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China central bank’s record $83 billion injection heightens worries over ailing economy

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SHANGHAI (Reuters) – China’s central bank injected a record $83 billion into the country’s financial system on Wednesday, seeking to avoid a cash crunch that would put further pressure on the weakening economy.

FILE PHOTO: Headquarters of the People’s Bank of China (PBOC), the central bank, is pictured in Beijing, China September 28, 2018. REUTERS/Jason Lee/File Photo

China’s policymakers are pledging to step up stimulus measures this year and do more to protect jobs as economic growth cools to 28-year lows.

But a raft of measures last year from big rail projects to tax cuts seem to have had little impact so far, with recent data suggesting activity is cooling more quickly than expected.

“The news is clear – the economy needs help,” said Trinh Nguyen, senior economist for emerging Asia at Natixis in Hong Kong.

Wednesday’s open-market operation, the bank’s largest net single-day injection on record, came a day after China’s state planner, central bank and finance ministry all offered reassurances to investors, signaling more spending and other types of policy support.

But shockingly weak December trade data released earlier this week, along with shrinking factory activity, are stirring speculation over whether more rapid and aggressive policy measures are needed to turn the world’s second-largest economy around.

Authorities now agree the economy needs more decisive support “and today’s large injection reflects that,” Nguyen added.

The People’s Bank of China (PBOC) said Wednesday’s injection was aimed at ensuring there are ample funds in the financial system, which is facing strains as tax payments peak in mid-January, and as demand for cash picks up ahead of the Lunar New Year holidays starting in early February.

“The banking system’s overall liquidity is falling rapidly,” it said in a statement.

While sizable injections are common this time of year ahead of the long holidays, the addition was much heftier than usual and follows a large cut in banks’ reserve ratios announced this month, which will free up a total of $116 billion for new bank lending.

The first stage, a 50-basis-point cut, came into effect on Tuesday. An equal-sized cut is scheduled for Jan. 25.

The move also came a day after money supply data showed several of China’s key credit gauges continue to languish around record lows, despite government efforts to channel more funds to cash-starved companies and lower their financing costs.

While authorities have urged banks to keep lending to struggling firms and even dangled incentives, banks are wary of bad loans after a long regulatory crackdown on riskier lending.

Many businesses, facing slowing sales, are in no mood to make the fresh investments that Beijing is counting on. New medium- and long-term corporate loans last month fell to less than half of average December levels, Nomura noted.

MORE HELP ON THE WAY

Chinese officials have repeatedly pledged more support for the economy while vowing they will not resort to “flood-like” stimulus that Beijing has unleashed in the past, which quickly juiced growth rates but left a mountain of debt.

Asked if the PBOC needed to cut benchmark interest rates, a PBOC deputy said on Tuesday that existing policy measures should be improved.

Analysts at OCBC said the comments suggest the PBOC is willing to give existing measures time to work, and is in no rush to switch to more aggressive tactics at this point.

“I have never seen such huge amounts of reverse repos … the central bank is making its attitude known,” said a trader at a brokerage house in Shanghai.

“It’s saying, ‘don’t question my determination’” to stabilize market expectations, the trader said.

Markets appear to agree that policymakers will stick with modest measures for some time yet.

Chinese stocks and money market rates, sensitive to hints of policy shifts, were little changed on Wednesday. The seven-day repo rate, CN7DRP=CFXS, a closely watched measure of liquidity, was 2.6142 percent on Wednesday afternoon, slightly lower than the previous day’s close.

“While the (PBOC’s) net injection is big, it’s little versus what a rate cut would release, which is what people in the market are watching for,” said Ken Cheung, senior Asian FX strategist at Mizuho in Hong Kong.

WEAKEST GROWTH IN 3 DECADES

In a rare encouraging sign, home prices remained buoyant in December, suggesting that at least some of Beijing’s efforts at support are beginning to have an effect. Construction also appears to be slowly picking up as regulators fast-track approvals of more infrastructure projects.

But analysts agree steps so far will take some time to percolate through the broader economy, with most not expecting activity to convincingly bottom out until summer.

On Monday, China is expected to report the economy grew 6.6 percent in 2018, cooling from 6.9 percent the previous year and the slowest rate of expansion the country has seen in 28 years.

The pace is expected to slow further to around 6.2 percent this year. Some analysts’ in-house models suggesting activity is already much weaker than official data suggests.

(For a related graphic click tmsnrt.rs/2SVUUFp)

Darkening the picture further, hopes are dimming once again that China will be able to reach a trade deal with the United States in current negotiations. U.S. tariffs have increasingly weighed on Chinese exports in recent months, disrupting its supply chains and dragging down business and consumer confidence.

U.S. Trade Representative Robert Lighthizer did not see any progress made on structural issues during U.S. talks with China last week, Republican U.S. Senator Chuck Grassley said on Tuesday.

Reporting by Winni Zhou and Andrew Galbraith in SHANGHAI and Kevin Yao in BEIJING, Additional reporting by Wu Fang and John Ruwitch in SHANGHAI and Noah Sin in HONG KONG; Editing by Richard Borsuk & Kim Coghill

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Future of Ottawa: Coffee with Francis Bueckert

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Francis Bueckert: When it comes to the current landscape of coffee-roasting companies and independent cafes in Ottawa, I think we are at a really interesting moment in time. There are more local roasters that are doing artisanal small-batch production—with more attention to the quality and origin of the beans.

With larger corporations such as Starbucks closing locations, it has opened a bit of space for local players to grow. We have been lucky to work with many folks in the coffee-roasting community, and we have found that there is a willingness to collaborate among different coffee roasters. For example, when Cloudforest started back in 2014, we were roasting our coffee at Happy Goat and it was the expertise of their head roaster Hans that helped me learn how to roast. Other companies such as Brown Bag Coffee have also lent a hand when we needed extra roasting capacity. There are others, such as Lulo, Mighty Valley Coffee, Bluebarn, The Artery, and Little Victories that are also part of the growing local coffee community. It’s small roasters like these who have shown me what a coffee community can look like, and that we can help to elevate each other, rather than being locked in competition.

If you care to make a prediction… What’s happening to the local café industry in 2021?

We believe that there is hope and that 2021 can be a big pivot year for small roasters and cafes.

This year will not be ideal from a business point of view. However, it could create a shift in people’s attitude toward where they get their coffee. We are holding out hope that people will support the roasters and cafes that are local to help them economically survive what is in all reality a very difficult time.

It all depends on where consumers decide to go this year. People are starting to recognize that supporting large corporations at this moment will be at the cost of the local roasters and cafes. There is the growing realization that a future where there is only Amazon, Walmart, and Starbucks would be pretty bleak. So we have an opportunity this year to support the kind of local businesses that we want to see thrive.

In your wildest dreams, what will the landscape for local coffee roasters and cafés look like in your lifetime?

In my wildest dreams, all of the coffee roasters and cafés would be locally owned and independent. They would all be focused on direct trade and artisanal coffee. Each different coffee roaster and café would know exactly where their coffee came from. Ideally, each company would be a partnership between the farmers who grow the beans and the people here selling them. There would be a focus on how to cooperate and collaborate with the farmers in the countries of origin to share the benefits around. We would all work together and share orders of cups, lids, and other packaging so that we could get better bulk pricing. In this way, we would make our local coffee community so efficient that the large corporate coffee companies wouldn’t even be able to compete.

We would also like to see people use coffee as a way to create social good. For example, we started Cloudforest as a way of helping support farmers in Ecuador who were taking a stand against large mining companies. This remote community stood up to protect their environment, so that they could have clean drinking water and soil for the next generation. They started an organic coffee cooperative to help show that there are other models of development, and we are doing our part year after year to help support their vision. They have a vision of development that does not include mass deforestation and contamination, and organic coffee is a key (among others) to show that another way forward is possible.

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Special events in the Ottawa Valley dominate annual OVTA tourism awards

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The Ottawa Valley Tourist Association hopes that its annual tourism awards will provide a little sunshine during what is a dark time for local tourism operators because of the pandemic.

The Ottawa Valley Tourism Awards are presented annually by the Ottawa Valley Tourist Association (OVTA) to individuals, businesses, and events that recognize the importance of working together for the growth of the local tourism industry, as well as offering exceptional visitor experiences.

“After a year that saw a lot of businesses in the hospitality and tourism industry being challenged like never before, the annual Ottawa Valley Tourism Awards represent a bit of light on the horizon” said Chris Hinsperger, co-owner of the Bonnechere Caves.

The Ottawa Valley Tourist Association’s (OVTA) Awards Committee co-chairpersons, Meghan James and Chris Hinsperger, said they were very pleased with the recent nominations received, especially in the Special Events category. Submissions were received for The Farm to Fork Dinner Series at the Whitewater Inn; Light up the Valley; The Eganville Curling Clubs’ Rock the Rings; The Ontario Festival of Small Halls ; The Bonnechere Caves On-line Underground Concert Series; The Opeongo Nordic Ski Clubs’ Ski Loppet; The Tour de Bonnechere — Ghost de Tour 2020; and The Bonnechere Caves Rock ‘n Roll Parking Lot Picnic.

“During a time when communities were challenged, it is nice to see that people still made an effort to get together and celebrate, albeit under certain conditions. It just shows the creativity and resiliency of our tourism Community here in the valley” said Meghan James, director of sales at the Pembroke Best Western.

There are three Award categories: The Marilyn Alexander Tourism Champion Award, The Business of Distinction and The Special Event of the Year.

Hinsperger, is excited about this year’s awards.

“During this pandemic the hospitality and tourism industry was the first to be hit, was the hardest hit and will be the last of our industries to fully recover. As Valley entrepreneurs we owe it to ourselves, to our businesses and to our communities to be an active part of that recovery. Our livelihood and economic recovery depends on our efforts. And we will get back to welcoming people from all over the world to share a little bit of the place we are privileged to call home. This awards process leaves myself and others fully optimistic about our positive outcomes.”

Award winners will be announced at the Ottawa Valley Tourist Association’s virtual annual general meeting on Monday, May 31.

The OVTA is the destination marketing organization for the Upper Ottawa Valley and proudly represents more than 200 tourism businesses, comprised of attractions and outfitters, accommodation, food, beverage and retail establishments, artists and galleries, municipalities, as well as media and industry suppliers. The OVTA is supported by the County of Renfrew, Renfrew County municipalities and the City of Pembroke.

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Future of Ottawa: Farming with Jeremy Colbeck

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Jeremy Colbeck: Well first, let’s talk about what we mean by farming. Although farms, and farming as an occupation, are in decline across Canada, they are still a major part of our rural landscape. That’s even more true for a strange city like Ottawa which includes a LOT of rural areas and whose urban boundary takes, what, three hours to cross? About 40 per cent of the rural land in Ottawa is farmland. Most of that farming is corn and soybean cash-crop, as well as some dairy and livestock farming. That’s mostly conventional farming (the kind that is profitable but not exactly where you take your kids on a Saturday).

There are also a lot of agri-tourism businesses in Ottawa, which give you that oh-so-good Saturday spot for family donkey-petting and apple-picking. And it’s totally understandable from a business perspective, but sometimes surprising to find out, that even though they grow some of the Christmas trees they sell, they might also be reselling some that come from much larger farms far away. The farmland around Ottawa is also inflated in price because of its proximity to the city, where it is in demand by would-be hobby farmers—folks who want to do some farming on their property in their spare time but make their money (to subsidize their small-scale farming habit) elsewhere. Unfortunately, many of these properties will have large mansions built on them, which will then make them completely unaffordable for the average farmer

There’s also a segment of small-to-medium-sized Ottawa farms that grow “premium” (artisanal, unique, extra-fresh, ecologically- or organically-grown etc…) products that they sell directly to local eaters via farmers’ markets or other direct marketing channels, including on-farm stores and farm stands. That’s where BeetBox fits in.

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