China’s Winter Olympics may be more of a drag on Beijing’s regional economy than a boost, as virus flare-ups and pollution curbs weigh on consumer and industrial activity.
A ban on public spectators means there won’t be the usual bump up in tourism and consumption that a city hopes to gain from hosting the international games. Tighter controls to contain the outbreaks of two virus variants are keeping holidaymakers away. And restrictions on polluting industries to ensure there are clear skies over the capital during the games means steel plants are curbing output.
“The Winter Olympics will affect industrial production and infrastructure construction in the first quarter,” said Lu Ting, chief China economist at Nomura Holdings Inc. “It won’t boost consumption either because of virus outbreaks.”
Beijing is battling a growing cluster of coronavirus infections, which rose to 96 cases since mid-January. It’s the last thing authorities want in the face of a world event, especially with its resolution to maintain a Covid Zero strategy.
The outbreak prompted authorities to decide not to sell Olympics tickets to the general public but only allow certain invited spectators to watch the game. Athletes and staff, on the other hand, will be moving within a vast bubble of transportation, accommodation and venues.
The games, which are jointly held in Beijing and the adjacent city of Zhangjiakou in Hebei province, will run from Feb. 4 to 20. The Winter Paralympics will follow from March 3 to 13.
To contain the recent flare-up, the city has put in place more stringent virus control measures, such as requiring residents who buy anti-fever medicine to get Covid tests and increasing the testing of inbound travelers.
Eric Zhu, a China economist at Bloomberg Economics, said Beijing is likely to keep restrictions largely in place through the first quarter, given the Winter Paralympics and the annual national legislative sessions scheduled in March. That will continue to dent the already-struggling tourism and service sectors, he wrote in a report.
In addition, cities around Beijing have curbed the output of industries like steel, in order to improve air quality in the capital. That’s after the Ministry of Ecology and Environment expanded the annual winter campaign to improve air quality to over 60 cities this year from the 28 cities previously.
‘Mild disruptions to industrial production’
Each of these cities, spanning from the eastern province of Shandong to the central province of Shanxi, have targets to meet in terms of the level of PM2.5 particles in the air and the number of clear air days.
“I expect some mild disruptions to industrial production from factory closures ahead of Winter Olympics, but the overall impact to growth may be temporary and limited,” said Liu Peiqian, China economist at NatWest Group Plc.
The positive effects of the games may only be evident over the longer term. It could help China achieve its ambitious target of making sports into a 5 trillion yuan ($786 billion) industry by 2025, a 70% increase from 2019 levels. Authorities say they’ve already more than met their target of involving 300 million Chinese in skiing, hockey and other cold-weather pastimes.
“Similar to Tokyo’s Summer Games, the timing of global sport events are less than ideal due to the pandemic,” said Raymond Yeung, chief economist for Greater China at Australia & New Zealand Banking Group Ltd. “However, such an event is seen to spark a ‘white economy’ meaning that more people will be interested in winter sports domestically. That’s the long term benefit to the economy.”
China had estimated in 2014 the Winter Olympics and the Paralympics would cost $1.56 billion in operational spending, according to a report from the International Olympic Committee. The city budgeted for capital investment of $1.51 billion, with 65% funded by the private sector and 35% by various levels of government.
The investment was expected to bring long-term benefits to the region. Ticketing revenue was estimated at the time to reach $118 million, which is unlikely to be recovered now.
The economic drag of the games will likely be temporary and probably won’t result in any significant impact on China’s first-half growth, Nomura’s Lu said.
“Unfortunately it won’t drive consumption demand this time because of the pandemic,” he said. “Overall, there is some short-term impact, but don’t exaggerate the impact on the first half and full year.”
TORONTO – Canada’s main stock index was higher in late-morning trading, helped by strength in energy stocks, while U.S. stock markets also moved up.
The S&P/TSX composite index was up 34.91 points at 23,736.98.
In New York, the Dow Jones industrial average was up 178.05 points at 41,800.13. The S&P 500 index was up 28.38 points at 5,661.47, while the Nasdaq composite was up 133.17 points at 17,725.30.
The Canadian dollar traded for 73.56 cents US compared with 73.57 cents US on Monday.
The November crude oil contract was up 68 cents at US$69.70 per barrel and the October natural gas contract was up three cents at US$2.40 per mmBTU.
The December gold contract was down US$7.80 at US$2,601.10 an ounce and the December copper contract was up a penny at US$4.28 a pound.
This report by The Canadian Press was first published Sept. 17, 2024.
OTTAWA – Canada’s inflation rate fell to two per cent last month, finally hitting the Bank of Canada’s target after a tumultuous battle with skyrocketing price growth.
The annual inflation rate fell from 2.5 per cent in July to reach the lowest level since February 2021.
Statistics Canada’s consumer price index report on Tuesday attributed the slowdown in part to lower gasoline prices.
Clothing and footwear prices also decreased on a month-over-month basis, marking the first decline in the month of August since 1971 as retailers offered larger discounts to entice shoppers amid slowing demand.
The Bank of Canada’s preferred core measures of inflation, which strip out volatility in prices, also edged down in August.
The marked slowdown in price growth last month was steeper than the 2.1 per cent annual increase forecasters were expecting ahead of Tuesday’s release and will likely spark speculation of a larger interest rate cut next month from the Bank of Canada.
“Inflation remains unthreatening and the Bank of Canada should now focus on trying to stimulate the economy and halting the upward climb in the unemployment rate,” wrote CIBC senior economist Andrew Grantham.
Benjamin Reitzes, managing director of Canadian rates and macro strategist at BMO, said Tuesday’s figures “tilt the scales” slightly in favour of more aggressive cuts, though he noted the Bank of Canada will have one more inflation reading before its October rate announcement.
“If we get another big downside surprise, calls for a 50 basis-point cut will only grow louder,” wrote Reitzes in a client note.
The central bank began rapidly hiking interest rates in March 2022 in response to runaway inflation, which peaked at a whopping 8.1 per cent that summer.
The central bank increased its key lending rate to five per cent and held it at that level until June 2024, when it delivered its first rate cut in four years.
A combination of recovered global supply chains and high interest rates have helped cool price growth in Canada and around the world.
Bank of Canada governor Tiff Macklem recently signalled that the central bank is ready to increase the size of its interest rate cuts, if inflation or the economy slow by more than expected.
Its key lending rate currently stands at 4.25 per cent.
CIBC is forecasting the central bank will cut its key rate by two percentage points between now and the middle of next year.
The U.S. Federal Reserve is also expected on Wednesday to deliver its first interest rate cut in four years.
This report by The Canadian Press was first published Sept. 17, 2024.
FREDERICTON – New Brunswick‘s finance minister says the province recorded a surplus of $500.8 million for the fiscal year that ended in March.
Ernie Steeves says the amount — more than 10 times higher than the province’s original $40.3-million budget projection for the 2023-24 fiscal year — was largely the result of a strong economy and population growth.
The report of a big surplus comes as the province prepares for an election campaign, which will officially start on Thursday and end with a vote on Oct. 21.
Steeves says growth of the surplus was fed by revenue from the Harmonized Sales Tax and federal money, especially for health-care funding.
Progressive Conservative Premier Blaine Higgs has promised to reduce the HST by two percentage points to 13 per cent if the party is elected to govern next month.
Meanwhile, the province’s net debt, according to the audited consolidated financial statements, has dropped from $12.3 billion in 2022-23 to $11.8 billion in the most recent fiscal year.
Liberal critic René Legacy says having a stronger balance sheet does not eliminate issues in health care, housing and education.
This report by The Canadian Press was first published Sept. 16, 2024.
