Men work with a crane near a shopping mall in Beijing, on Jan. 17.Ng Han Guan/The Associated Press
China’s economy grew 5.2 per cent in 2023, slightly more than the official target, but the recovery was far shakier than many analysts and investors expected, with a deepening property crisis, mounting deflationary risks and tepid demand casting a pall over the outlook for this year.
Expectations that the world’s second-largest economy would stage a strong post-COVID bounce quickly fizzled as the year progressed, with weak consumer and business confidence, mounting local government debts and slowing global growth sharply weighing on jobs, activity and investment.
“The recovery from COVID – disappointing as it was – is over,” according to China Beige Book International’s latest survey released on Wednesday.
“Any true acceleration [this year] will require either a major global upside surprise or more active government policy,” the private data collector said.
A slew of economic readings early on Wednesday suggested it lost more momentum heading into the new year, despite a flurry of government support measures.
Gross domestic product (GDP) grew 5.2 per cent in October-December from a year earlier, data from the National Bureau of Statistics (NBS) data showed, quickening from 4.9 per cent in the third quarter but missing a 5.3 per cent forecast in a Reuters poll.
On a quarter-by-quarter basis, however, GDP grew 1.0 per cent, slowing from a revised 1.5 per cent gain in the previous quarter.
Some December indicators released along with the GDP data were more grim, suggesting the country’s protracted property crisis is deepening despite government efforts to prop up the sector.
Other data for last month showed retail sales growth slowed and investment remained tepid, with only industrial output showing some signs of improvement.
Policy insiders expect Beijing will maintain a similar growth target of around 5 per cent for this year, but analysts say that may be a tall order even with additional stimulus.
Cyclical problems such as the property crisis are colliding with deep-seated structural issues such as an overreliance on debt-fuelled investment and infrastructure, rather than steps to broaden and deepen consumption.
The head of NBS, Kang Yi, said at a news conference in Beijing that China’s 2023 growth was “hard won,” but added the economy faces a complex external environment and insufficient demand in 2024.
Stocks in China, already plumbing five-year lows, tumbled after the latest disappointing data as did Chinese firms listed in Hong Kong, while the yuan eased. The currency has come under fresh pressure recently as market expectations grow that policy makers will have to commit soon to more interest rate cuts and other support measures.
“At present, our country’s government debt level and inflation rate are both low, and the policy tool box is constantly being enriched,” NBS’s Mr. Kang said. “Fiscal, monetary and other policies have relatively large room for manoeuvring, and there are conditions and space for intensifying the implementation of macro policies.”
Analysts said stock market investors appeared most rattled by ominous real estate data on Wednesday.
China’s December new home prices fell at the fastest pace in nearly nine years, marking the sixth straight month of declines, NBS data showed. Property sales by floor area fell 8.5 per cent for the year while new construction starts plunged 20.4 per cent.
Debt-ridden developers have delayed construction on millions of homes according to economists’ estimates, further weighing on consumer confidence.
“I think markets were disappointed they didn’t cut interest rates on Monday, but it seems they are thinking about more targeted measures,” said Woei Chen Ho, economist at UOB.
“The property issues are not fixed by broad-based rate cuts.”
On Monday, the central bank left the medium-term policy rate unchanged, defying market expectations for a cut as pressure on the yuan continued to limit the scope of monetary easing.
“The piecemeal rollout of support from mid-year has done little to turn things around. It’s clear that China’s economy needs extra stimulus,” said Harry Murphy Cruise, economist at Moody’s Analytics.
“Direct support for households could be the crowbar needed to pry open wallets, but the prospect of such support has been a non-starter for officials in recent years. Instead, monetary easing and new debt issuance for infrastructure, energy and manufacturing projects look more likely.”
As businesses remained wary of adding workers in the face of many uncertainties, the nationwide survey-based jobless rate increased to 5.1 per cent in December from November’s 5.0 per cent, NBS data showed.
NBS also resumed the publication of youth unemployment data, which it had suspended for five months. The December survey-based jobless rate for 16-24 years olds, excluding college students, was at 14.9 per cent, compared with a record high of 21.3 per cent in June.
Recent data had suggested the economy was starting 2024 on shaky footing, with persistent deflationary pressures and a slight pickup in exports unlikely to kindle a quick turnaround in lacklustre factory activity. December bank lending was also weak.
“While we still anticipate some near-term boost from policy easing, this is unlikely to prevent a renewed slowdown later this year,” said Julian Evans-Pritchard, head of China Economics at Capital Economics.
“Although the government met its 2023 GDP growth target of ‘around 5.0 per cent,’ achieving the same pace of expansion in 2024 will prove a lot more challenging.”
Adding to concerns over China’s longer-term growth prospects, the country’s population fell for a second consecutive year in 2023. The total number of people in China dropped by 2.08 million to 1.409 billion in 2023, a faster decline than in 2022.
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.
