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 – 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.
