Unfinished residential buildings developed by China Evergrande Group in the outskirts of Shijiazhuang, Hebei province, China, on Feb. 1.TINGSHU WANG/Reuters
As tens of millions of Chinese head home this week ahead of the Lunar New Year holiday, the mood is good. According to state media that is, with the People’s Daily saying the “entire country is filled with optimism.”
But scratch under the surface and a different sentiment appears, one of growing discontent and hopelessness. People feel battered by months of economic uncertainty, falling employment and a warning housing crisis. That Beijing’s remedies have been at best partially effective has only further sapped confidence in a government that lost many people’s trust during the COVID-19 pandemic, while views of the future are weighed down by a looming demographic crisis and slowing economic growth.
On Monday, the Organisation for Economic Co-operation and Development (OECD) said it expected China’s economy “to grow at a 4.7 per cent rate in 2024 and 4.2 per cent in 2025 – a lower performance than in any of the 25 years before COVID-19, reflecting weak consumer demand and structural strains in property markets.” The International Monetary Fund last week issued a similar forecast, warning of high uncertainty facing China amid property and stock market slumps.
Beleaguered property developer Evergrande, which has become symbolic of the broader housing crisis, was last month put into liquidation by a Hong Kong court, with more than $450-billion worth of liabilities. Property once accounted for up to 30 per cent of China’s GDP and the collapse of Evergrande and several other major developers has had knock-on effects throughout the economy.
Following the collapse of Evergrande, around 20 million unfinished housing units have been left in China.
Reuters
In December, new home prices fell by the highest amount in almost a decade, while overall investment in the property sector was down 9.6 per cent last year. Many households store their wealth in property, and fears Evergrande would not be able to complete promised developments have sparked protests in some parts of the country.
Stock market investors are not much better off. In the past three years, more than more than $8-trillion has been wiped off the value of Chinese and Hong Kong stocks. Equities did rise Tuesday after Chinese regulators announced new restrictions on trading, including anti-short-selling measures, and state-run funds bought up billions worth of shares, days before Chinese markets close for the week-long Lunar New Year holiday.
Nanjing resident Ray Zhang said she had bought into bullish narratives around the Chinese stock market and an expected rebound following the lifting of pandemic controls, plumbing much of her savings into domestic equities.
“New Year is just around the corner and I don’t know how I will tell my family about the losses,” the 27-year-old told The Globe and Mail. “My stocks are going down all the time, I feel like someone is stealing my money every day.”
Foreign investors are no more optimistic. They pulled out almost $40-billion last year, while a recent survey by the U.S. Chamber of Commerce in China found a quarter of U.S. businesses operating in the country were considering, or had already begun, relocating out of China.
As stock market woes have deepened, the Chinese authorities have responded in classic fashion: censoring criticism while boosting optimistic takes on the economy. Even the security services have gotten involved, with the Ministry of State security on social media warning against those who advance “false narratives” to cast doubt on China’s economic system and “the path of socialism with Chinese characteristics.”
After the China Securities Regulatory Commission blocked comments on its social media this month, many took to the page of the U.S. Embassy in Beijing, which tends to attract less censorship, to express their discontent. One recent post, about protecting wild giraffes in Africa, has more than 17,000 comments, with many complaining about the state of the economy.
Positive narratives have not been exempt from censorship. After a 2016 article from the People’s Daily, the official mouthpiece of the Communist Party, began to be shared widely last week, it was deleted. The piece, by economist Zheng Bingwen, predicted China would be a high-income country by 2024, “barring any major political upheavals, devastating blows to the economy, or institutional or systemic collapse.”
Mr. Zheng was optimistic China would “leapfrog” the so-called middle-income trap, whereby income per capita stagnates due to rising costs and declining competitiveness, causing a drag on growth that makes it extremely difficult to break out of the cycle.
As many of those ironically sharing Mr. Zheng’s predictions this month understood, China’s chances of escaping this trap are looking increasingly slim. Beyond short term challenges and shrinking growth that mean the country may never overtake the U.S. as the world’s largest economy, China is facing a looming demographic crisis that could prove beyond the Communist Party’s ability to handle.
Deaths outweighed births in China by almost 2 million last year, and while this drop is a blip in a population of more than 1.4 billion, it was the second straight-year of decline, a sign that initial efforts to encourage people to have more children are not working.
China’s population is aging rapidly. In the next 10 years, around 300 million people currently aged 50 to 60 – China’s largest demographic group, equivalent to almost the entire U.S. population – are set to leave the work force at a time when pension budgets are already stretched, with some forecasts predicting money could run out as soon as 2035.
There is some hope for a baby boom in the Year of the Dragon, which begins on Feb. 10. Certain animals in the Lunar Zodiac are seen as lucky, and there is evidence some families delay having children to wait for a particularly auspicious sign like the dragon.
But superstitions can cut both ways: the Ministry of Civil Affairs last week issued a statement refuting claims it would be bad luck to marry in 2024. Posts online claiming this was a “widow year” because the upcoming lunar year does not include a traditional “beginning of spring day,” also known as lichun, “seriously deviate from common sense and scientific sense,” the ministry said.
There are more serious potential challenges ahead in the Year of the Dragon however, which runs until the end of January 2025. That is when Donald Trump could be inaugurated as U.S. president for the second time, if elected this November.
During his first term, Mr. Trump oversaw a trade war with China, and has promised if re-elected to impose tariffs of more than 60 per cent on Chinese goods. Even if Mr. Trump is not victorious, the election campaign is expected to feature heated rhetoric on China, increasing pressure on U.S. firms to cut ties or reduce exposure at a time when many are already headed for the exits.
Many may not need much of a push, with recent crises sapping faith in Beijing’s ability to respond to the current moment.
“China’s economic policy-making process appears broken, or at the very least impaired,” Logan Wright, a U.S.-based analyst with the Rhodium Group, wrote last week. “As China confronts its most significant crisis of market confidence, there is only official silence, along with the tedium of multipronged proposals for initiatives that are never completed. Instead, economic policy-making is starting to resemble the period of zero COVID, complete with denials, unrealistic messaging and then finally a mad scramble to adjust to reality.”
OTTAWA – Statistics Canada says retail sales rose 0.4 per cent to $66.6 billion in August, helped by higher new car sales.
The agency says sales were up in four of nine subsectors as sales at motor vehicle and parts dealers rose 3.5 per cent, boosted by a 4.3 per cent increase at new car dealers and a 2.1 per cent gain at used car dealers.
Core retail sales — which exclude gasoline stations and fuel vendors and motor vehicle and parts dealers — fell 0.4 per cent in August.
Sales at food and beverage retailers dropped 1.5 per cent, while furniture, home furnishings, electronics and appliances retailers fell 1.4 per cent.
In volume terms, retail sales increased 0.7 per cent in August.
Looking ahead, Statistics Canada says its advance estimate of retail sales for September points to a gain of 0.4 per cent for the month, though it cautioned the figure would be revised.
This report by The Canadian Press was first published Oct. 25, 2024.
OTTAWA – The federal government is expected to boost the minimum hourly wage that must be paid to temporary foreign workers in the high-wage stream as a way to encourage employers to hire more Canadian staff.
Under the current program’s high-wage labour market impact assessment (LMIA) stream, an employer must pay at least the median income in their province to qualify for a permit. A government official, who The Canadian Press is not naming because they are not authorized to speak publicly about the change, said Employment Minister Randy Boissonnault will announce Tuesday that the threshold will increase to 20 per cent above the provincial median hourly wage.
The change is scheduled to come into force on Nov. 8.
As with previous changes to the Temporary Foreign Worker program, the government’s goal is to encourage employers to hire more Canadian workers. The Liberal government has faced criticism for increasing the number of temporary residents allowed into Canada, which many have linked to housing shortages and a higher cost of living.
The program has also come under fire for allegations of mistreatment of workers.
A LMIA is required for an employer to hire a temporary foreign worker, and is used to demonstrate there aren’t enough Canadian workers to fill the positions they are filling.
In Ontario, the median hourly wage is $28.39 for the high-wage bracket, so once the change takes effect an employer will need to pay at least $34.07 per hour.
The government official estimates this change will affect up to 34,000 workers under the LMIA high-wage stream. Existing work permits will not be affected, but the official said the planned change will affect their renewals.
According to public data from Immigration, Refugees and Citizenship Canada, 183,820 temporary foreign worker permits became effective in 2023. That was up from 98,025 in 2019 — an 88 per cent increase.
The upcoming change is the latest in a series of moves to tighten eligibility rules in order to limit temporary residents, including international students and foreign workers. Those changes include imposing caps on the percentage of low-wage foreign workers in some sectors and ending permits in metropolitan areas with high unemployment rates.
Temporary foreign workers in the agriculture sector are not affected by past rule changes.
This report by The Canadian Press was first published Oct. 21, 2024.
OTTAWA – The parliamentary budget officer says the federal government likely failed to keep its deficit below its promised $40 billion cap in the last fiscal year.
However the PBO also projects in its latest economic and fiscal outlook today that weak economic growth this year will begin to rebound in 2025.
The budget watchdog estimates in its report that the federal government posted a $46.8 billion deficit for the 2023-24 fiscal year.
Finance Minister Chrystia Freeland pledged a year ago to keep the deficit capped at $40 billion and in her spring budget said the deficit for 2023-24 stayed in line with that promise.
The final tally of the last year’s deficit will be confirmed when the government publishes its annual public accounts report this fall.
The PBO says economic growth will remain tepid this year but will rebound in 2025 as the Bank of Canada’s interest rate cuts stimulate spending and business investment.
This report by The Canadian Press was first published Oct. 17, 2024.
