon Valley’s prosperity.
As nations around the world attempt to dig their way out of a cataclysmic global recession, Britain is in a particularly tight spot of its own making.
The country is in the middle of an economic disaster and a health crisis. The Bank of England has predicted that the United Kingdom is heading for its worst economic crash in more than 300 years, while its death toll from Covid-19 is the highest in Europe.
Yet the United Kingdom is also racing toward a self-imposed deadline to construct a post-Brexit trade agreement with the European Union, its single biggest market for exports, by the end of the year. Talks are not going well — raising the possibility of another major shock just as the expected economic recovery gains momentum.
“The whole of the advanced world is in recession because of the coronavirus,” Kallum Pickering, senior economist at Berenberg Bank, told me. “But the UK has an additional problem of the UK-EU negotiations in the second half of the year.”
Concerns about Brexit could weigh on household spending, which accounts for around 70% of GDP in the UK, Pickering said. That could limit the impact of government relief efforts.
This just in: Attempting to stem the vast economic damage, the UK government borrowed £62.1 billion ($75.7 billion) in April, the highest level since records began in 1993.