Premarket stocks: China's economy is the envy of the world

China’s economy expanded by 4.9% in the third quarter compared to the previous year, according to government data published Monday, showing the rest of the world what’s possible when Covid-19 is brought under control. The pace of growth was a tad slower than economists had expected. But there were plenty of signs of strength, with the services and construction sectors performing especially well. China’s economy has now recovered from its historically bad first quarter, when the coronavirus forced the country to shut down. GDP grew a cumulative 0.7% through the first nine months of 2020, the data show. “China’s economy continued its rapid rebound last quarter, with the recovery broadening out and becoming less reliant on investment-led stimulus,” said Julian Evans-Pritchard, senior China economist for Capital Economics. Growth of less than 5% would normally be a cause for real concern in China, which is accustomed to much quicker expansion. But it’s pretty good considering the circumstances, and even more remarkable when compared to the extremely fragile recoveries underway in most other big economies. The big picture: The International Monetary Fund expects China’s economy to expand by 1.9% in 2020. That compares to contractions of 5.8% in the United States and 8.3% in the 19 countries that use the euro. Benefits of control: The way Beijing handled the initial outbreak of coronavirus late last year has been criticized by some Western politicians. But China’s stringent lockdown and population tracking policies helped bring the virus under control within its borders. The country also set aside hundreds of billions of dollars for major infrastructure projects to fuel economic growth. The central bank has done its part, too. The blueprint for controlling the virus has proved difficult for other countries to replicate, especially in places where leaders do not wield the same level of control over their populations as Beijing. Europe and the United States are now facing another surge of coronavirus cases. Paris has imposed an overnight curfew. In London, people from different households are banned from meeting indoors. The United States is averaging more than 55,000 new cases a day — up more than 60% since a mid-September dip, and pretty much every state is trending the wrong direction. What’s next: The United States is probably not headed for a national lockdown anytime soon, but its economy will remain hamstrung until there’s a dramatic reduction in the number of coronavirus cases. China, meanwhile, will continue to power ahead. Economic data for the month of September indicated the country’s recovery is gaining even more strength. Industrial production and retail sales figures were particularly robust. “We think growth will continue to pick-up in the near-term,” said Evans-Pritchard. “Fiscal policy is set to remain supportive until at least the start of next year, which should keep activity in industry and construction strong. Meanwhile, tightening labour market conditions and improving consumer confidence mean that the recovery in consumption and services activity probably has further to run.” Looking even further ahead: The International Monetary Fund predicts that China’s economy will grow by 8.2% in 2021, a much faster pace than the United States or the eurozone. Alibaba spots an opportunity Alibaba (BABA) has taken a controlling stake in one of China’s leading supermarket chains as it tries to fend off rival JD.com in the fast growing online grocery industry, my colleague Sherisse Pham reports. Alibaba is spending 28 billion Hong Kong dollars ($3.6 billion) to up its stake in Sun Art Retail Group from 36% to 72%, the company said in a statement Monday. Alibaba will then make a general offer to shareholders to buy out the rest of the the retail company. The news sent shares in Sun Art up nearly 20% in Hong Kong. Alibaba’s Hong Kong listed shares rose about 1%. Alibaba is in a fierce battle with JD.com for China’s online food market. The e-commerce giants are both using a mixture of physical supermarkets and online platforms to win shoppers. The play: The Sun Art deals signals that Alibaba is pushing for the “accelerated digitization” of Chinese consumers post-pandemic, according to Jefferies analyst Thomas Chong. Sun Art operates nearly 500 hypermarkets and supermarkets across China. Alibaba “has been highlighting digitization as the greatest opportunity to change how people live and work,” and seeking “opportunities in traditional retail” by solving problems such as scalability and sustainability, said Chong. What’s next: Ant Group, a crown jewel of Alibaba co-founder Jack Ma’s empire, is preparing to go public in what could be the biggest IPO in history. Ant Group is one of the biggest technology firms in the world and the biggest online payments platform in China. The app has established its presence in every aspect of financial life in China, from investment accounts and micro savings products to insurance, credit scores and even dating profiles. The company has secured a key approval from the China Securities Regulatory Commission for its listing in Hong Kong, Bloomberg reported on Monday. The IPO is expected to include a listing in Shanghai. US debt hasn’t been this high since World War II The amount of money that the United States owes investors has hit record levels in more than a few ways, my colleague Jeanne Sahadi reports. Both the annual deficit and total debt accumulated over the years has topped levels not seen since World War II. Last week, the US Treasury reported that for fiscal year 2020, which ended September 30, the US deficit hit $3.13 trillion. As a share of the economy, the 2020 deficit is more than triple what the annual deficit was in 2019. Having topped $21 trillion, the country’s total debt owed to investors is now estimated to have outpaced the size of the economy, coming in at nearly 102% of GDP, according to calculations from the Committee for a Responsible Federal Budget. Debt hasn’t been that high since 1946 when it hit 106% of GDP. Extraordinary times: With millions of Americans still out of work and struggling to get by as a result, the country’s burgeoning debt is understandably no one’s top concern at the moment. Even deficit hawks are urging a dysfunctional Washington and a chaotic White House to approve another round of badly needed stimulus to the tune of trillions of dollars. Big picture: The problem with such high debt levels going forward is that they will increasingly constrain what the government can do to meet the country’s needs. “There is no set tipping point at which a fiscal crisis becomes likely or imminent, nor is there an identifiable point at which interest costs as a percentage of GDP become unsustainable,” Congressional Budget Office director Phillip Swagel said last month. “But as the debt grows, the risks become greater.” Up next Halliburton and Philips will report their latest quarterly results before the bell. Also today:

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China’s economy is the envy of the world