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China Targets 'Reasonable' Monetary Policy as Economy Recovers – BNN

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(Bloomberg) — China said it will implement “reasonable” monetary policy next year and ensure fiscal plans are “sustainable,” signaling it will limit its stimulus measures as the economy continues to recover.

The comments were published by state media Friday after the Communist Party’s annual Central Economic Work Conference. The ruling party uses the event to set its policy framework for the coming year, with analysts expecting a renewed focus in 2021 on slowing the pace of debt growth and insulating the economy from tensions with the U.S.​

The language around monetary and fiscal policy was a change from earlier guidance, indicating a more measured approach to stimulus in 2021 after this year’s boost. At the same time, authorities vowed there wouldn’t be a quick reversal as the economy’s rebound “is not yet solid.”

China should “maintain necessary support” for the recovery, “make policy operations more precise and effective” and “make no sharp turn,” the conference decided.

The ruling party is expected to flesh out details of its policies and publish more precise targets when the National People’s Congress meets, usually in March.

China is the only major economy expected to grow this year, thanks to its effective control of the coronavirus and fiscal and monetary stimulus. The recovery so far has relied on surging property and state-led infrastructure investment, with private-sector manufacturing investment and household consumption lagging behind last year’s levels.

Goldman Sachs Group Inc. economists, led by Zhennan Li, see the fiscal deficit target returning to 3% of gross domestic product from 3.6% this year and credit growth slowing.

“Although cyclical policy would normalize next year from this year’s significant expansionary stance, we believe the likelihood of a “policy cliff” is low and the government would be mindful of the timing and magnitude of exit/reduction of policy support,” they said.

Read More: China’s Central Bank Going It Alone Spurs an Influx of Capital

Debt Ratio

With the growth forecast to accelerate to more than 8% in 2021 from 2% this year, Beijing is turning its focus once again on reducing risks in the economy as debt soars.

The government will aim to “keep the macro-leverage ratio basically stable” next year, according to state media. Authorities will also seek to slow the growth in money supply and aggregate financing to match the expansion of nominal economic growth, which should keep the ratio of debt to gross domestic product about the same level as now.

Houze Song, a research fellow at the Paulson Institute, said the latest policy signal from the economic work conference is “growth negative.”

“Local government debt is back to the top of Beijing’s agenda,” he said. “Since local expenditure accounts for the majority of fiscal support, fiscal consolidation at local level will be a significant drag on growth next year.”

Beijing’s aim to increase technological self-sufficiency following tensions with Washington was clear from the statement, with increasing “strategic scientific and technological strength” listed as next year’s most important economic task. That was followed by increasing “independent control” over supply chains, particularly for key technologies where “choke points” exist.

Other highlights from the statement:

  • Strengthen the capacity of the state’s strategic technology, improve self-reliance and control over industrial and supply chains
  • Expand domestic demand, including by improving social security policies
  • Continue “reform and opening” policies, such as improving intellectual property protections, and the environment for businesses
  • Increase anti-monopoly work
  • Actively consider joining the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, a preferential trade pact
  • Develop an action plan for peaking carbon emissions before 2030, supporting regions with the right conditions to peak earlier
  • Maintain the “basic stability” of the yuan exchange rate at a “reasonable” level

(Updates with comments from economists)

©2020 Bloomberg L.P.

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Economy

Canada’s unemployment rate holds steady at 6.5% in October, economy adds 15,000 jobs

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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 Press. All rights reserved.

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Health-care spending expected to outpace economy and reach $372 billion in 2024: CIHI

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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.

The Canadian Press. All rights reserved.

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Trump’s victory sparks concerns over ripple effect on Canadian economy

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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.

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