China's deflating property market threatens wider economic trouble

Magellan Asset Management

October 2022

The Reserve Bank of New Zealand a year ago became the first advanced central bank to raise interest rates to cool its economy to tackle inflation. So far, the RBNZ has lifted its key rate seven times. The Bank of England, starting last December, has boosted its benchmark rate seven times too. The Reserve Bank of Australia has hiked the cash rate six times in six months; the Bank of Canada five times in seven months. The Federal Reserve has hoisted interest rates five times over six months. The European Central Bank has conducted two rate increases, one by a record amount. In the emerging world, Banco Central do Brazil has raised its Selic rate by 11.75 percentage points in 12 steps. The tally for El Banco Central de la República Argentina is eight increases that tally to 29.5 percentage points. The Reserve Bank of India has boosted its policy repo rate three times this year. What's the People's Bank of China done? It has loosened monetary policy again and again since late 2021.

In December last year, the PBOC ordered the cut of the one-year loan prime rate, one of two de facto benchmark lending rates. [1] In January, the PBOC forced cuts in the one-year and five-year loan prime rates, where the five-year rate is the other de facto key rate.[2] In April, the PBOC reduced the amount banks must hold as reserves so they had more to lend.[3] In May, the PBOC instructed banks to again cut the five-year loan prime rate.[4] In August, the PBOC orchestrated a spate of rate cuts,[5] instructed banks to keep lending,[6] and organised special loans of up to US$29 billion for property developers.[7] In September, to support a tumbling yuan that trades within a daily PBOC-set band, the central bank cut the bank forex reserve ratio[8] - yet 10 days later the currency still fell below 7 to the US dollar compared with 6.35 at the start of the year. Same month, the PBOC directed state banks to cut deposit rates for the first time since 2015,[9] manoeuvred to support the yuan that still fell to a record low of 7.2 against the greenback the next day,[10] and applied tweaks to encourage lending to first-time home buyers.[11] Over the 10 months, Beijing has repeatedly announced fiscal stimulus.[12]  

Policymakers in China are pursuing such remedies because China's economy is hobbled in at least 10 ways. Standing out is the troubled property sector, which drives about 20% of GDP and represents about 66% of urban household wealth. The country is riddled with half-built residential buildings, which is deflating a property bubble. The history behind such worries is that policymakers super-stimulated the property market to compensate for lost exports to get through the global financial crisis of 2008-09. Since 2020, to quell overheating, however, officials under a 'three red lines' policy[13] have restricted credit to property companies, which has dented building activity and bankrupted developers (most notably, China Evergrande Group that has an estimated US$300 billion in liabilities).[14] Home prices have slid every month over the year to August.[15] Since Chinese buy off the plan, many people now own homes yet to be built - The Economist estimates that only 60% of homes pre-sold between 2013 and 2020 have been delivered.[16] Many of these dudded pre-buyers are boycotting  mortgage payments - hundreds of thousands of borrowers in more than 100 cities, by some counts.[17] The property crisis so imperils the finances of local governments - they rely on land sales for much of their revenue - cities have implemented about 70 policies to support property, to little avail.[18]

The property crisis highlights a second weakness. The country's business, government and household debts reached 280% of GDP in 2019 and can't rise endlessly. Central government debt at 73% of output in 2022, while low by international standards, curtails Beijing's ability to bail out the property sector[19]

China's debt-fuelled property woes link into a third challenge; the stability of China's banks, especially the country's 4,000 small and mid-sized banks. In April, several small banks in eastern landlocked Henan Province failed. The fact that authorities silenced depositors entitled to compensation shocked China watchers, especially when on July 10 thugs assaulted depositors in front of police when they protested outside the People's Bank branch office in Henan's capital of Zhengzhou.[20] China's largest banks, having lent to property companies and to risky emerging countries as part of the Belt and Road Initiative, are too shaky to absorb tottering smaller banks. The concern is that a rash of small bank failures could trigger a systemic financial crisis.

The perils surrounding China's banks are amplified by a fourth problem; covid-19. To enforce a zero-covid policy, Chinese authorities have locked down large cities to control the disease because they can't rely on the inferior China-made vaccines and refuse to import foreign ones. These repeated lockdowns of up to 30% of China's population have stifled economic activity, created youth unemployment of 20%, undermined business and consumer confidence, prevented people from scouting for properties and stirred protests. This lockdown blow to the economy blunts the effect of monetary and fiscal stimulus. China's wobbly banks are no longer protected by the double-digit economic growth of yesteryear, or even the 7.1% annual growth from 2011 to 2020.

China's worst-ever heatwave and the linked drought is a fifth economic misfortune, even if a temporary problem.[21] Factories have been forced to cut production because hydro generation has halved.[22] Water levels have dropped enough to impede river trade. Food prices have jumped. Authorities have warned the drought poses a "severe" threat to the coming autumn harvest, when 75% of the country's grain is gathered.[23]

China's sixth trial is that the rate increases implemented by about 90 central banks (according to Bloomberg's tally) are reducing demand for Chinese exports.[24] A seventh worry is that the deglobalisation fanned in part by China-US tensions deters the Western investment that drove China's economic ascension. Higher wages in China, as part of the government's spluttering push to switch from an export-and-investment-led economic model to a consumption-driven protype, deters investment too.

An eighth handicap is China-US strains are cutting China off from Western technology, especially related to artificial intelligence, microchips and supercomputers. A ninth and durable impediment is China's poor demographics. A record low fertility rate of 7.52 births per 1,000 people mean the country's population of 1.4 billion is ageing and close to shrinking, commonly accepted as drags on economic dynamism.[25]

A tenth handicap is President Xi Jinping's nationalistic and statist ideological bent. Xi favours state intervention in the economy. He has diverted resources to the state sector and preferred industrial ventures while curbing the dynamism of the private sector, especially that of the technology industry. Productivity, the lifeblood of rising living standards, is threatened.

China's troubles mean its economy is expected to expand only about 3% in coming years, effectively at recession levels - the World Bank in October reduced its China growth forecast for 2022 from 5% to 2.8%. Such a slowdown comes with local and global consequences. Within China, the biggest risk is the public's faith in the Chinese Communist Party could be tested, especially people's confidence in Xi, China's most powerful ruler since Mao Zedong. Disagreement over an economic recovery plan is even stirring opposition to Xi inside the Communist Party, including within the supreme Politburo Standing Committee (cabinet). "For the first time since the 1989 Tiananmen Square protests, China's leader is facing not only internal dissent but also an intense popular backlash and a real risk of social unrest," assesses. Cai Xia, a professor at the Central (Communist) Party School from 1998 to 2012. [26]

Any China slump would be felt around the world because China's output comprises about 19.6% of global GDP on a purchasing-power-parity basis. Many of the commodities, currencies and other assets, priced on an assumption that China will endlessly expand, could falter. Countries dependent on China (Australia, Brazil and Germany that just recorded its first trade deficit since 1991, to cite two) might struggle. Stressed emerging countries tied to the Belt and Road Initiative could suffer because China, having spent US$1 trillion on the project, is no position to release them from punishing terms.[27] A Xi-led CCP under pressure at home could double-down on 'wolf warrior' diplomacy and nationalism. Some fret it makes an invasion of Taiwan more likely.[28]

China escaped the worst of the global financial crisis but its reaction may have cultivated a local brew of the same toxicity that makes it unlikely China will become the world's biggest economy any time soon, even ever. At the very least, an era of slow Chinese growth is dawning. At worst, a Chinese implosion could be the biggest blow of all for a fragile world economy.

To be sure, China's economy is still expanding, the manufacturing sector is in fine shape and the country's state-backed financial system can absorb huge losses. A drop in imports is preserving China's trade surplus. China's spending on research and development now reaches 85% of that spent by the US. So innovation must be coming that will spur productivity.[29] There are no signs the masses are unruly. With its surveillance technology, perhaps no autocratic regime has been better equipped to stifle dissent. Xi is expected to cement a third term. But his power might be weakened in the process, perhaps a beneficial outcome. Rather than fuel aggression, China's economic woes might push Beijing towards a rapprochement with Washington.[30] China's slowdown at least helps the world curb inflation. Beijing's move towards a consumption-driven economy is the right long-term solution, as is prioritising high-tech and renewable sectors. But such solutions will take time.

They can't quickly solve that four decades of growth have stirred imbalances that Xi is exacerbating with lockdowns, aggression abroad and an ideology that restrains economic development. Even more PBOC support might be insufficient to avoid the worst.      

Source: China's economic statistics come from the IMF's World Economic Outlook Database released in April 2022 unless otherwise stated. The database can be found at: imf.org/en/Publications/WEO/weo-database/2022/April. China's non-financial company, government and household debts in 2019 are from the Bank of International Settlements.

Source: IMF World Economic Outlook database 2022

Author: Michael Collins, Investment Specialist

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Magellan Global Fund (Hedged), Magellan Global Fund (Open Class Units) ASX:MGOC, Magellan High Conviction Fund, Magellan Infrastructure Fund, Magellan Infrastructure Fund (Unhedged), MFG Core Infrastructure Fund

[1] 'Chinese banks cut borrowing costs to counter economic slowdown.' Bloomberg News. 20 December 2021. bloomberg.com/news/articles/2021-12-20/chinese-banks-cut-borrowing-costs-for-first-time-in-20-months

[2] 'Chinese banks cut borrowing costs as PBOC signals easing.' Bloomberg News. 20 January 2022. bloomberg.com/news/articles/2022-01-20/chinese-banks-cut-borrowing-costs-again-on-pboc-easing-signals

[3] 'China's central bank takes modest easing path despite covid.' Bloomberg News. 15 April 2022. bloomberg.com/news/articles/2022-04-15/china-s-central-bank-cuts-reserve-ratio-for-banks-to-spur-growth

[4] 'China banks cut key rate by record to boost ailing economy.' Bloomberg News. 20 May 2022. bloomberg.com/news/articles/2022-05-20/china-cuts-borrowing-costs-by-record-to-boost-loan-demand

[5] 'China shocks with rate cut as data shows 'alarming' slowdown.' Bloomberg News. 15 August 2022. bloomberg.com/news/articles/2022-08-15/china-central-bank-unexpectedly-cuts-key-rate-to-boost-growth.

[6] 'China seeks to stabilise property crisis as PBOC urges lending.' Bloomberg News. 22 August 2022. bloomberg.com/news/articles/2022-08-22/china-s-banks-trim-lending-rates-to-reverse-slump-in-borrowing

[7] 'China plans $29 billion in special loans to troubled developers.' Bloomberg News. 22 August 2022. bloomberg.com/news/articles/2022-08-22/china-plans-29-billion-in-special-loans-to-troubled-developers

[8] 'China cuts forex reserve ratio in bid to support tumbling yuan.' Bloomberg News. 5 September 2022. bloomberg.com/news/articles/2022-09-05/china-battles-yuan-losses-by-unleashing-foreign-exchange-onshore

[9] 'China's state banks cut deposit rates for the first time since 2015.' Financial Times. 15 September 2022. ft.com/content/e9d7a148-a7af-400b-8ea3-a76c9607b188?emailId=5c0c3eae-12b0-4649-86a0-e0ed2e6a8474&segmentId=60a126e8-df3c-b524-c979-f90bde8a67cd

[10] The PBOC ordered that financial institutions selling foreign-exchange forward contracts be subject to a 20% risk-reserve ratio, up from zero. The change makes it costlier to sell yuan to buy dollars in the derivatives markets. See 'China's central bank moves further to bolster the yuan.' The Wall Street Journal. 26 September 2022. wsj.com/articles/chinas-central-bank-moves-further-to-bolster-the-yuan-11664190159. 'China's offshore currency hits record low against dollar.' The Wall Street Journal. wsj.com/articles/chinas-offshore-currency-hits-record-low-against-dollar-11664333671

[11] 'China property shares rally on policy support.' Financial Times. 3 October 2022. ft.com/content/0ffa4fb4-906f-4faa-8906-8a7e07852c92

[12] 'These are China's new measures to bolster economic growth.' Bloomberg News. 25 August 2022. bloomberg.com/news/articles/2022-08-25/these-are-china-s-19-new-measures-to-bolster-economic-growth. See also 'China's stimulus: All the steps taken recently to boost the economy. Bloomberg News. 26 August 2022. bloomberg.com/news/articles/2022-08-26/china-s-stimulus-all-the-steps-taken-recently-to-boost-economy

[13] Bloomberg News. QuickTake. 'What China's three red lines mean for property firms.' 9 October 2020. bloomberg.com/news/articles/2020-10-08/what-china-s-three-red-lines-mean-for-property-firms-quicktake

[14] Financial Times. 'Evergrande misses deadline for $300bn debt restructuring plan.' 31 July 2022. ft.com/content/01f8a2c7-4ed1-487b-aada-ac5e2b5a9932

[15] Bloomberg. 'China's home price slump reaches a year as crisis drags on.' 16 September 2022. bloomberg.com/news/articles/2022-09-16/china-s-home-prices-fall-for-one-year-straight-as-crisis-deepens#xj4y7vzkg. The statistics are from the National Bureau of Statistics of China but its website is unsafe.

[16] 'China's Ponzi-like property market is eroding faith in the state.' The Economist. 12 September 2022. economist.com/finance-and-economics/2022/09/12/chinas-ponzi-like-property-market-is-eroding-faith-in-the-state

[17] Daisuke Wakabayashi. 'Homeowners boycott mortgage payments.' The New York Times. 17 August 2022.  nytimes.com/2022/08/17/business/china-economy-real-estate-crisis.html

[18] Bloomberg News. 'China rolls out property policies across nation to fix slump.' 14 September 2022. bloomberg.com/news/articles/2022-09-14/china-trickles-out-property-policies-across-nation-to-fix-slump. Bloomberg. 'China's home price slump reaches a year as crisis drags on.' 16 September 2022. Op cit.

[19] Non-financial company debt stood at about 160% of GDP and household debt at about 60% in 2019.

[20] See 'China's debt bomb looks ready to explode.' Nikkei Asia. 17 July 2022. asia.nikkei.com/Opinion/China-s-debt-bomb-looks-ready-to-explode

[21] See New Scientist. 'Heatwave in China is the most severe ever recorded in the world.' 23 August 2022. newscientist.com/article/2334921-heatwave-in-china-is-the-most-severe-ever-recorded-in-the-world/

[22] Bloomberg News. 'Power crunch in Sichuan adds to industry's woes in China.' 21 August 2022. bloomberg.com/news/articles/2022-08-21/power-crunch-in-sichuan-adds-to-manufacturers-woes-in-china

[23] Ministry of Agriculture and Rural Affairs of the People's Republic of China. 'China urges intensified efforts to secure autumn harvests amid heatwaves.' 23 August 2022. english.moa.gov.cn/news_522/202208/t20220823_300951.html. See also 'China's record drought is drying rivers and feeding its coal habit.' The New York Times. 26 August 2022. nytimes.com/2022/08/26/business/economy/china-drought-economy-climate.html

[24] The World Bank in September warned the rate increases could trigger a "devastating" global recession. The World Bank. 'Risk of global recession in 2023 rises amid simultaneous rate hikes.' 15 September 2022. worldbank.org/en/news/press-release/2022/09/15/risk-of-global-recession-in-2023-rises-amid-simultaneous-rate-hikes

[25] ChinaDaily, a government-controlled English-language publication. 'Lower living costs to boost birth rate.' 19 January 2022. global.chinadaily.com.cn/a/202201/19/WS61e75124a310cdd39bc81e1b.html

[26] Cai Xia, professor at the Central Party School of the Chinese Communist Party from 1998 to 2012. 'The weakness of Xi Jinping.' Foreign Affairs. September/October 2022. foreignaffairs.com/china/xi-jinping-china-weakness-hubris-paranoia-threaten-future

[27] See 'China reins in its Belt and Road Program, $1 trillion later.' The Wall Street Journal. 26 September 2022. wsj.com/articles/china-belt-road-debt-11663961638

[28] See 'War jitters. A weak China may be more warlike than a strong one.' A review of the book 'Danger zone: The coming conflict with China' by Hal Brands and Michael Beckley. The Economist. 1 September 2022. economist.com/china/2022/09/01/a-weak-china-may-be-more-warlike-than-a-strong-one

[29] OECD. 'Main science and technology indicators.' September 2020. oecd.org/sti/msti.htm

[30] See Victoria Herczegh. 'A confrontation China can't afford.' 27 July 2022. https://geopoliticalfutures.com/a-confrontation-china-cant-afford/

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Global Economic Outlook: a perfect storm

abrdn

September 2022

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10k Words 

Equitable Investors

October 2022

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Equitable Investors Dragonfly Fund

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Nothing in this blog constitutes investment advice - or advice in any other field. Neither the information, commentary or any opinion contained in this blog constitutes a solicitation or offer by Equitable Investors Pty Ltd (Equitable Investors) or its affiliates to buy or sell any securities or other financial instruments. Nor shall any such security be offered or sold to any person in any jurisdiction in which such offer, solicitation, purchase, or sale would be unlawful under the securities laws of such jurisdiction.

The content of this blog should not be relied upon in making investment decisions. Any decisions based on information contained on this blog are the sole responsibility of the visitor. In exchange for using this blog, the visitor agree to indemnify Equitable Investors and hold Equitable Investors, its officers, directors, employees, affiliates, agents, licensors and suppliers harmless against any and all claims, losses, liability, costs and expenses (including but not limited to legal fees) arising from your use of this blog, from your violation of these Terms or from any decisions that the visitor makes based on such information.

This blog is for information purposes only and is not intended to be relied upon as a forecast, research or investment advice. The information on this blog does not constitute a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. Although this material is based upon information that Equitable Investors considers reliable and endeavours to keep current, Equitable Investors does not assure that this material is accurate, current or complete, and it should not be relied upon as such. Any opinions expressed on this blog may change as subsequent conditions vary.

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RBA shows some patience with a return to neutral territory

Pendal

October 2022

The Reserve Bank of Australia (RBA) surprised the market this month when raising the cash rate by 25 basis points to 2.60%.

The market had assigned an 85% probability of the RBA hiking by 50 basis points.

Governor Lowe dropped a hint last month that the pace of tightening would slow when he commented that "the case for a slower pace of increase in interest rates becomes stronger as the level of the cash rate rises".

The market rallied following this comment which indicated 25 rather than 50 was more likely to happen in the nearer term.

Yesterday's 25bp hike means the RBA has now raised rates from 0.1% to 2.6% in 5 months. This is now seen as the bottom end of neutral territory.

Markets were looking for a 50bp hike given the hawkish party happening globally, led by Jerome Powell and his recent 75bp hike.

It was a case of a rising tide lifts all boats. As the following graph shows, central banks globally continued to tighten monetary policy aggressively in September.

In Sweden the Riksbank tightened by a more than expected 100 basis points.

The Federal Reserve, Bank of Canada, European Central Bank and Swiss National Bank (the last remaining member of the negative interest rate policy club) all raised their rates by 75 basis points.

The RBA, Bank of England and Norges Bank were all in the 50 basis point hike camp last month.

However, unlike other central banks, the RBA has shown some patience with this move. Rate hikes normally take 2 to 3 months to show up in any data given lags between the RBA hikes and the higher rates hitting mortgages.

One of the key lines out of the statement yesterday was "One source of uncertainty is the outlook for the global economy, which has deteriorated recently".

The UK Government's mini budget released last month was the source of much financial turmoil last month, the moves (and lack of liquidity) were astonishing late in the month.

The RBA is also acutely aware of the large amount of fixed rate mortgages that roll off over 2023.

The national accounts also reflected a drop in the household savings rate, indicating that the large savings buffers that households have built over the past 2 years may start to be called upon as cost of living pressures rise.

The decision to raise by a less than expected 25 basis points yesterday resulted in the market pricing in a terminal cash rate of 3.6% in 1 years time. At the end of September this was around 4.1%.

Back around neutral the RBA now thinks it has time on its side.

Their hope will be for better behaved CPI numbers in the quarters ahead.

The Sep Quarter CPI, due out later this month, should show elevated yet slowing CPI.

Our initial forecast is for a 1.4% increase, although electricity subsidies in WA and Victoria, and a lesser extent Queensland, could mean a lower number.

1.4% would be no cause for celebration but after a 2.1% and a 1.8% in recent quarters it is in the right direction.

Governor Lowe will likely take his next round of speeches reiterating their preparedness to tackle inflation with above neutral rates if needed.

"The Board remains resolute in its determination to return inflation to target and will do what is necessary to achieve that" was the final line of yesterday's decision.

For now though, reopening of supply chains, anchored inflation expectations and falling commodity prices are working in their favour.

The key domestically will be how tight labour markets feed into wage outcomes over the next year.

The RBA is prepared for 3.5% to 4% increases to wages, as many agreements are now showing, but will be alert for any trend higher.

Immigration is making a welcome comeback and may well impact enough in the next 12 months for the RBA to get their way.

However, the jobs market is unlikely to be back at pre COVID conditions until 2024 so the RBA patience, although welcome, may be tested again.

Author: Tim Hext, Portfolio Manager and Head of Government Bond Strategies

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The Rate Debate - Episode 32

Are central banks at risk of blowing up markets?

Yarra Capital Management

04 October 2022

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Around the world in 200 Meetings,

Mary Manning: Sustainable Futures

Alphinity Investment Management

October 2022

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'Small Talk' -  Mood Swings

Equitable Investors

October 2022

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Nothing in this blog constitutes investment advice - or advice in any other field. Neither the information, commentary or any opinion contained in this blog constitutes a solicitation or offer by Equitable Investors Pty Ltd (Equitable Investors) or its affiliates to buy or sell any securities or other financial instruments. Nor shall any such security be offered or sold to any person in any jurisdiction in which such offer, solicitation, purchase, or sale would be unlawful under the securities laws of such jurisdiction.

The content of this blog should not be relied upon in making investment decisions.Any decisions based on information contained on this blog are the sole responsibility of the visitor. In exchange for using this blog, the visitor agree to indemnify Equitable Investors and hold Equitable Investors, its officers, directors, employees, affiliates, agents, licensors and suppliers harmless against any and all claims, losses, liability, costs and expenses (including but not limited to legal fees) arising from your use of this blog, from your violation of these Terms or from any decisions that the visitor makes based on such information.

This blog is for information purposes only and is not intended to be relied upon as a forecast, research or investment advice. The information on this blog does not constitute a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. Although this material is based upon information that Equitable Investors considers reliable and endeavours to keep current, Equitable Investors does not assure that this material is accurate, current or complete, and it should not be relied upon as such. Any opinions expressed on this blog may change as subsequent conditions vary.

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The Inflation Reduction Act will drive US' efforts towards net-zero

4D Infrastructure

September 2022

What is the Inflation Reduction Act?

On 16 August 2022, President Biden signed the IRA into law having passed through Congress based on the Democrats holding a majority in both houses. The IRA includes US$369 billion in climate and energy spending, the largest energy transition focused spending package ever in the US. It's expected to put the US on track to achieve a 40% greenhouse gas (GHG) reduction against 2005 levels by 2030[1] - which is still a little off Biden's communicated target of a 50-52% reduction[2].

Background to the legislation

The components within the IRA were derived from the larger legislative package proposed by the Democrats, the Build Back Better Act (BBB), which was abandoned due to its perceived impact on the budget deficit. Moderate Democrat senator, Rep Manchin, was a key objector to BBB, but was convinced of the merits of the IRA and had the deciding vote in pushing the legislation through the Senate and signed into law. 

What is included in the package?

The IRA spending package incorporates a number of high-level targets, with spending allocated to each. These goals include[3]:

• Lower consumer energy costs through energy rebates and energy efficiency grants

• Ensure American energy security and support domestic manufacturing on clean/renewable energy technology components

• Decarbonise the economy through supporting private investment

• Invest in communities and support environmental justice in lower socio-economic communities

• Support sustainability measures for farmers, forestland owners and resilient rural communities.

The spending package is primarily financed through the establishment of a new minimum corporate tax rate of 15%, and increased powers of the Internal Revenues Service (IRS) to enforce tax payment.

Specific support mechanisms to assist in facilitating the energy transition process are included in the table below. These are intended to improve the economics of clean/renewable energy production to incentivise their adoption. This is not an exhaustive list of mechanisms included in the IRA.

Source: White & Case: Inflation Reduction Act Offers Significant Tax Incentives Targeting Energy Transition and Renewables

Funds operated by this manager:

[1] Environmental and Energy Study Institute: Historic US$369 Billion Investment in Climate Solutions Preserves a Pathway to Keep Global Warming Below 1.5°C - 16 August 2022

^{[2] President Biden Sets 2030 Greenhouse Gas Pollution Reduction Target Aimed at Creating Good-Paying Union Jobs and Securing U.S. Leadership on Clean Energy Technologies - 22 April 2022}

^{[3] Summary of the Energy Security and Climate Change Investments in the Inflation Reduction Act of 2022 - https://www.democrats.senate.gov/summary-of-the-energy-security-and-climate-change-investments-in-the-inflation-reduction-act-of-2022}

^{[4] The Wage and Apprenticeship Requirements are measures which aim to ensure that 1) contractors and subcontractors are paid in line with commensurate job wage requirements; and 2) a proportion of the workforce are filled by qualified apprentices.}

^{The content contained in this article represents the opinions of the authors. The authors may hold either long or short positions in securities of various companies discussed in the article. This commentary in no way constitutes a solicitation of business or investment advice. It is intended solely as an avenue for the authors to express their personal views on investing and for the entertainment of the reader.}