China’s mediocre economic growth, paired with the issue’s neglect during the recent 20th National Congress of the Chinese Communist Party, has raised concerns about the country’s lack of attention to economic policy.
According to experts, that disregard by the world’s second-largest economy could have a damaging impact on Canadian business and beyond.
China announced on Monday that its gross domestic product had risen 3.9 per cent in the third quarter compared with the same period a year earlier. The figure fell below Beijing’s 5.5 per cent growth target and well behind the eight per cent experts say is required to support future population and economic growth in China.
Beijing had delayed releasing its GDP data on Oct. 18, the second day of the party’s congress. It’s likely that Beijing wanted to keep economic growth and its consequences out of the headlines during the congress, which ended on Oct. 22, said John Gruetzner, co-founder of Asia-focused business advisory firm Intercedent and a fellow with the Canadian Global Affairs Institute.
The weeklong party congress, held twice a decade to appoint new leaders, assess the constitution and affirm China’s ideological orientation, is perhaps the most significant event on the Chinese Communist Party’s calendar. It ended with President Xi Jinping securing an unprecedented third term as party leader, presiding over a cabinet loyal to his ambitions of consolidating power, deterring opposition and extending term limits.
A man standing at a public display case reads newspaper coverage of the 20th Communist Party Congress, in Beijing on Monday. The weeklong party congress, held twice a decade, is perhaps the most significant event on the party’s calendar. (Thomas Peter/Reuters)
Canada’s exports to China rose in 2021
Withholding data that’s as significant to trade relations as GDP was “pretty much unprecedented for any major trading country,” said Charles Burton, a senior fellow at the Macdonald-Laurier Institute, a former counsellor at the Canadian Embassy in China and an associate professor of Chinese and comparative politics at Brock University in St. Catharines, Ont., until 2020.
“I’m not sure what signal China’s sending to global trading partners by not providing us with the normal kind of interaction we would expect, which would be a statement of China’s economic prospects,” Burton said prior to the GDP release.
China’s 3.9 per cent third-quarter growth was a bounceback from spring’s measly growth of 0.4 per cent. In the end, “the number came back stronger than many had anticipated, including us,” said Andrew Hencic, senior economist with TD Bank. Its economists had estimated growth of 2.8 per cent.
New vehicles ready for export are parked at a dockyard in Yantai, in eastern China’s Shandong province, on Oct. 13. China’s 3.9 per cent GDP growth in the third quarter was a big improvement from spring’s sluggish growth of 0.4 per cent. (Chinatopix/The Associated Press)
“Looking forward, we’ll see to what extent that moment can be carried through,” Hencic said. That’s especially true as countries around the world, including Canada, are anxious to see whether, to their detriment, Xi will place national security and politics ahead of economic performance.
“It’s clear that over a period of time, one-party states ultimately tend to hit a wall,” Gruetzner said. “If you don’t have multiple inputs into your economic and social policy, you’re ultimately going to have an economic growth problem.”
Canada counts China as its third-most valuable trading partner, behind the United States and the European Union, but second if EU countries were counted individually. Canada’s exports to China grew steadily throughout 2021 to $28.8 billion, according to the University of Alberta — the highest amount since before the COVID-19 pandemic and $10 billion more than was exported in 2016.
The agriculture, meat, paper and mining industries, which drive Canadian exports to China, must be cognizant of how GDP slowdowns might impact their investments in China’s economy, Gruetzner said.
Miners work underground at Vale’s Thompson mine in northern Manitoba. Along with the mining industry, agriculture, meat and paper drive Canadian exports to China. Canada counts China as its third-most valuable trading partner, behind the United States and the European Union. (Katie Nicholson/CBC)
Iron ore, oil, coal and copper prices, in particular, react “very, very quickly” to shifts in Chinese GDP growth, he said. “There’s a whole portion of the Canadian economy that requires China to have the demand. Certainly in the western provinces.”
Share prices in Canadian fertilizer company Nutrien, based in Saskatoon, and Teck Resources Ltd., an agricultural feed developer and metals company headquartered in Vancouver, both saw dips on the Toronto Stock Exchange the day of China’s GDP release ($113.07 to $108.33, and $48.05 to $46.95, respectively).
GDP growth in China faces obstacles
China’s zero-COVID policy and housing crisis have continued to hold back the world’s second-largest economy from a full economic recovery post-pandemic, Burton said. Both will likely impact China’s export-oriented economy and “could be quite disturbing for Canadian business and the global economy in general,” he said.
Although Beijing’s zero-COVID policy has kept total infections in the country of 1.4 billion people to just over one million, it’s hampered the efficiency of China’s ports, decommissioned half of its highways and instituted a total shutdowns of cities that together account for 40 per cent of China’s GDP, according to a report from Alicia Garcia Herrero, the chief economist for Asia-Pacific at French investment bank Natixis.
China strengthened its commitment to the zero-COVID policy this week, sealing buildings, locking down districts and placing millions at home as the country on Friday reported 1,000-plus cases for three consecutive days.
People wearing face masks stand in line at a COVID-19 testing site in Beijing on Oct. 12. Although China’s zero-COVID policy has kept cases relatively low in the country of 1.4 billion people, it’s come at the expense of the economy. (Mark Schiefelbein/The Associated Press)
China’s housing sector is also in the midst of a serious crisis. A lack of government funds has led to several delays in housing construction, and Chinese borrowers who paid for their homes in advance have been left without their investment, Burton said. Local governments in China traditionally fund operations through land auctions and have felt the consequences in their coffers.
Were Chinese economic growth to stay below eight per cent, there would be consequences for the country’s ability to meet its more than $9 trillion US debt obligations, as well as youth unemployment, Gruetzner said.
Reports from China’s 20th Communist Party Congress suggest that the government will nonetheless prioritize national security and military growth in the face of U.S. competition ahead of focusing attention on the economy for its own sake and that of its trading partners, Burton said.
WATCH | China’s leader calls for military growth at Communist Party Congress:
Xi kicks off Communist Party Congress, calls for China’s military growth
13 days ago
Duration 3:25
China’s Communist Party kicked off its 20th Congress in Beijing, with President Xi Jinping calling for faster military growth. Xi also touted his government’s COVID-19 policies and refused to rule out the use of force against Taiwan.
China is on record as wanting to redirect its agricultural and commodity imports away from Western suppliers and toward those in South America and Africa, Gruetzner said.
Burton said both should be a consideration for Canada as it openly reassess trade relationships in the region.
Workers wearing face masks ride on tricycle carts loaded with goods in Beijing last month. China’s zero-COVID policy and housing crisis have continued to hold back the world’s second-largest economy from a full economic recovery post-pandemic, one analyst says. (Andy Wong/The Associated Press)
Canada plans to release Indo-Pacific policy
During a speech in Washington, D.C., on Oct. 12, Deputy Prime Minister Chrystia Freeland suggested Western democratic countries prioritize free trade with one another and limit opportunities for states actively working against their values. Governance in Russia and China, for example, has become increasingly consolidated and autocratic.
Those considerations could be a feature of the upcoming Indo-Pacific policy statement, which Canada’s minister of foreign affairs, Mélanie Joly, said would be released following the Chinese party congress and before the end of the year.
Mélanie Joly, Canada’s minister of foreign affairs, right, and U.S. Secretary of State Antony Blinken speak at the federal government’s official guest house in Ottawa on Thursday. Joly announced that Canada plans to seek membership to the Indo-Pacific Economic Framework for Prosperity. (Blair Gable/Pool/The Associated Press)
“In the coming decades, developments in the Indo-Pacific region will have profound impacts on the lives of Canadians from coast to coast to coast,” Joly said in a news release, adding that Canada is committed to strengthening its presence in the region.
“There will be a strong section on implications for the economy” within the coming policy statement, Burton said. “A lot of businesses would like to see what the government’s intentions are before they consider their choices with regard to investment in China.”
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.
