Taipei, Taiwan – China may be headed for negative economic growth in certain sectors and regions this year as it struggles with the worst economic indicators since the start of the pandemic, economic analysts have warned.
China’s Communist Party (CCP) has locked down tens of millions of people since the start of 2022 to contain the spread of the Omicron variant, severely impeding key economic sectors, including services and manufacturing.
The draconian measures have disrupted production at factories operated by firms from Foxconn to Tesla and Toyota, and crimped retail sales as millions have been forced to stay at home.
As Beijing warns against deviating from its controversial “dynamic Covid Zero” strategy, there are few signs of a respite from the economic bleeding on the horizon.
On Tuesday, WHO Director-General Tedros Adhanom Ghebreyesus said China’s strategy is not sustainable and a “shift would be very important,” in a rare public criticism of the country’s handling of the pandemic.
Shanghai, a key financial and manufacturing hub, has been under some form of lockdown since late March, while much of Beijing is at a standstill as authorities scramble to roll out increasingly strict controls to avoid a city-wide lockdown.
‘Worst set of numbers’
“The takeaway of what we’re seeing in China right now is hands down the worst set of numbers that we have seen in terms of economic performance since the initial downturn that took place in 2020,” Shehzad Qazi, managing director of China Beige Book, which surveys about 1,000 businesses in China each quarter, told Al Jazeera.
China Beige Book’s April results showed that revenue and margin growth had fallen across China’s manufacturing, retail, and services sectors, with new hiring returning to early pandemic levels and borrowing sharply down.
None of this bodes well for Beijing’s ambitious target of 5.5 percent gross domestic product (GDP) growth in 2022, said Qazi, as the pursuit of ‘zero COVID’ at all costs renders traditional economic tools, such as monetary stimulus, largely ineffective.
“Credit can only be put to use if you have normal economic activity, or you have businesses that are functioning,” Qazi said, adding that the CCP is “very limited in what it can do if you’re simultaneously forcing people to stay home”.
Far from adjusting the draconian pandemic strategy, authorities have in recent days tightened restrictions in Shanghai and Beijing. More than 373 million people across 45 cities were under some form of lockdown as of mid-April, according to an analysis by Japan’s Nomura Holdings.
Qazi said he expects the economy to shrink in the second quarter of 2022 if such measures continue, although a full-blown recession is less certain. China last reported a quarter of negative growth in April 2020 but has not experienced a recession — defined as two consecutive quarters of contraction — since the 1970s.
Even without a full-scale recession, lockdowns could create uneven growth between northern and southern China as well as among industries, said Gary Ng, Asia-Pacific economist for Natixis, a French investment and corporate bank.
“Even though it may not enter into a recession as a whole country, if we look at certain provinces, I wouldn’t be surprised to see negative growth for some of the provinces with strict lockdowns,” Ng told Al Jazeera.
China’s economy is slowing down as lockdowns in major cities, including Shanghai, weigh on growth [File: Qilai Shen/Bloomberg]
While Shenzhen, a manufacturing hub neighbouring Hong Kong, exited its lockdown earlier this year relatively unscathed as factories continued to operate, Ng said exporting the “Shanghai model” elsewhere could have serious economic ramifications.
Tommy Wu, lead economist for Oxford Economics in Hong Kong, said one particularly concerning metric is the effect of lockdowns on logistics and supply chains, with truck flow data at about 30 percent of normal levels.
Wu said he expects the disruptions to last through the second quarter of 2022 with a “ripple effect” on Asian and global supply chains and uneven growth across China’s economy.
“It’s not as bad as 2020, but this is still pretty significant, more significant than what we’ve seen over the past couple of years,” he said.
“I think the official statistics will still tell you a very weak growth … but I would say that there will be contraction at least in some sectors like consumption and also manufacturing.”
Beijing has called attention to growing economic risks in the lead-up to a key National Congress in October without acknowledging that its zero-tolerance policies have been anything less than successful.
This year’s party congress holds particular significance as Chinese leader Xi Jinping is set to seek an unprecedented third term in office.
At a Politburo meeting last month, China’s top leaders emphasized the importance of infrastructure spending and construction to economic recovery, despite the government’s efforts in recent years to reduce the huge debts on the balance sheets of state-run firms.
“China may actually trade off its deleveraging call with basically the short term economic growth in the short run,” said Ng, adding that loose monetary policy could also help companies weather the storm.
Natixis has estimated that for China to hit its 2022 GDP targets, infrastructure investment would need to grow by nearly 18 percent, harkening back to pre-2017 levels. Some of that growth has already started as infrastructure spending grew 8.5 percent in the first quarter compared with 2021, but it still has a way to go, the bank said.
On the consumption side, Ng authorities may look to reduce down payments and interest rates for first-time and even second-time homebuyers.
The real estate sector is expected to recover from a low point at the end of 2021 and the start of the year – when major companies like Evergrande defaulted on loans – while there are signs of a possible reprieve for beleaguered tech companies.
After Beijing launched a sweeping regulatory crackdown on the tech sector in 2020, imposing restrictions on data collection, service fees, and even app usage in pursuit of “common prosperity”, state media has in recent weeks flagged the need for greater support for the industry.
China Beige Book’s Qazi said the issue may return to the national agenda in 2023 or 2024, but for now, the CCP is focused on maximum stability and calm financial markets as it heads into its October meeting.
In the meantime, “zero COVID” appears here to stay.
Oxford Economics’s Wu said it may begin to shift towards a more “dynamic” definition of the strategy as Beijing finds itself both unable to admit defeat and also in need of economic recovery.
Under such an adjustment, provincial and city governments could start to gradually lift lockdowns by area as individual districts are cleared of COVID cases and relax more extreme measures, he said, while continuing with mass testing.
“This year, even though I think it’s really challenging to meet that [growth target], they will try as hard as possible,” Wu said. “It’s an important political year so it’s important for them to balance things out.”
Almost seven years since news broke of an alleged conspiracy to fix the price of packaged bread across Canada, the saga isn’t over: the Competition Bureau continues to investigate the companies that may have been involved, and two class-action lawsuits continue to work their way through the courts.
Here’s a timeline of key events in the bread price-fixing case.
Oct. 31, 2017: The Competition Bureau says it’s investigating allegations of bread price-fixing and that it was granted search warrants in the case. Several grocers confirm they are co-operating in the probe.
Dec. 19, 2017: Loblaw and George Weston say they participated in an “industry-wide price-fixing arrangement” to raise the price of packaged bread. The companies say they have been co-operating in the Competition Bureau’s investigation since March 2015, when they self-reported to the bureau upon discovering anti-competitive behaviour, and are receiving immunity from prosecution. They announce they are offering $25 gift cards to customers amid the ongoing investigation into alleged bread price-fixing.
Jan. 31, 2018: In court documents, the Competition Bureau says at least $1.50 was added to the price of a loaf of bread between about 2001 and 2016.
Dec. 20, 2019: A class-action lawsuit in a Quebec court against multiple grocers and food companies is certified against a number of companies allegedly involved in bread price-fixing, including Loblaw, George Weston, Metro, Sobeys, Walmart Canada, Canada Bread and Giant Tiger (which have all denied involvement, except for Loblaw and George Weston, which later settled with the plaintiffs).
Dec. 31, 2021: A class-action lawsuit in an Ontario court covering all Canadian residents except those in Quebec who bought packaged bread from a company named in the suit is certified against roughly the same group of companies.
June 21, 2023: Bakery giant Canada Bread Co. is fined $50 million after pleading guilty to four counts of price-fixing under the Competition Act as part of the Competition Bureau’s ongoing investigation.
Oct. 25 2023: Canada Bread files a statement of defence in the Ontario class action denying participating in the alleged conspiracy and saying any anti-competitive behaviour it participated in was at the direction and to the benefit of its then-majority owner Maple Leaf Foods, which is not a defendant in the case (neither is its current owner Grupo Bimbo). Maple Leaf calls Canada Bread’s accusations “baseless.”
Dec. 20, 2023: Metro files new documents in the Ontario class action accusing Loblaw and its parent company George Weston of conspiring to implicate it in the alleged scheme, denying involvement. Sobeys has made a similar claim. The two companies deny the allegations.
July 25, 2024: Loblaw and George Weston say they agreed to pay a combined $500 million to settle both the Ontario and Quebec class-action lawsuits. Loblaw’s share of the settlement includes a $96-million credit for the gift cards it gave out years earlier.
Sept. 12, 2024: Canada Bread files new documents in Ontario court as part of the class action, claiming Maple Leaf used it as a “shield” to avoid liability in the alleged scheme. Maple Leaf was a majority shareholder of Canada Bread until 2014, and the company claims it’s liable for any price-fixing activity. Maple Leaf refutes the claims.
This report by The Canadian Press was first published Sept. 19, 2024.
Companies in this story: (TSX:L, TSX:MFI, TSX:MRU, TSX:EMP.A, TSX:WN)
TORONTO – Canada’s main stock index was up more than 250 points in late-morning trading, led by strength in the base metal and technology sectors, while U.S. stock markets also charged higher.
The S&P/TSX composite index was up 254.62 points at 23,847.22.
In New York, the Dow Jones industrial average was up 432.77 points at 41,935.87. The S&P 500 index was up 96.38 points at 5,714.64, while the Nasdaq composite was up 486.12 points at 18,059.42.
The Canadian dollar traded for 73.68 cents US compared with 73.58 cents US on Thursday.
The November crude oil contract was up 89 cents at US$70.77 per barrel and the October natural gas contract was down a penny at US2.27 per mmBTU.
The December gold contract was up US$9.40 at US$2,608.00 an ounce and the December copper contract was up four cents at US$4.33 a pound.
This report by The Canadian Press was first published Sept. 19, 2024.
VANCOUVER – Supervised injection sites are saving the lives of drug users everyday, but the same support is not being offered to people who inhale illicit drugs, the head of the BC Centre for Excellence in HIV/AIDS says.
Dr. Julio Montaner said the construction of Vancouver’s first indoor supervised site for people who inhale drugs comes as the percentage of people who die from smoking drugs continues to climb.
The location in the Downtown Eastside at the Hope to Health Research and Innovation Centre was unveiled Wednesday after construction was complete, and Montaner said people could start using the specialized rooms in a matter of weeks after final approvals from the city and federal government.
“If we don’t create mechanisms for these individuals to be able to use safely and engage with the medical system, and generate points of entry into the medical system, we will never be able to solve the problem,” he said.
“Now, I’m not here to tell you that we will fix it tomorrow, but denying it or ignoring it, or throw it under the bus, or under the carpet is no way to fix it, so we need to take proactive action.”
Nearly two-thirds of overdose deaths in British Columbia in 2023 came after smoking illicit drugs, yet only 40 per cent of supervised consumption sites in the province offer a safe place to smoke, often outdoors, in a tent.
The centre has been running a supervised injection site for years which sees more than a thousand people monthly and last month resuscitated five people who were overdosing.
The new facilities offer indoor, individual, negative-pressure rooms that allow fresh air to circulate and can clear out smoke in 30 to 60 seconds while users are monitored by trained nurses.
Advocates calling for more supervised inhalation sites have previously said the rules for setting up sites are overly complicated at a time when the province is facing an overdose crisis.
More than 15,000 people have died of overdoses since the public health emergency was declared in B.C. in April 2016.
Kate Salters, a senior researcher at the centre, said they worked with mechanical and chemical engineers to make sure the site is up to code and abidies by the highest standard of occupational health and safety.
“This is just another tool in our tool box to make sure that we’re offering life-saving services to those who are using drugs,” she said.
Montaner acknowledged the process to get the site up and running took “an inordinate amount of time,” but said the centre worked hard to follow all regulations.
“We feel that doing this right, with appropriate scientific background, in a medically supervised environment, etc, etc, allows us to derive the data that ultimately will be sufficiently convincing for not just our leaders, but also the leaders across the country and across the world, to embrace the strategies that we are trying to develop.” he said.
Montaner said building the facility was possible thanks to a single $4-million donation from a longtime supporter.
Construction finished with less than a week before the launch of the next provincial election campaign and within a year of the next federal election.
Montaner said he is concerned about “some of the things that have been said publicly by some of the political leaders in the province and in the country.”
“We want to bring awareness to the people that this is a serious undertaking. This is a very massive investment, and we need to protect it for the benefit of people who are unfortunately drug dependent.” he said.
This report by The Canadian Press was first published Sept. 18, 2024.
