(Bloomberg) — China’s pledges for more economic support are mounting as a worsening Covid outbreak and efforts to contain infections threaten to upend global supply chains and push a critical government growth target out of reach.
President Xi Jinping has made clear he’s sticking with China’s strict Covid Zero strategy, which involves locking down entire cities and provinces to eliminate community spread of the virus. To limit the disruption to the economy though, Beijing is taking a number of supportive steps, from central bank aid and tax cuts, to measures that allow factories to keep running.
With outbreaks in places like the trade and financial hub Shanghai becoming difficult to control, it’s unclear how effective those initiatives will be. Several economists have already downgraded their gross domestic product growth forecasts for the year to 5% or less — well below the government’s target of about 5.5%.
Here’s a look at several of the measures announced or taken in recent months:
Factory Bubbles
As some major manufacturing hubs have locked down across China to contain the virus, many companies have turned to so-called closed loop systems, or factory bubbles, to keep production humming, a plan endorsed by government officials who have laid out rules for how to resume work with minimal risk of Covid spread.
Such bubbles allow businesses to operate by letting employees live and work on site, so they can avoid running afoul of movement restrictions. The workers are regularly tested and subject to strict hygiene rules intended to keep Covid out of the factories. Governments have been encouraging companies to make plans for closed-loop management, most notably in Shanghai where lockdowns have stretched for weeks and are hampering production.
But those systems aren’t perfect, as companies run short of logistics and workers. Tesla Inc., for example, only has inventory for just over two weeks based on its new closed-loop schedule, while workers locked in Volkswagen AG’s Shanghai factory don’t have sufficient supply of the auto parts needed to make cars.
Eliminating Checkpoints
China’s Ministry of Transport tried this month to solve logistics snags by ordering that no Covid testing checkpoints be set up in the main lanes of highways. The ministry called for a relaxation of mobility restrictions for logistics workers at checkpoints at other locations along the roads during the outbreak, as trucking services have been battered by road closures and cumbersome Covid requirements.
Read More: Why China Is Sticking With Its Covid Zero Strategy: QuickTake
Trucks dominate China’s local transportation, hauling about three-quarters of total freight, according to data from the transport ministry. But Covid Zero orders are creating difficult conditions for the truckers themselves, as drivers have been hampered by the need to undergo compulsory mass testing being conducted in cities like Shanghai, along with the need to show negative Covid results at multiple checkpoints.
Possible Exemptions
Top Chinese authorities have also promised stronger measures to stabilize supply chains, including extra help for qualified firms to ensure they can stay open amid Covid controls.
The government will establish “white lists” of companies in sectors including automobiles, semiconductors, consumer electronics, food, equipment manufacturing and medicine and foreign trade, according to a recent state media readout of a meeting attended by Vice Premier Liu He and chaired by State Councilor Xiao Jie.
The report in the official Xinhua News Agency didn’t provide more details, although a similar “white list” of companies in Shanghai was disclosed late last week allowing companies to make plans to resume production.
Reduced Quarantine
China has started trialing looser quarantine requirements in some cities, including Shanghai and Guangzhou.
Eight cities last week reduced the quarantine period for overseas travelers and those who’ve had close contact with infected individuals to 10 days from 14 days, as part of a month-long trial, according to people familiar with the matter.
Apartment complexes, retail outlets, office buildings and other locations locked down because of infections will also be allowed to open after 10 consecutive days without a positive test result, shortened from the 14 days previously required, the people said.
PBOC Measures
The People’s Bank of China has rolled out several announcements in recent weeks, though its actions have so far indicated restraint.
The PBOC detailed 23 measures and other promises largely focused on boosting lending and providing financial support to industries that are suffering from virus-related restrictions. The list included guidance for banks to extend more loans, along with references to the PBOC’s relending program. That program, which provides funds for banks to lend to sectors in need, is expected to lead to 1 trillion yuan ($157 billion) in additional bank loans.
Earlier this month, the central bank gave lenders a modest cash boost by reducing the reserve requirement ratio — the amount of money banks have to keep in reserve — for most banks by 25 basis points. The ratio was dropped by 50 basis points for smaller lenders. However, the PBOC left its one-year policy interest rate unchanged. And Chinese banks just maintained their lending rates for a third month.
Stabilizing Property
Along with ongoing guidance from the People’s Bank of China for banks to step up lending, more cities have relaxed home purchase and mortgage rules since policy makers vowed in mid-March to prevent a “disorderly collapse” in the property market.
More than 60 municipal authorities loosened housing regulations in the first quarter. They include four provincial capital cities that abandoned signature restrictions on how many residences each household can own and how long they should hold properties before selling them.
Read More: PBOC Says Banks Should Help Homeowners Hurt by Covid
Banks in more than 100 cities have lowered mortgage rates by 20 to 60 basis points since March, the head of the central bank’s financial market department Zou Lan said at a briefing last week. There was a rebound in medium- and long-term loans to households, which are a proxy for mortgages, in March from a contraction in February, though the actual value was still lower than a year earlier.
China’s largest banks are also allowing residents in Shanghai to delay their mortgage payments as the city’s outbreak continues.
Services Incentives
China’s government in February said it would refund up to 90% of unemployment insurance premiums paid in the previous year to small services companies that don’t fire employees or minimize layoffs. That was up from a previous 60% ratio, according to an announcement at the time from the National Development and Reform Commission, the state economic planner.
The commission also said a policy of a temporary reduction of unemployment insurance and work-related injury insurance rates will be extended in 2022, and that provinces with relatively large balances in these insurance funds could delay collection of premium payments from catering, retailing and tourism companies for no longer than a year.
Tax Relief
China has promised on several recent occasions to reduce the burden on its taxpayers, another measure of economic relief.
Beijing in March announced 2.5 trillion yuan in tax cuts, more than double the size of 2021 and the fifth year of such reductions. The central bank at that time also said it would send more than 1 trillion yuan in profits to the finance ministry to help pay for tax rebates and other government expenses.
Since March, regions that have been hit by the outbreak have announced several measures to help taxpayers, including permitting companies to delay or reduce social security and housing fund payments. Some regions have also postponed tax reporting, exempted small businesses from paying rent on state-owned property for several months, and offered temporary subsidies for corporate expenses on things like power and water.
OTTAWA – Canada’s unemployment rate held steady at 6.5 per cent last month as hiring remained weak across the economy.
Statistics Canada’s labour force survey on Friday said employment rose by a modest 15,000 jobs in October.
Business, building and support services saw the largest gain in employment.
Meanwhile, finance, insurance, real estate, rental and leasing experienced the largest decline.
Many economists see weakness in the job market continuing in the short term, before the Bank of Canada’s interest rate cuts spark a rebound in economic growth next year.
Despite ongoing softness in the labour market, however, strong wage growth has raged on in Canada. Average hourly wages in October grew 4.9 per cent from a year ago, reaching $35.76.
Friday’s report also shed some light on the financial health of households.
According to the agency, 28.8 per cent of Canadians aged 15 or older were living in a household that had difficulty meeting financial needs – like food and housing – in the previous four weeks.
That was down from 33.1 per cent in October 2023 and 35.5 per cent in October 2022, but still above the 20.4 per cent figure recorded in October 2020.
People living in a rented home were more likely to report difficulty meeting financial needs, with nearly four in 10 reporting that was the case.
That compares with just under a quarter of those living in an owned home by a household member.
Immigrants were also more likely to report facing financial strain last month, with about four out of 10 immigrants who landed in the last year doing so.
That compares with about three in 10 more established immigrants and one in four of people born in Canada.
This report by The Canadian Press was first published Nov. 8, 2024.
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.
