When Group of 20 officials meet this week, those representing Chinese President Xi Jinping have some serious explaining to do about a “zero-Covid” policy threatening the global economy.
Wednesday’s confab in Washington takes place on the sidelines of the spring sessions of the International Monetary Fund and the World Bank. It comes as the latter institution cuts its prediction for global growth in 2022 to 3.2% from 4.1%. Most of the downshift reflects fallout from the war in Ukraine. But some of it will bear Beijing’s fingerprints, too.
For weeks now, economists everywhere worried that sticking with China’s Covid absolutism was a headwind the global system scarcely needs. A zero-case strategy that worked wonders in 2020 is no match for Omicron and more transmissible variants to come. Worse, it’s backfiring on Asia’s biggest economy, on which the region is relying to drive recovery efforts.
Fresh lockdowns in Shenzhen, Shanghai and elsewhere are reaching a critical mass. They mean that roughly 400 million people across 45 mainland cities are under full or partial lockdown, notes economist Lu Ting at Nomura Holdings. Lu says we’re talking about roughly 40% of Chinese gross domestic product, or about $7.2 trillion.
“Global markets may still underestimate the impact, because much attention remains focused on the Russian-Ukraine conflict and U.S. Federal Reserve rate hikes,” Lu says.
New data are a reality check for G-20 officials who have a rare chance this week to put China on the spot, if they dare. On the surface, China had a solid first quarter, with a 4.8% jump in GDP after a 4% rise in the October-December quarter. But a 3.5% drop in retail sales in March from a year ago is precisely the lockdown-related downshift economists feared.
The same with the modest 5% growth rate for factory output, a marked slowdown from January and February. Imports, too, disappointed in March, highlighting the global feedback effects from China’s government stubbornly sticking with the “zero-Covid” plan.
If G-20 officials did their jobs, they’d be expressing their concerns to their Chinese counterparts.
U.S. President Joe Biden addresses a press conference at the end of the G20 of World Leaders Summit on October 31, 2021 at the convention center “La Nuvola” in the EUR district of Rome.
BRENDAN SMIALOWSKI/AFP via Getty Images
This goes, too, for calling U.S. officials to account. Surely, there are valid reasons to question why Fed Chairman Jerome Powell’s team is so laid back about U.S. inflation surging to 40-year highs. Or why democracies like India think there’s no reputational risk to sending Vladimir Putin’s Russia billion-dollar checks for oil and gas. Or whether Moscow deserves to stay in the G-20.
Yet China’s inward focus is a growing headwind. For Xi, the next several months are all about his norm-smashing power grab. This is the year he secures an unprecedented third term as Chinese Communist Party leader. Xi’s linear focus on that prize above all else could be a bigger problem than Asian neighbors may realize.
Blame it on pride, reckons economist Nancy Qian at Northwestern University. Xi’s nation of 1.4 billion people reveled in China’s 2020 success in taming the pandemic, a performance that helped the economy lead the globe back to growth in 2021. Yet, Qian argues, that win made Xi’s inner circle reluctant to pivot to other strategies in the Omicron phase of the pandemic.
The answer, Qian argues, is for Xi’s inner circle to “change their public messaging to manage expectations.” That includes preparing the masses for living with the virus—and accepting more infections, deaths and vaccination boosters. Adopting a more flexible strategy could help boost domestic confidence and retail sales in China’s $13 trillion economy, increasing its role as a growth engine.
In March, for example, China’s exports increased 15.7% year-on-year, while imports were effectively flat. The disconnect means that demand inside China was disappointing even as the lockdowns spooking world markets—and worrying G-20 nations—were just beginning.
There are steps China could take to get as close to this year’s 5.5% growth target as possible. The People Bank of China could slash its 2.85% one-year policy loan rate or announce bigger cuts in reserve requirement ratios. Beijing could enact tax cuts, as Premier Li Keqiang suggested. Xi’s team could incentivize municipal governments to stimulate growth via bond sales.
Of course, any of these steps might undo Beijing’s efforts in recent years to reduce leverage in the economy, particularly among giant property developers. Arguably, nothing would revive things faster and more broadly than dropping the Covid absolutism undermining household and business demand.
Will Xi have the foresight to do that? Or the confidence to change gears in ways he’s avoided for several months now? These are among the questions G-20 officials should be posing to China’s representatives in Washington this week.
The Canadian Institute for Health Information says health-care spending in Canada is projected to reach a new high in 2024.
The annual report released Thursday says total health spending is expected to hit $372 billion, or $9,054 per Canadian.
CIHI’s national analysis predicts expenditures will rise by 5.7 per cent in 2024, compared to 4.5 per cent in 2023 and 1.7 per cent in 2022.
This year’s health spending is estimated to represent 12.4 per cent of Canada’s gross domestic product. Excluding two years of the pandemic, it would be the highest ratio in the country’s history.
While it’s not unusual for health expenditures to outpace economic growth, the report says this could be the case for the next several years due to Canada’s growing population and its aging demographic.
Canada’s per capita spending on health care in 2022 was among the highest in the world, but still less than countries such as the United States and Sweden.
The report notes that the Canadian dental and pharmacare plans could push health-care spending even further as more people who previously couldn’t afford these services start using them.
This report by The Canadian Press was first published Nov. 7, 2024.
Canadian Press health coverage receives support through a partnership with the Canadian Medical Association. CP is solely responsible for this content.
As Canadians wake up to news that Donald Trump will return to the White House, the president-elect’s protectionist stance is casting a spotlight on what effect his second term will have on Canada-U.S. economic ties.
Some Canadian business leaders have expressed worry over Trump’s promise to introduce a universal 10 per cent tariff on all American imports.
A Canadian Chamber of Commerce report released last month suggested those tariffs would shrink the Canadian economy, resulting in around $30 billion per year in economic costs.
More than 77 per cent of Canadian exports go to the U.S.
Canada’s manufacturing sector faces the biggest risk should Trump push forward on imposing broad tariffs, said Canadian Manufacturers and Exporters president and CEO Dennis Darby. He said the sector is the “most trade-exposed” within Canada.
“It’s in the U.S.’s best interest, it’s in our best interest, but most importantly for consumers across North America, that we’re able to trade goods, materials, ingredients, as we have under the trade agreements,” Darby said in an interview.
“It’s a more complex or complicated outcome than it would have been with the Democrats, but we’ve had to deal with this before and we’re going to do our best to deal with it again.”
American economists have also warned Trump’s plan could cause inflation and possibly a recession, which could have ripple effects in Canada.
It’s consumers who will ultimately feel the burden of any inflationary effect caused by broad tariffs, said Darby.
“A tariff tends to raise costs, and it ultimately raises prices, so that’s something that we have to be prepared for,” he said.
“It could tilt production mandates. A tariff makes goods more expensive, but on the same token, it also will make inputs for the U.S. more expensive.”
A report last month by TD economist Marc Ercolao said research shows a full-scale implementation of Trump’s tariff plan could lead to a near-five per cent reduction in Canadian export volumes to the U.S. by early-2027, relative to current baseline forecasts.
Retaliation by Canada would also increase costs for domestic producers, and push import volumes lower in the process.
“Slowing import activity mitigates some of the negative net trade impact on total GDP enough to avoid a technical recession, but still produces a period of extended stagnation through 2025 and 2026,” Ercolao said.
Since the Canada-United States-Mexico Agreement came into effect in 2020, trade between Canada and the U.S. has surged by 46 per cent, according to the Toronto Region Board of Trade.
With that deal is up for review in 2026, Canadian Chamber of Commerce president and CEO Candace Laing said the Canadian government “must collaborate effectively with the Trump administration to preserve and strengthen our bilateral economic partnership.”
“With an impressive $3.6 billion in daily trade, Canada and the United States are each other’s closest international partners. The secure and efficient flow of goods and people across our border … remains essential for the economies of both countries,” she said in a statement.
“By resisting tariffs and trade barriers that will only raise prices and hurt consumers in both countries, Canada and the United States can strengthen resilient cross-border supply chains that enhance our shared economic security.”
This report by The Canadian Press was first published Nov. 6, 2024.
OTTAWA – Statistics Canada says the country’s merchandise trade deficit narrowed to $1.3 billion in September as imports fell more than exports.
The result compared with a revised deficit of $1.5 billion for August. The initial estimate for August released last month had shown a deficit of $1.1 billion.
Statistics Canada says the results for September came as total exports edged down 0.1 per cent to $63.9 billion.
Exports of metal and non-metallic mineral products fell 5.4 per cent as exports of unwrought gold, silver, and platinum group metals, and their alloys, decreased 15.4 per cent. Exports of energy products dropped 2.6 per cent as lower prices weighed on crude oil exports.
Meanwhile, imports for September fell 0.4 per cent to $65.1 billion as imports of metal and non-metallic mineral products dropped 12.7 per cent.
In volume terms, total exports rose 1.4 per cent in September while total imports were essentially unchanged in September.
This report by The Canadian Press was first published Nov. 5, 2024.
