| Hello. Today we look at the how China's incentive structure is changing and what that means for its economy, how Netflix is tapping into South Korea's booming entertainment industry and a new way of monitoring Federal Reserve policy. The biggest and most lasting consequence of China's regulatory push this year may be simply that Beijing has altered, in a number of ways, the incentive structure for businesses and officials both. China watchers will need to think well beyond issues like implications for bondholders or educators or economic growth rates. Instead, it will pay to consider how exactly incentives have changed, for the long haul. Louis-Vincent Gave, co-founder of Gavekal Research, offered several in a note he published Wednesday. For companies, one of the profound takeaways is, "the days when the default business model in China was a race to achieve 'too big to fail' stature are now over," Gave writes. In the past, scaling up paid off. Big employment rolls and big debt guaranteed state support. During economic slowdowns, such as in 2015, officials would pressure lenders to extend credit. Companies "made investments not because they would be profitable, but because being bigger was a guarantee they would survive the next downturn," Gave says. Now, given the scrutiny and punishment applied to so many of China's private-sector giants, it now pays, effectively, to be too small to notice — "small enough to fly under the regulators' radar," as Gave puts it. Reduced scale and less "over-investment" means less capacity, which could alter some of the disinflationary impulse China has imparted to the rest of the world for decades. (One of Alan Greenspan's favorite indicators used to be the prices of imported goods from China.) Another major incentive structure change is President Xi Jinping's pledge to achieve peak carbon dioxide emissions by 2030. This is important not just for China, or the environment. For big oil companies around the world, it may make less sense to open as many new oilfields as previously conceived. Energy-intensive sectors in China like steel, aluminum, petrochemicals and shipbuilding net-net will be adding less capacity. And again, less capacity means, net-net, less disinflationary pressure. The changes are in part a consequence of a shift in the incentive structure for China's leaders themselves. Back when the population was climbing, policy makers had to ensure there were jobs for the 20 million or so workers moving from rural areas to cities every year. But now, with much higher urbanization rates and a shrinking workforce, the imperative of embracing scale to ensure work has disappeared. Those threads were on display Thursday as the latest economic data showed the official manufacturing purchasing managers' index contracted in September for the first time since the pandemic began last year. That's as a widespread electricity crunch that's been exacerbated by efforts to clean up the environment and uncertainty in the property market as authorities eschew a bailout for embattled developer Evergrande. —Chris Anstey "Squid Game" has topped Netflix Inc.'s global rankings this month, becoming the first Korean drama to claim the number one slot in the U.S. It's a product of Netflix's aggressive expansion in South Korea, where it added 5.6 trillion won ($4.7 billion) to the economy between 2016 and 2020, with 2.3 trillion won in just last year alone, the company said in a report jointly written with Deloitte. "Squid Game," for those who haven't watched it yet, follows a group of heavily indebted Koreans who are lured into playing deadly children's games in the hope of winning a fortune.  | - Staying on message | Federal Reserve Chair Jerome Powell and his counterparts at other key central banks voiced cautious optimism that supply-chain disruptions lifting inflation around the world would prove temporary.
- Global risks | Cathie Wood, Mohamed El-Erian and Scott Minerd muse on the biggest risks confronting the global economy and markets.
- China outlook | Activity in China's vast factory sector contracted in September for the first time since the pandemic began, the latest sign of deceleration in the world's second-largest economy.
- Britain's bounce | The U.K. economy emerged from the winter lockdown more strongly than previously reported, but not nearly enough to claw its way back to its pre-crisis size this year.
- IMF vote | The U.S., Germany and the U.K. were among nations to withhold support from a recent International Monetary Fund decision to approve $67 million in emergency financing for Equatorial Guinea, a dictator-led nation dogged by corruption concerns.
- On the mend | Germany's labor-market recovery continued at a slower pace in September amid fading momentum in the country's reopening boom.
The Taylor Rule was once a ready-reckoner for Federal Reserve interest rates and how they would respond to shifts in inflation and output. But the Fed's new framework for monetary policy has prompted David Wilcox of Bloomberg Economics to devise a new rule. The main implications are that the Fed's benchmark rate is effectively pinned at zero because the labor force is not yet fully employed, lower than what a Taylor Rule would suggest. And looking out to 2024, assuming the Fed's outlook is correct, suggests a rate of just above 2% versus around 3.5% for the Taylor Rule. Read more reactions on Twitter - Click here for more economic stories
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The fourth annual Bloomberg New Economy Forum will convene the world's most influential leaders in Singapore on Nov. 16-19 to mobilize behind the effort to build a sustainable and inclusive global economy. Learn more here. | 
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