Sicily yacht captain facing investigation - local media

Updated / Monday, 26 Aug 2024 

Rescue teams at the site of the shipwreck last week

Italian prosecutors have placed Captain James Cutfield under investigation over the deaths of Mike Lynch and six others after the British tech magnate's superyacht sank off Sicily last week, a judicial source has said.

The official, who asked not to be named, confirmed earlier reports in Italian media that the New Zealander was being investigated for manslaughter and shipwreck.

Being placed under investigation in Italy does not imply guilt and does not mean formal charges will necessarily follow.

Mr Cutfield, 51, is being investigated for manslaughter and shipwreck, the dailies La Repubblica and Corriere della Sera said.

Magistrates spoke to Mr Cutfield yesterday for the second time in a week, La Repubblica reported, questioning him for more than two hours.

It said prosecutors may also investigate a crew member who was on duty when the storm hit and survived the incident.

The British-flagged Bayesian, a 56-metre-long superyacht, was carrying 22 people when it capsized and sank last Monday within minutes of being hit by a pre-dawn storm while anchored off northern Sicily.

Fifteen people survived, including Mr Lynch's wife, whose company owned the Bayesian. Mr Lynch's 18-year-old daughter, Hannah, was among those who died.

Mike Lynch and his daughter Hannah died in the shipwreck

While the yacht had been hit by a sudden meteorological event, it was plausible that crimes of multiple manslaughter and causing a shipwreck through negligence had been committed, the head of the public prosecutor's office of Termini Imerese, Ambrogio Cartosio, said on Saturday.

Maritime law gives a captain full responsibility for the ship, crew, and all on board.

Mr Cutfield and his eight surviving crew members have made no public comment yet on the disaster.

"The Bayesian was built to go to sea in any weather," Franco Romani, a nautical architect that was part of the team that designed it, told daily La Stampa in an interview.

He said it was likely the yacht had taken on water from a side hatch that was left open.

Mr Romani said the crew underestimated the bad weather and that they should have made sure that all openings had been shut and the anchor removed before the storm hit the boat.

Boeing Whistleblower Points to Electrical Issues With Ethiopian 737 MAX Crash Aircraft

By Len Varley
August 26, 2024

A former Boeing employee has provided documents which point to electrical issues discovered during the assembly of the Ethiopian Airlines 737 MAX which crashed in 2019.

LLBG Spotter, CC BY-SA 2.0, via Wikimedia Commons

A former Boeing employee-turned-whistleblower, has released documents through the Foundation for Aviation Safety that suggest an electrical malfunction may have potentially contributed to the Ethiopian Airlines Flight 302 crash.

These documents outline a series of electrical issues that were discovered during the assembly of the aircraft. This had notably resulted in “uncommanded rolls” and other potentially dangerous flight behaviors.

Whistleblower Revelations

In a covering email to the NTSB Chair Jennifer Homendy, former Boeing staffer Ed Pierson addressed the information supplied. He stated that the documents should have been shared with the NTSB by Boeing and the FAA over five years ago.

Aircraft records were supplied by Pierson relating to the Boeing 737 MAX 8 aircraft with tail number ET-AVJ. This is the Ethiopian Airlines aircraft which conducted the fatal flight ET302 on 10 March 2019.




The report describes an inflight incident on 7 December 2018. This saw the aircraft carry out an uncommanded roll to the right at 1,000 feet AGL. The aircraft was on autopilot and conducting an approach to Addis Ababa when the incident occurred.

The report goes on to show that Boeing had reviewed the incident report and had suspected an intermittent electrical fault.

While the official investigations into the crash have primarily focused on the MCAS software system, whistleblower Ed Pierson’s allegations now raise a set of new questions about the safety of the aircraft. It has called into question the potential role of other manufacturing defects in the 737 MAX tragedy.

Photo Credit: Boeing

The Question of Further 737 MAX Problems

Pierson’s revelations come at a time when both the US plane manufacturer and the Boeing 737 MAX program have faced increased regulatory scrutiny. The MCAS system has undergone significant modifications to prevent future accidents. However, the whistleblower’s claims potentially suggest that there may be additional safety concerns that need to be addressed.

The documents released by Pierson further serve to highlight the importance of thorough testing and quality control in the manufacturing process.

If the allegations are proven to be true, it could lead to a deeper investigation into the root causes of the 737 MAX crashes. It raises fresh questions about the adequacy of Boeing’s safety culture and procedures.

The whistleblower’s allegations have sparked intense debate among aviation experts and the public. Some now question whether the electrical issues raised by Pierson may perhaps have played a contributing role leading to the Ethiopian Airlines crash.

The release of Pierson’s documents also reignites concerns about the transparency of Boeing’s investigations and the company’s commitment to safety. Boeing has maintained that the 737 MAX is now safe to fly. However, the whistleblower’s allegations question whether there still may be underlying issues that the company has not fully addressed.

As the investigation into the Boeing 737 MAX crashes continues, the whistleblower’s allegations provide a new perspective on the tragedy. If the claims are substantiated, it could have further implications for the aircraft.

Poland commits $1.2bn for maiden nuclear power plant

The plant, expected to be located near the Baltic Sea, is set to start operations in about ten years.

August 26, 2024

Poland is set to designate $1.2bn in its 2025 budget to initiate the planning and development of its first nuclear power plant. Credit: Stefan_Sutka / Shutterstock.

Poland has announced an investment of 4.6bn zloty ($1.2bn) from its 2025 budget to initiate the development of the nation’s inaugural nuclear power plant (NPP), Bloomberg reported.

This move is a strategic effort to diversify the country’s energy mix and reduce electricity costs, Poland finance minister Andrzej Domanski said in Olsztyn, northeast Poland.

He emphasised on the necessity of combining renewable energy sources with nuclear generation to achieve more affordable electricity prices.


Domanski disclosed the preliminary funding details for the project, which is poised to be the largest investment in the country’s history, just days ahead of a cabinet meeting to discuss the upcoming year’s budget proposal.

The government had earlier projected that around 60bn zloty would be needed for the 2025-2030 phase of the nuclear project, before additional funding from the US, which is providing the technology, becomes available.

The plant, which is expected to be situated near the Baltic Sea, is anticipated to commence operations in roughly ten years.

The International Atomic Energy Agency (IAEA) conducted a review mission in April, which praised Poland’s progress in establishing the necessary infrastructure for nuclear power.

The Phase 2 Integrated Nuclear Infrastructure Review, which occurred from 15 to 25 April, was requested by the Polish Government. It aimed to assess the country’s preparedness to either invite bids or negotiate a contract for its first nuclear power plant.

The review team “identified good practices that would benefit other countries developing nuclear power in the areas of contracting approach, strategic approach to funding, early authorisation of technical support organisations to support the nuclear regulator, engagement with the electrical grid operator, stakeholder involvement and industrial involvement.”

Earlier this month, the Polish Government revealed plans to introduce a loan programme for offshore wind energy worth approximately €5bn ($5.46bn), supported by the EU’s recovery funds.

State-owned bank BKG announced that the loan agreements will support projects with a minimum installed capacity of 300 MW.

These loans can be arranged until 31 August 2026, with repayment periods extending up to 2053.

Eni receives approval for Geng North and Gehem gas projects in Indonesia

These approvals pave the way for the establishment of a new production hub, known as the Northern Hub, in the Kutei Basin

Staff Writer 26th Aug 2024

Indonesian authorities approve Eni’s POD for Geng North and Gehem gas projects. (Credit: QR9iudjz0 on Freeimages.com)

Eni has received approval from Indonesian authorities for the plan of development (POD) for its Geng North (North Ganal PSC) and Gehem (Rapak PSC) fields, as well as the Gendalo and Gandang fields (Ganal PSC).

These approvals pave the way for the establishment of a new production hub, known as the Northern Hub, in the Kutei Basin. Additionally, Eni has been granted a 20-year extension for the Indonesia deepwater development (IDD) licences covering the Ganal and Rapak blocks.

With these approvals, Eni is set to significantly enhance its production capabilities in the East Kalimantan region, targeting approximately two billion cubic feet per day (bcf/d) of gas and 80,000 barrels per day (bopd) of condensates.

This production will supply both domestic and international markets, leveraging existing infrastructure in the region, including the Bontang LNG plant and the Jangkrik floating production unit (FPU).

Eni CEO Claudio Descalzi said: “The approval of the Northern Hub and Gendalo & Gandang Plans of Development by the Indonesian authorities marks a crucial milestone towards the final investment decision (FID) for both gas projects, aligning with our decarbonisation and energy security strategy.

“The establishment of a new production hub in the Kutei Basin represents a significant shift for Eni in Indonesia. This outcome is the result of a consistent strategy that combines our exploration expertise with the acquisition of IDD and Neptune assets, providing us with a strong leadership position in a world-class basin, close to existing facilities and major markets.”

The Northern Hub POD includes the development of five trillion cubic feet (TCF) of gas and 400 million barrels of condensates from the Geng North discovery, which Eni announced in October 2023.

The project also involves the development of the 1.6 TCF Gehem discovery through subsea wells, flowlines, and a newly constructed floating production, storage, and offloading (FPSO) unit.

This FPSO will have the capacity to process approximately one billion cubic feet per day (bcf/d) of gas and 80,000 barrels of condensates per day, with storage for one million barrels. Gas processed on the FPSO will be transported via pipelines to onshore facilities at Santan terminal and integrated into the East Kalimantan pipeline network.

Part of the gas will be liquefied at the Bontang LNG facility, with the remainder supplied to the domestic market. The FPSO will also stabilise and store condensates for evacuation via shuttle tankers.

In addition, the approved Gendalo and Gandang POD will develop two TCF of gas reserves in the Ganal PSC using subsea wells connected to the Jangkrik FPU. This development is expected to extend the Jangkrik gas production plateau, currently at approximately 750 million standard cubic feet per day (mmscf/d), by at least 15 years.

These developments result from Eni’s partnership with SKK Migas and are anticipated to have a substantial impact on local content. They will also increase the utilisation of the Bontang LNG plant’s capacity, ensuring a consistent supply of gas for domestic consumption.

Eni plans to undertake a drilling campaign over the next four to five years to explore the near-field potential within its operated blocks in the Kutei Basin. The area is estimated to hold over 30TCF of gas, with risks significantly mitigated following the Geng North discovery.

The Italian oil and gas firm operates the North Ganal Block – Geng North field with an 83.3% participating interest, while Agra Energi holds the remaining 16.7%. In the Ganal and Rapak blocks, Eni holds an 82% participating interest, with Tip Top as a partner holding the remaining 18%.

Last week, Eni closed the previously announced $783m sale of Nigerian Agip Oil Company (NAOC) to Oando, a Nigeria-based energy solutions provider.

 

What Went Wrong For Nestlé CEO Mark Schneider?

August 26, 2024 By Reuters

Mark Schneider, Nestlé's recently ousted CEO, steered the world's biggest food maker through the COVID-19 pandemic, grew margins despite a subsequent supply chain crunch, and pulled off a historic reorganisation.

So when did he lose the board's faith?

While Nestlé declined to comment on the nature of his departure when announcing it on Thursday, and Schneider did not respond to a request to do so, three sources told Reuters on Friday that the executive had been axed.

One source said the decision was reached after Nestlé's board became increasingly concerned about weak sales growth. They also cited worries about slowing product development, with new and revamped products taking longer to be devised and rolled out.

Changing Perceptions

"Two years ago, Mark Schneider could do nothing wrong; now he seems to get it all wrong," Bernstein analyst Bruno Monteyne said, flagging a drop in Nestlé's stock, which has slid roughly 30% since its pandemic high in early 2022.

But, "is that a good reason to break up with a CEO that was only two years ago feted as the best CEO in the sector?" Monteyne asked.

Schneider, 58, in 2017 became the first company outsider to lead the maker of KitKat bars and Nescafe coffee in nearly a century. Its stock peaked during his tenure, tapping a record of CHF 129.5 (€136.82) at the start of 2022.

That year, he led an overhaul of the Swiss company, changing its executive board to align with a new geographic structure.

Where rivals like PepsiCo and Unilever were not able to sustain operating margin growth in the seven years to 2023, Schneider grew Nestlé's to 17.3% from 16.5%.

This feat was particularly remarkable, given the hit industry margins took during the pandemic.

But the board's concerns about sluggish sales volumes and underinvestment are not unfounded, and have been raised repeatedly in calls with analysts and investors in recent years.

Slow Growth

Nestlé has posted patchy sales growth through Schneider's nearly eight-year tenure in comparison to some of its competitors, losing the momentum it gained during the pandemic by alienating shoppers with too-high prices in 2023.

It and the rest of the consumer goods industry hiked prices dramatically in the face of sky-rocketing supply chain and raw materials costs, fuelling a global cost-of-living crisis.

In response to a question during his final post-results call in July, Schneider acknowledged that supply chain constraints in 2022 had left "less energy" for innovation, which he said may have inadvertently helped private label, or store-brand, goods compete.

This was a new position - Schneider had previously brushed off the threat posed to Nestlé by private label competition, saying that while the company had seen "limited" signs of that, it was likely to be temporary. "I'm not concerned," he said at the time.

Market Share Declines

But in the year to mid-June, according to Nielsen data analysed by Barclays, Nestlé's grocery store market share had fallen dramatically in Europe from the year before and been deeply hurt in the U.S.

Other companies like PepsiCo and Unilever also lost market share and sales volumes due to higher prices. However, these other major players have in recent quarters managed to boost volumes again, garnering praise from analysts for supporting their comebacks with innovation and strong advertising.

Nestlé was initially less able to slow its price hikes and even when it did last year, volumes - or 'real internal growth'- stayed weak.

Marketing Rollback

Schneider's step back on marketing in 2022 has also been criticised repeatedly by investors and analysts, despite his renewed push for advertising since.

He has said himself that marketing was "quite muted" in 2022 due to supply chain and capacity constraints.

His replacement, Laurent Freixe, a 62-year-old Frenchman, started working for Nestlé 40 years ago in marketing roles before moving up the ranks to executive positions.

He is seen as a food industry insider, with a broad network of executives and experts from within and outside the Swiss group. He has immediately pledged to focus Nestlé on organic growth rather than acquisitions.

Canada's LNG Energy Group Creates Oilfield Services Division in Colombia

by Rocky Teodoro
|Rigzone Staff
| Monday, August 26, 2024 

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'LEC is a one-of-a-kind operator with the equipment, personnel and expertise to offer turnkey drilling and workover solutions'.
Image by Igor Borisenko via iStock

LNG Energy Group Corp. has created a new oilfield services division at its wholly owned subsidiary in Colombia, Lewis Energy Colombia Inc. (LEC).

LEC owns and operates two drilling rigs and one workover rig that are capable of executing a wide range of well services, including new exploration and development wells, LNG Energy Group said in a news release.

“LEC is a one-of-a-kind operator with the equipment, personnel and expertise to offer turnkey drilling and workover solutions,” LNG Energy Group Chairman and CEO Pablo Navarro said. “Through the creation and deployment of the Oilfield Services Division, LEC will not only generate another revenue stream, but further strengthen its position as an integral part of the energy landscape in Colombia”.

The oilfield services division will be led by Matthew O’Neill, head of LEC’s Completion and Well Intervention Services. O’Neill has worked in the oil and gas industry for 27 years and has been with the company since 2015. He has held various roles in the industry, from a wireline field engineer up to senior management, and has worked across Europe, the Middle East, West Africa, North America and Latin America. Prior to LEC, O’Neill worked for the global oilfield services company Schlumberger, according to the release.

LNG Energy Group said it looks to mobilize its equipment and personnel in the fourth quarter.

LEC has three rigs on the ground in its Sinú-San Jacinto Norte-1 Block near Barranquilla, Colombia. They include one 1,600-HP top-drive drilling rig, one 1,000-HP top-drive drilling rig and one 550-HP workover rig. These rigs come complete with generators, pumps, blowout preventers (BOPs), mud systems, tanks and other equipment needed to fully execute drilling and workover operations, LNG Energy Group said. Together, the rigs and associated equipment have an estimated value of approximately $10 million.

According to LNG Energy Group, the Colombian natural gas market is facing a supply-demand imbalance, which was further exacerbated in 2024 by the El Niño phenomenon leading to lower rainfall, subsequent reduced hydroelectric power generation, and further reliance on natural gas fired power plants. The country can meet its growing domestic natural gas demand through additional exploration and development of natural gas fields, which should “translate into an increase in demand for efficient and effective drilling services along with experienced service providers,” the company noted.

Since LEC’s entry into Colombia in 2008, it has drilled 70 exploration and production wells and completed numerous workovers using internal equipment. The company has had a wildcat success rate nearly double the industry average, according to the release. The efforts have been led by an expert in-house team that collectively has drilled more than 3,000 wells between the Eagle Ford and Austin Chalk Shales in south Texas and in Latin America.

Toronto, Ontario-based LNG Energy Group describes itself as focused on the acquisition and development of oil and gas exploration and production assets in Latin America.

Uber fined in Netherlands for sending drivers' data to the US

Reuters
Updated Mon, 26 Aug 2024

Ride-hailing platform Uber (UBER) has been fined 290 million euros ($324 million) in the Netherlands for sending the personal data of European taxi drivers to the United States in violation of EU rules, Dutch data protection watchdog DPA said on Monday.
Uber Technologies, Inc. (UBER)

Uber has stopped the practice, the DPA added.

"This flawed decision and extraordinary fine are completely unjustified," Uber spokesperson Caspar Nixon told Reuters in an email.

"Uber’s cross-border data transfer process was compliant with GDPR during a 3-year period of immense uncertainty between the EU and US," he added, saying the company would appeal and was confident that "common sense will prevail".

The DPA said Uber transferred personal data to the United States and failed to appropriately safeguard the data.

"This constitutes a serious violation of the General Data Protection Regulation (GDPR)," it said.

Uber can appeal the decision with the DPA and if unsuccessful can then file a case with the Dutch courts. The appeals process is expected to take some four years and any fines are suspended until all legal recourses have been exhausted, according to the DPA.

The investigation was triggered after a French human rights organisation lodged a complaint on behalf of more than 170 taxi drivers in France with the country's data protection authority. However, as Uber has its European headquarters in the Netherlands, it was forwarded to the DPA.

French national data protection regulator CNIL said in a separate statement that it had cooperated with the DPA.

In a related case, the DPA fined Uber 10 million euros ($11 million) in January for infringement of privacy regulations regarding its drivers' personal data.

($1 = 0.8942 euros)

(Reporting by Stephanie Van Den Berg, Tassilo Hummel; editing by Jason Neely, Kirsten Donovan)

Red Lobster taps former P.F. Chang's head as CEO in bankruptcy exit plan


Red Lobster restaurant in Virginia·

Mon, 26 Aug 2024

(Reuters) - Damola Adamolekun, former CEO of P.F. Chang's, will take the helm at Red Lobster after a court approval of the restaurant chain's bankruptcy plan, investment management firm Fortress said on Monday.

Lenders, including Fortress Investment Group, are seeking approval for RL Investor Holdings, a newly formed entity, to acquire Red Lobster out of bankruptcy.

Adamolekun, who stepped down from his role as the boss of restaurant chain P.F. Chang's in 2023, will become the CEO of RL Investor, Fortress said.

Red Lobster filed for bankruptcy in Florida in May with about $300 million in debt and a plan to close some restaurants and sell itself to its lenders or a higher bidder.

Red Lobster would continue to operate as an independent company, with 544 locations across 44 states in the U.S. and four Canadian provinces, Fortress said.

(Reporting by Anuja Bharat Mistry in Bengaluru; Editing by Sriraj Kalluvila)

Poison Pen: Elliott Sends Open Letter To Southwest Investors Attacking Airline Leadership

By Rytis Beresnevičius

Summary

Elliott Investment Management, which has amassed an 11% shareholding in Southwest Airlines, has continued to push a leadership change at the airline.

While Southwest Airlines has attempted to make changes, the investment firm brushed them off, continuing to call for the resignation or removal of the carrier's top executives.

The proxy battle has been brewing since early June, when Elliott announced its Stronger Southwest plan, which outlined the needed changes at the airline, including the removal of its chairman of the board and CEO.


Elliott Investment Management (Elliott) has continued criticizing Southwest Airlines' current and former chief executives, with the investment firm addressing the carrier’s shareholders and reiterating its plans to change the leadership at Southwest Airlines.
Continuous criticism

Continuing to publish letters on the Stronger Southwest platform, Elliott has once again critiqued Bob Jordan, the president and chief executive officer (CEO) of Southwest Airlines, and Gary Kelly, the current chairman of the board and former CEO of the airline.

Photo: Southwest Airlines

Blaming the two executives for years’ long mismanagement, the investment firm outlined that over the course of three years before it announced its 11% position in Southwest Airlines in June, the airline’s share price has fallen by more than 30%.

“Shareholders are demanding better, and as one of the Company’s largest investors, we are leading an effort to arrest Southwest’s decline and return it to its rightful place as an industry leader.”

Elliott stated that after it had announced its intentions to initiate a leadership change at the airline, Jordan indicated his desire to fight Elliot’s efforts, which has included a poison pill that was armed in July.

Furthermore, the investment firm pointed out that the airline has falsely claimed that the two warring sides have not met, adding that in addition to a meeting in June, Elliott intended to meet with Southwest Airlines’ representatives on September 9.

Elliott Strategy Is Wrong For Southwest: Former United Airlines CEO Explains Why

The former United CEO advises Southwest to stick with its new course.

No leadership changes

Elliott pointed out that Kelly has led a process to add new directors to the airline’s board. At the same time, the investment firm was adamant that this was an effort to “entrench its current leadership.”

“We have no doubt that Southwest will attempt to portray our decision not to participate in this sham process absent a comprehensive solution as further evidence of our unwillingness to engage.”

Photo: Markus Mainka | Shutterstock

However, Elliott pointed out that Southwest Airlines’ executives were willing to talk openly only if “the most critical question,” namely the change of the carrier’s leadership, was taken off the table.

The company added that while it was willing to engage with the carrier’s board, it would only do so if it agreed to remove both Kelly and Jordan.

Otherwise, it preferred that shareholders, including itself, had a direct say in Southwest Airlines' future leadership.

Elliott Investment To Push For 10 New Boardroom Directors At Southwest Airlines

The firm wants big changes at the airline


Meeting with proposed directors

After Elliott announced ten independent directors to the airline’s board in early August, Southwest Airlines’ representatives have attempted to meet with the proposed executives.


“Neither Elliott nor its independent director candidates see the benefit to Southwest or to us of participating in this Company-controlled process.”

When Southwest Airlines has underperformed so much, no process conducted by its current leadership could be considered credible, Elliott noted.

Photo: Angel DiBilio | Shutterstock



The investment firm reiterated that another firm, Artisan Partners, has joined in its efforts to change the leadership at the airline, with several other unidentified shareholders expressing the same desire.
Related

SWAPA President Backs Call For Change As Elliot Responds To 'Poison Pill'

Southwest Airlines' pilots reiterated that whatever will happen in the next few months, changes will be coming to the airline and its business model.
2



Embracing the company’s culture

At the same time, while reiterating that leadership had to go, Eliott stated that it believed Southwest Airlines' current culture was vital to its success and had no intention of changing it.


“But the underlying message of Mr. Jordan’s recent rhetoric is that the culture of Southwest, which has powered its success for half a century, now seems to solely depend on the continued employment of its two top executives… who happen to be Mr. Kelly and Mr. Jordan.”

The recently announced changes to the boarding process and additional revenue initiatives were also criticized, with the investment firm saying that rapid and ad-hoc decisions could impede the long-term stability of Southwest Airlines.




“We have seen this movie before, and it rarely ends well, because there is no one more short-term-oriented at the expense of future value than a beleaguered CEO trying to preserve his or her job.”

Elliott concluded its letter by saying that it has continued to assume it would meet with the airline on September 9.

Photo: F Armstrong Photography | Shutterstock

At the same time, Southwest Airlines will attempt to distract shareholders by using various measures to avoid engaging with them.

The investment firm has hoped that some members of the board will look past the personal interests of Jordan and Kelly and do what was in favor of Southwest Airlines and its stakeholders.

China’s Budget Spending Drops as Land Sales See Record Fall


Bloomberg News
Mon, 26 Aug 2024, 

(Bloomberg) -- China’s broad budget expenditure contracted and income from land sales for local governments fell at a record pace, a sign of fiscal weakness that may further increase calls on Beijing to add stimulus to support the $17 trillion economy.

The combined spending in the general public budget and the government fund account was about 19.7 trillion yuan ($2.8 trillion) in the first seven months of the year, down 2% from the same point in 2023, according to Bloomberg calculations based on data released by the Ministry of Finance on Monday.

Behind the decline was a 8.9% decrease in land-related expenditure that includes payments for primary land development and compensation for existing rural infrastructure in preparation for a potential sale. Local governments have been cutting spending as their budgets come under strain from a severe housing downturn that’s made developers reluctant to purchase land.

The property fallout on public finances is becoming increasingly evident on the balance sheets of indebted local governments. Their revenue from land sales in July shrank just over 40% on year to 250 billion yuan, according to Bloomberg calculations, the sharpest fall since comparative data became available in 2016.

Total revenue under the two budgets came in at 15.9 trillion yuan in the first seven months, down 5.3% on year. That translated into an augmented deficit — a broad measure of the fiscal gap — of 3.8 trillion yuan.

“We see significant downward pressure for fiscal funding this year from falling tax and land sales revenue, besides the multi-year” deleveraging by state-owned companies known as local government financing vehicles, Goldman Sachs Group Inc. economists including Lisheng Wang wrote in a note after the data release. It’s a reference to Beijing’s campaign to curb local governments’ exposure to off-balance-sheet debt risks.


On Monday, six government departments including the Ministry of Finance issued measures to strengthen oversight of municipal infrastructure projects to prevent hidden debt. The actions bar local governments from selling bonds to fund projects with zero or little returns.

Policy at Crossroads

The spending contraction came during a month when China’s ruling Communist Party convened for its most important economic policy meetings for the second half of the year. The country’s top leadership pledged to make boosting consumer spending a greater focus but fell short of outlining decisive new measures.

At a regular meeting on July 31, China’s cabinet vowed to study additional steps that would be strong enough to reach companies and households.

The Goldman economists estimate fiscal expenditure growth rebounded in July, citing a broad deficit metric of their own that combines major on- and off-budget channels. They also expect government bond net issuance to increase “notably” in coming months to support fiscal spending and government-led investment.

Calls are meanwhile intensifying for the Chinese authorities to ramp up fiscal stimulus. Domestic demand has struggled to pick up as the persistent real estate crisis, price competition between companies and a gloomy job market weigh on business and consumer confidence.

A growing chorus of state-linked economists has urged Beijing to raise this year’s official deficit ceiling to allow more central government borrowing. Late last year, China lifted the ratio to 3.8% of gross domestic product from the original 3% with the sales of an additional 1 trillion yuan of sovereign bonds.

Among the challenges facing local governments is finding quality infrastructure projects to invest their special bond funds. In response, the economists have proposed using part of the money raised from any additional government borrowing this year to pay for subsidies for less well-off households as well as address the local debt risks and help rescue the property market.

A shift in the use of government bonds has already started. China is tapping some of the 1 trillion yuan of ultra-long special sovereign bonds it’s selling this year to subsidize purchases of new equipment by companies and consumers — Beijing’s key initiative aimed at boosting consumption.

Policymakers are also considering a proposal to let local authorities use these bonds to fund their purchases of unsold homes as part of efforts to prop up the housing market, Bloomberg reported last week.

The issuance of local special bonds — mostly meant for infrastructure investment — accelerated in August after staying slow earlier this year, partly as large amounts of sovereign debt hit the market. Sales of new local special notes have reached 632.7 billion yuan so far this month, already the largest volume since June 2022.

--With assistance from Ailing Tan, Jing Zhao and Lucille Liu.