China last year narrowly beat its economic growth target of 5 percent, one of its lowest benchmarks in decades. Looking ahead, analysts expect the economy to face stiff headwinds in the Year of the Dragon.
Against the backdrop of a crisis-stricken property market, subdued export earnings and crackdowns on private industry, international investors are pulling out of Chinese stocks at record rates.
With business sentiment faltering, economists broadly agree that Beijing needs to roll out measures to stimulate more domestic consumption.
While some analysts are calling for radical measures to jolt China’s economy, expectations are subdued owing to Beijing’s aversion to broad-based social spending.
Others see grounds for optimism beyond the current strains.
China is experiencing its longest deflationary run since the 2008 Global Financial Crisis. Consumer prices fell in January for a fourth straight month and declines look likely to extend into 2024.
“China didn’t see the boost most people expected after COVID restrictions were removed in late 2022,” Kevin P Gallagher, the director of the Boston University Global Development Policy Centre, told Al Jazeera.
“Authorities are now keenly aware of the threat of falling prices.”
Falling prices risk turning into a self-reinforcing cycle if households and businesses postpone purchases in the hope that goods will keep getting cheaper.
Deflation also squeezes debtors as the real cost of borrowed money rises.
In China, where the debt-to-GDP (gross domestic product) ratio, including local government liabilities, reached 110 percent in 2022, that poses a growing headache for policymakers.
In recent months, authorities have ramped up support measures to try and stem falling prices – mortgage rates on home purchases have been lowered and banks have been allowed to hold smaller cash reserves to spur increased lending.
China’s real-estate sector accounts for 20-30 percent of GDP [Andy Wong/AP]
Much of China’s deflationary woes can be traced back to its beleaguered real-estate sector, which accounts for 20-30 percent of GDP.
After the 2008 Global Financial Crisis, local governments encouraged a debt-fuelled construction boom to boost growth. But after decades of rapid urbanisation, housing supply has run ahead of demand.
Amid several high-profile developer defaults, including the failure of Evergrande Group, new home sales fell by 10-15 percent in China last year, according to the Fitch Ratings agency.
In turn, Chinese households have become cautious about spending money, especially on property, while a weak social safety net encourages families to save for emergencies.
In 2022, household consumption accounted for just 38 percent of China’s GDP.
By comparison, private spending made up 68 percent of the GDP in the United States that same year.
“Households ran down savings during the pandemic,” Sheana Yue, a China economist at Capital Economics, told Al Jazeera. “The real-estate crash undermined consumer confidence even further. China also has an ageing population and, typically, spending declines with age.”
The upshot is that gross national savings exceeded 40 percent in 2023, more than double the US level.
“Looking ahead, getting people to spend their savings won’t be easy. For decades, economists have encouraged the government to rebalance the economy away from investment in favour of consumption,” Yue said.
At 42 percent of GDP, China’s rate of investment dwarfs that of other emerging economies, let alone advanced economies – which average 18-20 percent. In addition to housing stock, Beijing has invested heavily in roads, bridges and train lines.
As with housing, however, years of over-investment have resulted in spare capacity. Revenues at China Railway, for instance, regularly fall short of costs. At the end of 2022, the state-backed agency was 6.11 trillion yuan ($886bn) in debt.
“We’re seeing the limitations of China’s capital-intensive infrastructure model,” Yue said.
“And given that interest rates are already quite low, Beijing will need to start stimulating consumption to generate high and stable growth.”
Yue said policymakers should remove incentives to hoard savings by spending more on education, healthcare and pension provisions.
Analysts expect the National People’s Congress, China’s rubber-stamp parliament, to again set an annual growth target of about 5 percent when it meets in March.
While many economists have exhorted Beijing to stimulate growth through household transfers, Victor Shih, an expert on the Chinese economy at the University of California, San Diego, expects investment-driven growth to continue to hold sway.
“Marxist ideology, which valorises industrial production, remains the fundamental basis for policymaking in Beijing,” Shih told Al Jazeera.
“In all likelihood, the government will continue to subsidise manufacturing. Consumption, by contrast, is viewed as indulgent.”
Shih added: “There are 1.4 billion people in China, so comprehensive social assistance would be extremely expensive, especially in a deflationary context.”
Shih said Beijing could raise household consumption by urging companies to pay higher wages but that “China’s manufacturing edge is partly based on subdued worker income”.
As such, “higher wages would undermine Chinese exports, which is an important source of output”, he said.
“I don’t think the government will shift budgetary priorities in favour of the Chinese people… which will likely result in a period of economic weakness.”
Separately, Beijing has other strategic priorities, said Gary Ng, a senior Asia Pacific economist at Natixis in Hong Kong.
“President Xi [Jinping] appears less keen on stimulating rapid growth than he is on optimising the economy for security and resilience,” Ng told Al Jazeera.
By moulding industrial policy on the basis of national security, Beijing has set its sights on reducing its reliance on foreign technology and supporting its long-term geopolitical ambitions.
At the same time, Ng said, “Beijing has shown a new willingness to invest in more consumer-facing tech sectors, like renewable energy and electric vehicles.”
“Unlike property, these industries have the capacity to create jobs and promote economic self-sufficiency,” he said.
Ng also stressed that economic transformation takes time and that “there’s no magic pill for lightning-quick growth”.
“Investment in high-tech sectors should, slowly, reform China’s economic base,” he said. “Incidentally, private consumption is already on an upward trend.”
Gallagher, of Boston University, said China’s economic growth trajectory is healthier than sometimes portrayed.
“It’s easy to forget about China’s economic development since the 1990s. Growth has slowed from high levels lately but it still tallied at 5.2 percent last year,” Gallagher said. “Forecasts are equally solid for this year.”
“Hawks have been predicting the demise of China’s growth model for decades,” Gallagher added. “It is true, however, that to build on China’s remarkable success, Beijing has to shake off its timidity about the investment-consumption pivot.”
Gallagher said 2024 is likely to underscore the urgency of reform.
“If [US presidential candidate] Donald Trump is re-elected and chooses to engage in a new trade war, Beijing will want to be more self-reliant. The Year of the Dragon could be ideal for China to step up its efforts to unleash domestic consumption.”
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.
