Jobs Growth of 353,000 Blasts Past Expectations as Labor Market Stays Hot Jobs growth far outstripped expectations, the latest surprise delivered by a labor market that has defied predictions of a significant slowdown.

Employers added 353,000 jobs last month, the Labor Department reported Friday. That was the strongest in a year and nearly double what economists surveyed by The Wall Street Journal expected. (…)

December’s payroll gains were also revised upward to 333,000 from 216,000, further undercutting the widely held view among economists and investors that it was becoming harder to find a job.

The unemployment rate in January held steady at 3.7% instead of rising to 3.8% as economists had forecast. Wages outpaced expectations, jumping 4.5% last month from a year earlier, though the large increase may have reflected a big drop in hours worked—a possible result of bad winter weather, some analysts said. (…)

The bulk of hiring last year came from just three sectors: government, healthcare and restaurants and hotels. In January, however, job gains broadened, with nearly two-thirds of private-sector industries adding to their payroll or keeping them steady. (…)

First, let’s hear the critics of this totally surprising NFP report:

• It’s the weather: “The survey week corresponded with a stretch of severe winter weather that roiled economic activity across a number of US regions. It triggered freezing temperatures in Texas, heavy snow in the Midwest and flash flooding in the Northeast.” Poor data, faulty calculations, particularly on hourly wages which may have been boosted by reduced workweeks.
• It’s the revisions as the BLS conducted its annual annual re-benchmarking and update of seasonal adjustment factors.
• It’s the elections…

In any case, the data does say:

• Demand for labor remains strong and broad (diffusion index at 65.6), stronger than thought, pushing wages upwards at an accelerating rate:

• As seen below, jobs growth and wages have been accelerating since October:

• But declining hours in December and January are significant, if not weather-related. Below, the blue bar combines the number of employees with hours worked, down MoM in both December and January. It is quite possible that hourly earnings calculations may have been boosted by reduced hours. We’ll see in coming months.

• The end result is that aggregate weekly payrolls, a solid proxy for consumer spending (dashed line below), rose only 0.16% MoM in January after +0.3% in December and +0.8% in November. YoY trends are plotted below: aggregate payrolls are up 4.7% in January, a sharp deceleration from the 5.8% growth rate in November/December, dragged down by aggregate hours which rose only 0.4% YoY in January.

So, despite this strong NFP report (with its caveats), nominal consumer spending growth might have slowed in January. But more normal weekly hours in February could reverse this and make everybody realize that the labor market is even tighter than thought.

Particularly in services …

… where wage growth has unusually lagged that of goods-producing employees:

Goldman Sachs’ wage tracker now stands at +4.7% for Q4 vs +4.5% in Q3. Note the relationship between CPI-Services and wage growth and the trends since 2012. Is 4-5% the new normal?

All that said, we are still having The Wealth Defect: When inflation-adjusted household net worth rises rapidly above trend like in the late 1990s, the mid-2000s and recently, expenditures grows faster than income, i.e the savings rate declines.

Summers Warns of Interest Rates Well Above 3% Through 2030 Former Treasury chief notes economy strong despite rate rises

Former Treasury Secretary Lawrence Summers said the economy’s enduring strength in the face of vigorous Federal Reserve tightening makes it increasingly likely that neutral interest rates have risen.

“(…) Arguments in favor of neutral rates being higher thanks to fiscal deficits, and spending now being less sensitive to the level of borrowing costs, are “tending to be borne out,” he said. (…)

“One would want to be guessing that Treasury bill rates will be averaging well above 3% through the rest of this decade,” said Summers, a Harvard University professor and paid contributor to Bloomberg TV. Last year, the White House projection for bill rates in 2030 was 2.4%. (…)

Summers spoke hours after the government reported a much bigger jobs gain than economists projected for January. He said it was a “very strong number” that suggests, despite the Fed’s rate hikes over the past two years, “there’s a lot of strength in the economy.” (…)

The former Treasury chief also cautioned against dismissing the risk of a re-acceleration in inflation, given the economy’s strength. Fed Chair Jerome Powell earlier on Wednesday said that “the greater risk” than re-acceleration is that price gains “would stabilize at a level meaningfully above 2%.” (…)

• Powell Says Fed Has New Focus: When to Cut Rates The Fed chair said in a rare television appearance that officials “just want to gain a little more confidence” on inflation.

Federal Reserve Chair Jerome Powell said the central bank has shifted its focus toward deciding when to begin cutting interest rates, but that solid economic growth means officials don’t have to rush that decision.

Given recent economic strength, “we feel like we can approach the question of when to begin to reduce interest rates carefully,” Powell said during a rare television interview broadcast on CBS on Sunday night.

Powell, speaking on “60 Minutes,” said officials were trying to balance the risks of leaving rates too high for too long, which could cause an economic slowdown, and of cutting rates too soon and allowing inflation to settle above the Fed’s 2% goal. (…)

Bloomberg’s headline: Powell Tells ‘60 Minutes’ Fed Is Wary of Cutting Rates Too Soon

Too Soon to Cry Victory on Inflation, OECD Tells Central Banks Organization urges prudent policy as it cuts inflation outlook

Global economic growth is proving more resilient and inflation in the US and Europe is easing faster than the organization expected in its November outlook. But it warned that factors helping that process, including improvements in supply chains and commodity costs, are dissipating or even reversing.

The OECD also pointed to core inflation above target in most countries and growth in unit labor costs, in addition to risks of the Middle East conflict pushing up shipping and energy costs. (…)

Even when rate cuts do begin, the OECD said central banks will have to move more slowly than they did with the large, rapid hikes that began in 2022.

“Scope exists to lower policy interest rates as inflation declines, but the policy stance should remain restrictive in most major economies for some time to come,” the OECD said. (…)

Within major economies, the US was particularly buoyant at the end of 2023 thanks to strong consumer spending and labor markets, and the OECD revised up its forecast for 2024 growth to 2.1% from 1.5%.

On a global scale, that strength is largely offset by poorer expectations for most European countries, where the OECD said tight credit conditions are holding back activity. It cut its euro-area 2024 growth forecast to 0.6% from 0.9%.

• Bank of England Holds Rates, Signals Cut This Year

The Bank of England left its key interest rate unchanged but signaled it is likely to lower borrowing costs this year for the first time since 2020, though perhaps not as soon as investors expect. (…)

Last week, the European Central Bank left its key rate at a record high but kept open the door to cuts as soon as the spring.

Inflation rates are falling rapidly around the world after a postpandemic surge. Unusually, that hasn’t come at the cost of a decline in economic output or a jump in unemployment. And with borrowing costs expected to fall, the International Monetary Fund on Tuesday said the global economy is likely heading for a soft landing this year. (…)

Sweden’s Riksbank also signaled a readiness to lower borrowing costs Thursday, leaving its key rate unchanged but indicating that a first cut may come in the first half of the year. (…)

While the U.S. economy has been growing rapidly over recent quarters, the U.K.’s has flatlined and isn’t expected to stage a strong recovery this year. 

The BOE on Thursday raised its growth forecast for 2024, but even so now sees gross domestic product increasing by just 0.25%. In 2025, it expects an acceleration in growth to a still-modest 0.75%. 

In its new forecasts, the BOE said it now expects the inflation rate to fall to its target in the second quarter from 4% in December, and be well below that two years from now if it were to leave its key rate unchanged. That is another signal that policymakers expect to ease monetary policy this year.

However, the BOE also publishes forecasts that assume it follows the rate path expected by investors. Those expectations include a first cut in May and a key rate of 4% by the end of this year. In that scenario, the BOE forecast that the inflation rate would be above its target two years out. That is a signal that policymakers don’t expect to cut rates as rapidly as investors anticipate. (…)

Eurozone Services PMI: Eurozone downturn at its weakest since July 2023

The HCOB Eurozone Services PMI Business Activity Index fell to 48.4 in January, from 48.8 in December, signalling a sixth successive month of falling service sector output levels. While only mild, the latest decline was the quickest for three months.

There is a north-south divide in the eurozone’s service sector, but perhaps not in the way you may expect. Contrary to the general view that southern European countries are the weak link of the currency union, these economies are presently performing relatively well. This positive trend serves as a counterforce, partially mitigating declines in Germany and France. Thanks to the resilience exhibited by Italy and Spain, the PMI for services experienced only a marginal dip to 48.4, maintaining proximity to the expansionary threshold of 50.

Weak demand conditions remained a major hindrance for activity, with the latest survey data indicating a seventh consecutive monthly reduction in new business. January’s drop in output came despite the faster completion of outstanding projects, which was evidenced by the sharpest fall in backlogs of work in close to three years.

The alleviation of capacity pressures was supported by increased hiring activity, with employment growth quickening to a four-month high. Greater recruitment tallied with an improvement in firms’ confidence towards the next 12 months. Expectations for growth were at their strongest since last May.

Price pressures across the service sector remained steep by historical standards, latest survey data showed. In fact, rates of inflation for both input costs and output charges accelerated in January, to their quickest for four and seven months, respectively.

China’s Lunar New Year Pork Gloom Exposes Deep Economic Trouble Festive season traditionally sees high demand for meats

For families across China preparing for Lunar New Year, the most important celebration in the calendar, pork is a must. An ingredient synonymous with prosperity and abundance, it’s used in countless dishes and cured for festive delicacies.

But in Beijing’s Xinmin market, vendor Wu Aizhen is struggling. Though pork prices have fallen by about a fifth compared to a year ago, she is selling a third less than she would in a normal holiday season.

Pork demand has been sluggish for months in China, but its continued weakness even as the country approaches peak season for elaborate meals sends a powerful message about consumption and oversupply in the world’s second-largest economy, as wage declines hit households and weigh on consumer prices. (…)

• China’s Country Garden says over 30 projects have local government support

Cash-strapped developer Country Garden said on Saturday more than 30 of its projects had been listed by Chinese local governments as suitable for financing support, as authorities aim to inject liquidity into the crisis-hit sector.

China’s largest private property developer said in a statement to Reuters that its projects were included on the so-called “white lists” of the provinces of Heinan, Hubei, Sichuan, Shandong and the municipality Chongqing. The developer, which defaulted on its offshore debt late last year, hopes to enter the lists of Guangdong and Hunan provinces among others.

Country Garden said the projects, after being added to the white lists, could receive financing support, which would in turn helps ease the pressure on its liquidity and ensure the completion of homes.

Reuters reported on Friday that China aims to ramp up financing for home projects in the coming days as part of its support measures for real estate firms, but banks’ reluctance to lend to the sector will remain a major obstacle for the distressed developers that need fresh funding the most.

Under the “project white list” mechanism, governments of 35 cities across the country are gearing up to recommend to banks residential projects that need financial support.

Throughout 2023, we had the real estate accident happening in slow motion until unravelling in summer. Now, it’s the mending happening in slow mo, but its happening. (See China: “Here we go!”)

• China Services PMI: January sees further solid rise in service sector activity

At 52.7 in January, the seasonally adjusted headline Caixin China General Services Business Activity Index fell only slightly from
December’s five-month high of 52.9 to signal a further solid increase in service sector output. Business activity across the service economy has now risen in each of the past 13 months. However, growth momentum remained softer than seen on average over the series history.

Chinese service providers registered a further increase in overall new business at the start of 2024, thereby stretching the current period of expansion to just over a year. According to panel members, firmer underlying demand conditions and new customer wins had supported the latest upturn in sales. However, the rate of growth eased notably from December’s seven-month record and was only modest.

New export business likewise rose at a moderate pace, with the rate of growth easing only fractionally from the previous month.

Chinese service sector employment rose for the second straight month in January, with firms often linking the increase to efforts to expand capacity amid higher sales. That said, the rate of job creation remained marginal overall, as some firms took a more cautious approach to hiring. (…)

The rate of cost inflation weakened across China’s service economy at the start of the year. Average operating expenses increased only slightly and at a rate that was comfortably below the series average. Where greater input prices were recorded, higher raw material, labour and transportation costs were often mentioned.

Prices charged by service providers meanwhile declined for the first time since April 2022 during January. There were a number of reports that firms faced pressure to cut their fees due to increased competition for new business. That said, the rate of discounting was only marginal overall.

• Trump Floats Chinese Goods Tariff Exceeding 60% If Elected

EARNINGS WATCH

We now have 230 reports in, an 80% beat rate and a +6.4% surprise factor, broadly distributed.

The 230 companies having reported show a 6.6% earnings gain on +3.3% revenue growth.

Q4 EPS are now seen up 7.8% vs 4.7% on Jan. 1.

Trailing EPS are $221.14. Full year 2024: $242.22e.

• Tech Mania 2.0:  Indeed, looking at TMT as a whole, not only are absolute valuations back toward the 2021 highs (and this chart takes a broader definition/set of valuation indicators), but valuations for tech stocks relative to ex-Tech are the highest they’ve been since 2001. Investors have fallen in love with tech, and are pricing-in very good times ahead. (Callum Thomas)

(ILLUSTRATION: EMIL LENDOF/THE WALL STREET JOURNAL)

Neil Howe’s “The Fourth Turning is Here”

U.S. Manufacturing PMI: Strongest improvement in manufacturing performance since September 2022

The seasonally adjusted S&P Global US Manufacturing Purchasing Managers’ Index™ (PMI) posted 50.7 in January, up from 47.9 in December and slightly higher than the earlier released ‘flash’ estimate of 50.3. The latest upturn ended a two-month sequence of decline, and signalled the strongest improvement in operating conditions since September 2022.

Driving the uptick in the headline figure was a renewed expansion in new orders at manufacturing firms at the start of the year. The pace of growth was moderate overall and the quickest since May 2022. Where an increase was noted, companies linked this to successful marketing initiatives and stronger customer demand.

That said, improved demand conditions were domestically focused, as new export orders fell for the nineteenth time in the last 20 months. Europe and Canada were identified by panellists as key export markets with a weakened sales environment.

Despite greater new order inflows, goods producers recorded a drop in output during January. Supply disruption stemming
from severe storms and transportation delays reportedly hampered firms’ ability to expand production. The pace of output decline eased to only a marginal pace, however.

Supplier delivery performance deteriorated for the first time in just over a year as trucking and transportation was delayed. Although only marginal, the extent to which lead times for inputs lengthened was the greatest since October 2022.

Concurrently, higher transportation, supplier and fuel costs pushed up the pace of input price inflation in January. The rate of increase accelerated for the second month running to the sharpest since April 2023, despite being softer than the series average.

Meanwhile, manufacturers stated that output prices continued to rise as firms sought to pass on higher costs to customers. The pace of charge inflation was broadly in line with the series trend and the quickest in nine months.

Employment at manufacturers rose fractionally in January, thereby ending a three-month period of job shedding. Firms hired in anticipation of greater new orders despite a further strong drop in backlogs of work.

A rise in new orders led firms to cut their input buying at a much slower pace compared to that seen in December. Although stocks of inputs also continued to fall, the pace of depletion eased to a marginal pace, with stocks of finished goods also declining only slightly.

Finally, business confidence at goods producers jumped to a 21-month high in January. Optimism was reportedly underpinned by planned investment in marketing spending and building capacity, alongside hopes of stronger demand conditions.

The ISM: Demand remains soft but shows signs of improvement

The Manufacturing PMI^® registered 49.1 percent in January, up 2 percentage points from the seasonally adjusted 47.1 percent recorded in December. The New Orders Index moved into expansion territory at 52.5 percent, 5.5 percentage points higher than the seasonally adjusted figure of 47 percent recorded in December. (…) The Prices Index registered 52.9 percent, up 7.7 percentage points compared to the reading of 45.2 percent in December. (…) Also, the Customers’ Inventories Index contracted further, becoming more accommodative for future production. (…)

The U.S. inventory cycle is over. New domestic orders are picking up which should allow production to rise in coming months. Goods prices are firming somewhat. Recall from yesterday`s PMIs:

• In China, “New export orders increased for the first time since last June, albeit marginally.“
• In ASEAN countries: “the rate of contraction in new orders was the softest seen over this period and only marginal.“

John Authers:

If you want to predict that rates aren’t coming down as quickly as everyone seems to think, you could use the latest Institute of Supply Managers surveys of the manufacturing sector. In the US, new orders and prices unexpectedly turned up sharply, suggesting that the sector wasn’t contracting, and that some inflationary pressures might still be around. The proportion of businesses complaining about rising prices was the highest in nine months:

Canada: PMI up to three-month high on back of slower falls in output and new orders

(…) rising to 48.3, from 45.4 in December, the PMI pointed to the weakest rate of sector contraction since last October. (…)

Panellists nonetheless commented on soft market demand, and an unwillingness amongst clients to commit to new work especially against a backdrop of elevated market prices. Demand from abroad was also lower, with various conflicts from around the world cited as a factor weighing on sales. New export orders declined during January for a fifth month in a row.

Strong Productivity in Q4 Further Helps Fed’s Inflation Fight

Nonfarm labor productivity, or output per hour worked, increased at a stronger-than-expected 3.2% annualized rate in the fourth quarter. The outturn marks a deceleration from the third quarter’s 4.9% rise, but continues to indicate a solid pace of productivity over the past year. Relative to the fourth quarter of last year, productivity is up 2.7%.

Productivity growth can be volatile not only on a quarterly basis, but also through the economic cycle. Productivity typically surges at the beginning of an economic expansion as output ramps up quicker than hours worked. In the pandemic experience, this trend was super-charged; businesses saw robust demand seemingly overnight once initial lockdowns ended, and many firms struggled to staff up. This dynamic led to annual productivity growth of 5.2% in 2020. As hiring picked up, productivity growth nosedived in 2022 (declining 1.9%, the steepest annual drop in records dating back to 1948) as hours worked outpaced output.

Having moved further into the post-pandemic expansion, a cleaner read on productivity is emerging. Employment growth decelerated over the past year while output moved full steam ahead. Taken together, productivity perked up in 2023, increasing 1.4%, and has increased at an annual rate of 1.6% since the end of 2019. The current cycle’s average is slightly above the 1.5% annualized pace that prevailed over the past business cycle (2007-2019), while still paling in comparison to the near 3% growth seen in the early 2000s.

The recent firming in productivity has helped restrain the inflationary impulse from wage growth. Unit labor costs (ULCs), or the ratio of hourly compensation to labor productivity, increased at just a 0.5% annualized rate in Q4. Although that marked a pickup on both a quarterly and year-over-year basis from Q3, the trend in ULCs has slowed sharply over the past year as nominal compensation growth has slowed and productivity growth has rebounded. Having risen 2.3% year-over-year in Q4, growth in ULCs adds to other recent readings of labor costs, including the fourth quarter Employment Cost Index, that inflation pressures from the labor market are quickly moving back toward levels consistent with the Fed’s 2% inflation target.

In the last 3 years, inflation has been much higher than growth in ULC, meaning that nominal sales grew faster than labor costs …

… significantly boosting corporate profit margins and profits:

Quarterly trends show a narrowing gap between inflation and ULC growth rates, even more so using PCE inflation data. The Fed’s fight on inflation needs to also hold labor costs growth through slower gains in compensation or higher productivity in order to sustain margins at their current historically high levels.

Compensation per hour increased at an annualized 3.7% pace in Q4 (vs. +3.8% in Q3), while the YoY pace increased 1.0pp to +5.0%.

Goldman Sachs’ wage tracker stands at +4.1% annualized in Q4 (vs. +4.3% in Q3) and +4.6% year-over-year (vs. +4.4% in Q3). PCE inflation was 2.7% YoY in Q4, 2.6% in December. Good thing energy costs are down…

The Impact of the Boomer Exodus

Baby boomers—those born between 1946 and 1964—are steadily aging out of the U.S. labor force. The cohort represents a population bulge that produced dramatic demographic and economic changes in the country. The change continues as an ever-larger share of baby boomers reach retirement. Replacing these retirees, particularly after a period of curtailed immigration, has been a tall order. (…)

The relationship between the age profile of an economy and productivity is not immediately clear. Previous analysis has highlighted two opposing effects of changing demographics on productivity. (…)

The macroeconomic consequences of interest are determined by the growth rate of labor productivity. The compositional changes underway will leave the U.S. labor force younger, with the potential to accelerate productivity growth. (…)

  

New businesses introduce new technology and ways of operating that can lead to improvements in productivity. The median entrepreneur in the U.S. is in their early 40s. A growing share of workers in the early and middle parts of their careers means an increasing concentration of entrepreneurship. Further, the return on learning new skills and adapting to new technology decreases as fewer work years remain in front of an employee. A younger labor force, then, should be better positioned to receive new productivity-enhancing technology. (…)

Nevertheless, the current trend—where the oldest cohort in the labor force is declining in representation—has not been seen since the early 1990s. Though the decline will prove relatively modest compared with previous generational cycles, it is occurring at a time of rapid technological advancement. Recent developments in artificial intelligence are quickly finding value-adding uses in the workplace. Embracing a new technology like AI is disruptive in the short term but holds the promise of long-term efficiency gains. A marginally younger labor force means a greater share of people willing to invest the necessary time and energy to learn how to use it, hastening its broader implementation.

In the period between the global financial crisis and the COVID-19 pandemic, labor productivity growth in the U.S. averaged about 1.5% per year. (…)

In early 2024, our baseline forecast for the coming decade assumes labor productivity will expand faster than 2%. This would represent a meaningful improvement for the U.S. economy with far-reaching consequences. One of the most obvious effects of consistently high productivity is the ability for strong income growth, the function of a tight labor market, alongside a diminished fear that inflation will take off.

Eurozone Economy Slipping, But Not Slumping

(…) Eurozone Q4 GDP was unchanged for the quarter which, while far from impressive, was actually slightly better than the 0.1% quarter-over-quarter decline forecast by consensus economists. It also meant that, for now, the Eurozone avoided a technical recession—two consecutive quarters of negative GDP growth—during the second half of last year. With respect to the region’s largest economies, German GDP shrank 0.3% quarter-over-quarter, French GDP was unchanged, Italy’s GDP rose 0.2% and Spain’s GDP rose by a more solid 0.6%. Even though the Eurozone avoided recession, it has stuttered in recent quarters, and as a result Eurozone Q4 GDP was up just 0.1% year-over-year. (…)

  

As inflation has decelerated, Eurozone real household incomes have begun to grow again, albeit slowly. Based on the latest available data through Q3-2023, we estimate that real compensation of employees rose 0.7% year-over-year, while real household disposable income rose 0.5% year-over-year. The further slowing of inflation through the fourth quarter suggests those positive real income trends may have gathered further momentum in recent months. As a result, the worst of the downturn in real consumer spending—which fell 0.4% year-over-year in Q3-2023—may be behind us. Finally, we observe that household interest costs have risen only moderately over the past several quarters, to 2.3% of household disposable income by Q3-2023. At the very least, these moderately more favorable household finance fundamentals should, in our opinion, prevent a significant further decline in consumer spending. (…)

Eurozone employment has continued to advance, with Q3-2023 registering an employment gain of 0.2% quarter-over-quarter and 1.3% year-over-year. In December, the Eurozone unemployment rate held steady at a cycle (and record) low of 6.4%. The indications are that employment growth could have continued into early 2024, as although the Eurozone Employment Expectation Indicator fell to 102.5, that is still a level that is historically consistent with positive jobs growth.

While these key economic indicators argue against a deep slump in Eurozone activity, they do not offer much encouragement for a quick rebound either. Real household incomes are growing at less than a 1% pace, employment growth could potentially slow to below a 1% pace, and although PMI surveys have improved, they remain in contraction territory for the time being. It is against this backdrop that we see only a gradual firming in momentum as 2024 progreses, and forecast Eurozone GDP growth of 0.7% in 2024, up only slightly from the 0.5% growth seen in 2023.

Meanwhile:

The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the first quarter of 2024 is 4.2 percent on February 1, up from 3.0 percent on January 26. After [Thursday’s] construction spending release from the US Census Bureau and the Manufacturing ISM Report On Business from the Institute for Supply Management, the nowcasts of first-quarter real personal consumption expenditures growth and first-quarter real gross private domestic investment growth increased from 3.6 percent and -0.3 percent, respectively, to 4.9 percent and 1.7 percent, while the nowcast of the contribution of the change in real net exports to first-quarter real GDP growth decreased from 0.27 percentage points to 0.18 percentage points.

China Merges Hundreds of Rural Banks as Financial Risks Mount Move affects 2,100 rural banks with $6.7 trillion assets

China is embarking on its biggest consolidation in the banking industry by merging hundreds of rural lenders into regional behemoths amid growing signs of financial stress.

After engineering mergers of rural cooperatives and rural commercial banks in at least seven provinces since 2022, policymakers pinpointed tackling risks at the $6.7 trillion sector as one of its top priorities for this year. That means another wave of consolidation is on the way across the nation.

China’s banking industry has been weighed down by a litany of troubles over the past years, including a deepening slump in the real estate market and an overall fragile economy. The 2,100 banks in the rural cooperative system saw their bad-loan ratio stand at 3.48% at the end of 2022, more than twice as high as that for the whole sector.

“It’s where risks are the most concentrated among smaller financial institutions, so China is pushing the reform at a faster pace,” said Liu Xiaochun, deputy director of think-tank Shanghai Finance Institute. (…)