China Tax Cut Strategy to Tackle Slowdown
Financial Planning

China’s Tax-Cut Strategy to Tackle Slowdown

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As per the recent Chinese credit data, the Chinese Government is relying on the tax cut as the first line of defense against the slowing down of the economy. The data imply that the Chinese Government has accepted the fact and started taking measures for the same.

Senior Chinese policy officials confirmed that more large scale tax reductions are in the pipeline. As the country is facing multiple issues with the economy like worsening of trade and total output, it has finally depended on the fiscal measures. As per JPMorgan Chase & Co., the total impact would be around 2 trillion yuan ($300 billion), or 1.2 percent of the gross domestic product of China.

This time China is following a different path to tackle the situation than the path taken after the global financial crisis. Its focus on the previous attempt was on infrastructure investment and monetary policy changes. This time China wants to tackle the slower economic growth without a debt blowout. It has managed to expand the credit growth for December, and the Central bank has been very successful in curbing the shadow banking which possesses a huge risk to the economy.

As per data, aggregate Financing in November was 1524 billion yuan, and in December it rose to 1590 billion yuan, with a median estimate of 1300 billion yuan. Out of the total financing, new yuan loans for November was 1250 billion yuan, and in December it contracted to 1080 billion yuan, with a median estimate of 825 billion yuan. And M2 money supply year-on-year basis for November was 8.0 percent, and in December it rose to 8.1 percent, with a median estimate of 8.1 percent.

Cui Li, the head of macro research at CCB International Holdings Ltd. in Hong Kong said at this moment the scope for monetary policy is very less, and fiscal policies such as tax cuts will be effective. She also added that the high leverage and property prices had limited the chances of massive monetary stimulus. But comparing with the infrastructure binges, as a growth measure, tax cut’s effects will be realized gradually.

Last year May saw a deduction of value added tax by the Government in manufacturing, transportation, construction, telecommunications, and farm produce industries, followed by a lowered personal income taxes and the introduction of more such deductions. And earlier this month, the State Council announced a $29 billion annual tax cut meant for small businesses.

Though it is still unclear whether the new approach of a tax cut will be effective or not owing to global tensions and trade war with the United States, but the approach has been adopted due to China’s debt load. By spending money on infrastructure like bridges, road, railways, etc. may become counterproductive for the stability of the economy.

JP Morgan economists led by Zhu Haibin wrote in a report that the Government is facing the debt load problem due to years of over-investment and huge spending on infrastructure that led to a surging debt.

The report also states it is yet uncertain that how much tax benefits will be moved to the required class for showing the effects on the Economy.

As per economists, the reduction in the tax may boost the Gross Domestic Product growth by a minimum of 0.46 percent. But, the slowdown linked to slower growth of world economy and trade war will not leave the Chinese economy very soon. It will linger on to the few next quarters.

The new policy changes that are scheduled to happen was briefed by Zhu Hexin, deputy governor of the People’s Bank of China, Xu Hongcai, assistant minister of the Ministry of Finance, and Lian Weiliang, the vice chairman of the National Development and Reform Commission. They also pledged to support the consumption of cars as well as other household goods. It should be reported here that the sales of cars fell for the first time in 28 years.

Xu said that the government would facilitate local governments to issue more infrastructure bonds in comparison with 2018 that will ensure continuous infrastructure development, but the rise in bonds should not be taken as a measure to tackle slower growth.

A Shanghai-based economist at Shenwan Hongyuan Group Co. said that in order to increase the personal consumption and consumption by businesses, a tax cut is the only way out for the Government. Introducing big financial stimulus packages may not yield results that are expected.

However, owing to the nation’s quasi-fiscal efforts such as special bonds and land sales will lead to an inflated fiscal deficit. It is expected to have a growth in Fiscal deficit of 11.3 percent of total output this year, whereas the last year’s mark was at 10.7 percent.

Tariff Cuts-

The government also has declared rounds of import tariff deductions so that the cost pressure would be minimal on the consumers and it also had said that opening up of the economy would be again rolled out this year on a wider basis.

The Government is most likely to set a target growth for this year in the range of 6 and 6.5 percent, as per experts.

Carie Li, an economist at OCBC Wing Hang Bank Ltd in Hong Kong, said the credit data is still showing negative numbers as the Government’s prolonged campaign to wring out the shadow banking has been successful. The new stimulus measures in terms of fiscal policy changes are still unable to fill the gap created by the crackdown by the Chinese Government. And the Government, as well as the Central bank, may need to think about the funding needs of the privately-owned businesses specifically in order to achieve the credit growth they have expected.

Advisors

Chinese Central Bank Infuses Record Amount into Banking System

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China has become the biggest victim of the global slowdown. Proving this point stronger, the Chinese central bank, People’s Bank of China has infused 560 billion Yuan ($83 billion) into the banking sector. It is the highest amount to be injected in a day in Chinese history.

The yield on the 10-year Chinese government bond fell below 3.1 percent, and it is the lowest yield in the last two years, as per the statistics by financial database Wind. It should be reported here that bond yields fall when the price of the bond rises. And that implies people prefer other investments more than bonds. Ultimately it shows anticipation of an economic slowdown.

The People’s Bank of China said in a statement the cash availability with the banks is declining quickly and being at the peak of the tax period, the infusion of liquidity was much needed.

Liquidity is the availability of hard cash or the ease at which assets can be turned into cash. It has much importance for the companies and business houses as liquidity ensures money to pay taxes and operate the business on a daily basis. Since the last year, Chinese businesses have been facing difficulties with sluggish economic growth, increased financing difficulties and greater obligations to provide benefits for employees. And, the Chinese New Year Holiday is just three weeks away when the whole nation will be shut down for a week, giving no productivity of the businesses.

Zhao Bowen, research director at Beijing-based Blue Stone Asset Management, said that the enterprises in China were expected to pay more than 1 trillion yuan in taxes in this week. Hence, it is the peak period of tax payment. A historically low level of fiscal deposits and the expiration of 390 billion yuan in medium-term lending are also adding to the woes of the already devastated economy.

Zhao added that at the very moment the Government should push back against the downward pressure on the Chinese economy, and take the first step in the first quarter itself. He also said that the central bank is trying to loosen overall credit conditions and coordinate with the banks to issue large local debts.

The record infusion of 560 billion Yuan into the banking system was done through the reverse repurchase agreement (Reverse Repo). It means buying short-term bonds from some commercial lenders so banks will have more liquidity at the disposal. Sales of the bonds are called repurchase agreement (Repo). Both these measure of Repo and Reverse Repo are part of the central bank’s liquidity management tool, Open Market Operations (OMO).

As per the records of financial database Wind showed, the second highest injection of liquidity into the banking sector happened in 2016, when the Chinese economy was going through almost the same phase. Though no explanation followed that injection, today’s infusion of liquidity comes with an explanation that it was done to maintain reasonable and sufficient liquidity in the banking system.

Ting Lu, Nomura’s chief China economist, said it is evident that People’s Bank of China is stepping up for monetary easing, but the infusion in question is a seasonal move, and it should not be confused with long-term liquidity injections. It also implies that the central bank is cautious enough to stabilize interbank rates and bond yields to offset potential liquidity shocks.

Chinese Premier Li Keqiang also has declared that the Chinese Government would cut the reserve requirement ratio for the banks so that they hold more money to be used in the market. The year 2018 has seen four such cuts in the reserve ratio requirement.

Company News

Microsoft Signs Deal with Walgreens

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Amazon has recently become the most valuable company in the world with the highest market capitalization. In the times of Amazon’s growth, Microsoft has also started involving with more retailers. Recently, Microsoft has signed a multiyear deal with Walgreens Boots Alliance (WBA).

Though Amazon’s core business still lies in e-commerce, it has been expanding into many sectors along with that. It has opened brick and mortar shops through Amazon Go Stores, its Whole Foods acquisition and other efforts — and at times that’s proving to be an advantage to Amazon’s competitors in the cloud business. And recently, Amazon has reportedly been taking an interest in health care. Though not much is talked as of now, it has started its venture with acquiring online pharmacy PillPack and teaming up with J.P. Morgan and Berkshire Hathaway for financial advice for a long-term plan to improve care and reduce costs for employees.

WBA CEO and Executive Vice Chairman Stefano Pessina said he is not afraid of healthy competition from Amazon. He is hopeful that if Amazon enters into this sector, it will create an ecosystem for the sector and companies will thrive the way they deserve to. He also added that he had never believed that one company could monopolize one segment of the market. If one company is doing the right thing, it will have the ability to sustain the toughest of the competition.

As far as the deal goes, Walgreens Boots Alliance is signing up more than 380,000 employees for its Microsoft 365 cloud apps offering, including Office 365, Windows 10, and mobility and security tools. The company will transfer most of its Information Technology workloads to Microsoft’s Azure public cloud.

Walgreens Boots Alliance has almost 400 distribution centers that deliver to hundreds of thousands of doctors, hospitals, health centers, and pharmacies annually. It is also operating Walgreens and Duane Reade stores. The company has acknowledged Amazon’s acquire in the Pharma sector in the risk factor section of the latest annual report.

The deal with Microsoft will also include tests of “digital health corners” within some Walgreens stores, along with cooperation on research and development and software for managing patient engagement and chronic disease detection and record keeping.

Microsoft CEO Satya Nadella said that the deal was the outcome of a conversation three years ago. He also added that the WBA went through a pretty rigorous process of really finding the right partner who can bring both world-class technologies, but also the trust as well in order to be able to help them build the ecosystem that is needed.

He also added because, ultimately, this is about broad partnerships that need to be harnessed by Walgreens in order to deliver the services they are envisioning, and they needed to find a partner who, on the technology side, has the capability to do that ecosystem orchestration and is trusted. That is something where Microsoft does obviously deliver well in, and he was glad to really bring all of that to this partnership.

Nadella said that Microsoft would work as the glue for various technology and partnerships that will bring data from multiple sources together so that the new program can be established as soon as possible.

He emphasized that the deal is not just about Microsoft. The main motive here is to orchestrate that entire ecosystem of tech providers in order to help companies like WBA transform. It should be reported here that Microsoft has recently signed partnerships for cloud service rendering with big retailers like Gap, Kroger, and Walmart. But, the Amazon Web Services also possesses a large number of retail clients like Brooks Brothers and Under Armour, as well as health-care companies like Bristol-Myers Squibb and Celgene.

In the growing market capturing by Amazon in various segments, the other companies have to play cautiously finding the right allies at the right moment to tackle the big competition ahead.

UK Parliament Rejects PMs Brexit Deal by 230 Votes
News

UK Parliament Rejects PM’s Brexit Deal by 230 Votes

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UK Parliament has defeated Prime Minister’s Brexit deal on a crushing margin. As the date of the divorce is nearing, UK may have to leave the European Union without a deal or even have to stay in it.

Parliament had voted 432-202 against the deal proposed by the Prime minister. It is said to be the worst defeat for the Government in the recent British history. Not only the Brexiteers but also the lawmakers in support of EU membership voted down the deal.

The final date of March 29 for separation is nearing. And with these uncertainties, the United Kingdom is going through the deepest crisis of the century. The question remains intact about how to leave the union or even whether to leave the union. It should be reported here that the United Kingdom joined the European Union in 1973.

The British Prime Minister Theresa May wanted from the starting to depart with the European Union amicably having decided the future course of the relationship with the union. But, the recent defeat and the first British parliamentary defeat of a treaty since 1864, made it clear that the two years of strategy and persuasion did not work for the PM.

Anand Menon, professor of European politics and foreign affairs at King’s College London said the Brexit deal is basically dead. The EU lawmakers, as well as the British lawmakers, would consider the deal dead and as of now, Britain has neither Brexit nor any alternative to Brexit.

The British Prime minister has repeatedly refused to resign in the whole process of gathering consensus, but now she has some limited options at her hands. She might get agreed on the Brexit with no deal with the European Union or any last moment concessions from the European Union. She also has other options like a delay to Brexit, resignation, an election or a referendum.

The Dilemma-

Since 2016 referendum which allowed the Brexit to happen on a majority of 52 to 48 percent, the British political class has been debating how to leave the European projected which was created by Germany and France on the aftermath of World War II.

As the country is divided on the question of EU membership, the matter of vital importance is British’s contemporary position and the importance of its decision as it will shape the future generation’s prosperity.

Before the deal, Theresa May had made one thing clear that Britain would rather stay in the European Union than leaving the European Union without a deal. She had also urged her fellow conservative members not to let the Labour party hold power to control the Brexit. Labour leader Jeremy Corbyn, said he is now expecting an early election after calling a vote for a no-confidence motion. After the huge defeat, it is undemocratic for her to continue in the Government.

Supporters of EU membership strongly advocate that the Brexit will create more fissures between the western unity and it will undermine the reputation of the United Kingdom as a stable destination for investment, and it would eventually impact Britain’s importance in the Global Politics.

The opponents of Brexit also are hoping for another referendum and this time they are pretty hopeful of a win as the Brexiteers of the past referendum now have the proper insight and knowledge of the consequences of Brexit.

People supporting Brexit stated the over-bureaucratic nature of the union is responsible for the fast falling of the once used to be super powerful British. As per them, in order to continue the competition with countries like the United States and China, it has to change and get out of the Union which prohibits the freedom it requires.

Company News

Volkswagen and Ford Likely to Announce Alliance

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Volkswagen AG and Ford Motor Co may soon unveil an alliance to combine forces on commercial vehicles and may soon expand to electric vehicles and self-driving technologies. This move may save billions of dollars for both of the automakers.

Ford and Volkswagen will be soon declaring the alliance officially on Detroit auto show. As per VW Chief Herbert Diess, these two automakers have spent the last couple of months discussing cooperation in vans and other commercial vehicles. He also confirmed that the alliance would not involve any transfer of share or merger.

They also have scheduled a joint conference to provide more details of the alliance.

The two makers have confirmed that they had been looking for opportunities to cooperate with each other closely due to the recent trade frictions in the United States, Europe, and China.

The alliance also highlights the growing pressure amongst the automakers globally to manage the costs and develop electric or self-driving cars owing to the changes in legislation in many countries adopting strict emission standards.

The slowdown in the demand of cars in large markets like the United States, China has made the automakers to think about the cost cutting and advanced technology. The scope of the cooperation is yet to be ascertained fully as the talks are yet to be finalized on the area of electric cars and autonomous cars.

The alliance will let the two companies leverage upon each other’s unique capability. There might be a pooling of resources by the two companies for autonomous technology, and Ford might license Volkswagen’s MEB electric vehicles platform.

VW has confirmed in the Detroit auto show that the alliance would help VW to gain access to Ford’s midsized Ranger pickup truck platform, as the primary objective of the alliance would be to explore more on commercial vehicles. But, that doesn’t mean the alliance would be limited to commercial vehicle and electric vehicles. They would constantly be looking forward to other joint projects.

Executives of both these companies have talked about the deeper advantages of having this alliance. VW could use Ford’s plant to make vehicles whereas Ford might use the electric vehicle platform of VW.

The tie-up with Volkswagen will be a significant step for the Chief Executive of Ford Jim Hackett since he took over in May 2017 from the ousted Mark Fields with the mandate to speed up decision-making and cut costs. And, Ford recently said that it would cut thousands of jobs and discontinue loss-making models in order to cut costs to be able to absorb the shock in the car market.

Trading News

US Warns German Companies of Sanctions Over Russian Links

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In a long-standing conflict between the United States and Russia, this time German companies will have to face the ire. The United States has warned German companies involved in the Russian-led Nord Stream 2 gas pipeline that they may face sanctions if they choose to continue with the project.

US president Donald Trump has accused Germany of being a captive of Russia as it is heavily reliant on Russian energy and urged German companies to stop work at the earliest in the $11 billion gas pipeline project.

The pipeline since its plan formulation days has been criticized heavily as it will pass through Baltic Sea direct from Russia to Germany. It would bypass Ukraine depriving the country of lucrative gas transit fees. This may make Ukraine more economically vulnerable.

US Ambassador Richard Grenell has sent letters stating the same to various companies, as per the Embassy’s statement. The Embassy spokesperson said the letter reminds that any company operating in the Russian energy export pipeline sector is in danger under CAATSA of US sanctions and also added that other European countries had opposed this pipeline.

Germany along with its allies in the whole Europe alleged that the United States by using its Countering America’s Adversaries Through Sanctions Act (CAATSA) is trying to influence the country’s foreign and energy policies.

The Russian giant Gazprom is implementing the project along with western partners Uniper, Wintershall, Engie, OMV, and Shell.

The letter has created much talk in the Chancellor’s own Government. As per the sources, Chancellor Angela Merkel will direct take this issue with Washington as the ambassador’s letter did not follow the common diplomatic practice.

Juergen Hardt, the foreign policy spokesman for Merkel’s conservatives in parliament, said that the US ambassador’s direct threatening letter to the German companies is not acceptable. The letter demeans the tone of the transatlantic relationship. He also added that if the United States President wants to act tough on Russia in public, instead of targeting German companies he should first clear the air above his alleged relationship with the Russian regime.

The German companies that have received the letter denied making any official comment on the whole issue.

However, German and Russia also did not share a good relationship after Russia’s Crimea accession from Ukraine in 2014. But, both the countries had to advance the plan as they have common interests in the Nord Stream 2 project, which has the capacity to double the load of existing Nord Stream 1 route.

Russian Advantage-

German newspaper Bild am Sonntag reported that the letter from the Ambassador would only help Russia to have leverage on the gas pipeline project in future.

As per the spokesperson in US embassy, the letter is a coordinated effort by several US government agencies; it was never meant to be a threat letter but a letter stating the US policy clearly.

German Foreign Minister Heiko Maas said that the US sanctions on Nord Stream 2 pipeline project would be a wrong step for solving the dispute. The United States should stop meddling in the internal affairs of the European Countries and let the European countries decide their own energy policy.

Trump Orders Fast Food after Shutdown Closes White House Kitchen
News

Trump Orders Fast Food after Shutdown Closes White House Kitchen

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The on-going shutdown has affected the lives of many in the United States. The affected persons range from the federal employees to other businesses dependent on the Government. But, it is strange and equally surprising that the shutdown has also affected the United States President.

President Trump personally paid for an “all American” feast of burgers, pizza, and fries for a visiting college football champions in White House. President Trump had to do this as the White House chefs are among those federal workers who are furloughed owing to the partial shutdown. It should be reported here that the ongoing shutdown is the longest one in the history of the United States.

On Monday, the Clemson Tigers were invited by President Trump to the White House as they have won the national championship defeating Alabama Crimson Tide.

Having all the Chefs of White House absent due to the on-going shutdown, Trump used his own money to order burgers and fries from McDonald’s and the Wendy’s which he termed as the “great American food.”

He said that he had ordered American Fast food paid by the President himself, the food included lots of hamburgers, pizzas. He also added that he had hoped the team would like those foods more than he could offer.

Standing behind the spread of fast food, in the Dining Room of the White House, Trump said he likes them all, and he would like to see at the end of the evening how many are left.

White House Press Secretary Sarah Sanders said that the President had arranged a fun event to celebrate the College Football National Champion Clemson Tigers. As the Democrats are adamant on refusing the budget for the border wall, there is a shutdown, and the President had to pay on his own as due to the Shutdown, White House staff is also furloughed.

When asked about the choice of McDonald’s or Wendy’s Trump said he chose these outlets as those are all good American stuff, and the national champion team at the White House deserves a little celebration. Praising the team for the game, he said that the team had played fantastic against Alabama.

It was for the second time the Clemson Tigers were invited to the White House. They had visited the White House in June 2017 after winning the previous championship.

The football player walked into the event and found tables loaded with hamburgers from McDonald’s, Wendy’s and Burger King. Another table was full of Dominos Pizzas and fries.

President Trump explained that he had arranged a number of foods that are liked by the Americans throughout the nation and he would like to see how many are left after the end of the event. He also said that because of the shutdown he had to arrange the event like this.

He also added that he was happy about the Republicans sticking together for the greater good of the nation. Emphasizing on the border wall, he said it is needed from the security viewpoint, and the wall should have been done many years before. And he said he is confident that the wall is going to be built this time.

It should be reported here that the partial shutdown has reached 24th day due to the conflict between the Trump administration and the Congress over the funding of proposed U.S. – Mexico border wall. The lives of around 800000 federal workers have been affected by this partial shutdown. The cost of the proposed wall would be $5.7 billion and as per some experts in a week, if the Shutdown continues, the cost to the American economy will surpass the cost of the proposed wall.

The shutdown has closed temporarily many key departments like the State Department and not surprisingly the White House kitchen. Trump told at the event that he did not want to postpone the event until the shutdown ended.

The last record shutdown happened in 1995-1996 at the time of President Bill Clinton which lasted for 21 days.

Opinion & Analysis

Germany Economy Slows Down Adding to Global Woes

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After the global slow down and disappointing growth results from many countries, now Germany also reported the slowest economic growth since the last five years. The slowdown in Germany has added the problems of global downturn and trade conflicts between the countries.

Germany’s Government sources said that the economic growth eased in 2018 to 1.5 percent from 2.2 percent in 2017. However, being the major and dominant economy of the European Union, it successfully avoided the fear of fourth quarter recession.

Growth in Germany is traditionally linked with export, and it is also supported by domestic expenditures. Germany has managed well the unemployment rate at 3.3 percent. These all helped the country to bear the shock of the global downturn. It should be noted here that Germany has been growing for the last nine years.

The slowed growth of Germany has again raised the fear about the currency which is used by 19 European nations “Euro.” Along with the currency, the European Union is already facing the threat of Britain’s departure creating uncertainties about the future of the Union. Though the United States and Europe have imposed some tariff on each other, the biggest factor here would be the trade war between the United States and China. There are lots of companies that do businesses in these two countries; the trade war has lowered the investor’s confidence in those companies ultimately affecting the global growth.

China is Germany’s largest trade partner and owing to the large car market; China has been providing avenues of profit in car sales for German car makers like Daimler, Volkswagen, and BMW.

The European Central Bank has indicated that if the economy worsens further, it will have to postpone the first interest rate increase of the year by a few months. However, as per experts, the rate should remain unchanged through late 2020 owing to the condition of the economy.

German output fell by 0.2 percent in the third quarter due to many temporary factors like stricter emission testing rule and low demand in China. Though the fourth quarter figures are yet to come, two consecutive falls in quarter’s output ultimately imply situation very similar to a recession.

The statistics agency said they did not see a minus growth in the fourth quarter instead they are hopeful about positive growth. But, the agency cautioned that the figures as of now are on a preliminary stage and possess a huge potential to change at the final moment.

China Foreign Direct Investment into US Dropped Says Report
Opinion & Analysis

China’s Foreign Direct Investment into US Dropped, Says Report

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Foreign Direct Investment from China into the United States shrunk for the second year in a row.

According to the new data by the Rhodium Group, in 2018 Chinese FDI in the United States fell to just $4.8 billion — a massive decline from $29 billion in 2017 and $46 billion in 2016.

The figure of 2018 released by the independent group is a 90 percent decline from 2016 and the lowest level in FDI by China into the United States since 2011.

The report of the decline comes in between the on-going trade war between the two countries. China has been allegedly asking its companies to reduce their global holding and stocks so that it can reduce its debt level.

According to the same data, almost $13 billion worth of assets were sold in 2018 by China in the United States. China bought much of these assets in the 2015⎯2016 investment booms. Chinese net direct investment into the United States saw a decline of $8 billion in 2018, including those divestitures.

The group also added that there is also a $20 billion worth of divestitures that is still pending.

In recent months since the tariff war started between the two economies, Chinese companies have started selling assets. Anbang has already put up a number of its U.S. luxury hotels for sale, HNA Group has also allotted billions of dollars’ worth of assets for sale, Fosun International is willing to sell a stake in its New York property, 28 Liberty, and Dalian Wanda Group is looking for buyers for a sale of its stake in Legendary Entertainment.

Though Foreign Direct Investment from China into the United States fell, venture capital funding from Chinese resources into the United States has gained a record high of $3.1 billion, the Rhodium group said.

The National Association of Realtors data shows that amidst the contracting Foreign Direct Investment, Chinese investors are still on the top in buying residential housing in the United States both in terms of units and value. This shows the growing interest among the Chinese middle class in the American market.

Company News

Facebook to Invest $300 Million in Local News

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After receiving criticisms worldwide for its role in eroding the local news business, Facebook has decided to invest $300 million in this segment over three years.

The Company said the investment in time and money would be a significant expansion of a plan to help newsrooms not only in the U.S. but also in abroad to create and sustain viable business models to survive.

The recipients of the investment said that earlier investments by Facebook were somehow linked to the social media company, but this time it is unique and nowhere linked to Facebook.

The investments that were made by Facebook previously in the news business segment were designed to encourage or force the media house to publish news on Facebook’s platform. Eventually, this model hurt many of the recipients as Facebook shifted its strategies.

Campbell Brown, Facebook’s vice president of Global News Partnerships, said Facebook would continue its fight against fake news, misinformation, and low-quality news on its platform. Along with that, it has an opportunity and responsibility to help local news business to grow and thrive.

Earlier Facebook was criticized heavily for its role in promoting hate speech, misinformation, and political meddling.

The first round of investment will be done in the United States. It will help augment resources for the local news businesses for local reporting, help research how to use technology to improve news gathering and create new products, recruit trainee community journalists and place them in local newsrooms and also help fund a program modeled after the Peace Corp, which will place 1,000 journalists in local newsrooms over the next five years.

Pulitzer Center will receive the first round of investment, Report for America, Knight-Lenfest Local News Transformation Fund, the Local Media Association, and Local Media Consortium, the American Journalism Project and the Community News Project.

Fran Wills, CEO of the Local Media Consortium, an alliance of 80 news companies representing 2,200 outlets said Facebook is helping the local news businesses to create new and unique news content for the community; it will in return open multiple revenue streams by attracting advertisers. Ultimately this will help the local businesses to grow like anything.

Last December, Facebook announced making an investment of $6 million in local publishers in Britain. It also has plans to expand the investment in the existing “Accelerator” program, which was launched last year to help local media businesses like San Francisco Chronicle and the Denver Post improving their news reporting in order to attract more number of subscribers and membership donations.

Wills said that it ultimately helps the news businesses to have credible content on their platform and Facebook’s this investment also will help the local community as well.