When Chinese Premier Li Keqiang called for a “sense of urgency” about growing economic risks during a meeting with provincial officials earlier this week, it was his third such warning in days.
“We need to be highly vigilant for unexpected changes in the international and domestic situations, and downward economic pressure has further mounted,” China’s No 2 official told a symposium in Jiangxi province on Monday, according to a report in South China Morning Post, less than a week after drawing attention to the “complicated and evolving” global situation and COVID-19 outbreaks at home.
As China’s draconian “dynamic zero-COVID” pandemic restrictions and uncertainties including the war in Ukraine weigh on growth, Beijing appears increasingly concerned about the prospects for the world’s second-largest economy.
The uncertain outlook casts doubt on the ruling Chinese Communist Party’s ability to reach its target of 5.5 percent economic growth in 2022, even as state media insist the ambitious goal remains within reach, adding to mounting risks for the global economy that include war in Europe, soaring energy prices and upcoming interest rate increases in the United States.
And it raises questions about how far policymakers may go – regardless of adverse economic consequences – to meet Beijing’s lofty ambitions.
Shanghai’s ultra-strict lockdown is weighing on the economy and global supply chains [File: Aly Song/Reuters]
If COVID-19 cannot be quickly brought under control – which seems increasingly unlikely – then either Beijing’s zero-tolerance pandemic strategy or the growth target will have to go, said Carsten Holz, an expert on the Chinese economy and professor at the Hong Kong University of Science and Technology (HKUST).
“In the face of lockdowns, the old channel from state-directed credit to state-directed investment or production becomes inoperative,” Holz told Al Jazeera. “A relatively lockdown-free rural sector cannot save the real GDP growth rate: Agriculture’s share of GDP is only eight percent.
“Industry, the largest sector in GDP, cannot, either, as long as there are lockdowns, nor can the travel and hospitality industries,” Holz said.
Among China’s top 100 cities by GDP, all but 13 are under some level of pandemic restrictions, with the intensity of those controls on the rise, according to a recent analysis by global investment research firm Gavekal.
In March, China’s factories saw activity drop at the quickest pace in two years, while vehicle sales fell nearly 12 percent year on year.
‘Life above all’
Despite the mounting costs, Chinese President Xi Jinping, who is bidding to secure an unprecedented third term at the next party congress in October, has repeatedly ruled out any shift away from dynamic zero-COVID, insisting this week the country should “persist putting people above all, life above all.”
Facing deteriorating economic prospects, Beijing has flagged accelerating the rollout of pro-growth measures such as tax cuts and rebates and sales of special-purpose bonds (SPBs) to fund infrastructure projects.
On Monday, the China Securities Regulatory Commission announced that it would ask long-term investors and major shareholders to buy up shares to help stabilise the country’s sagging stock market, which in March saw foreign outflows of $11.2bn in bonds and $6.3bn in stocks.
Many analysts expect more sweeping measures, including interest rate cuts and looser lending rules, to follow in the near future.
“Up until now, Chinese leaders have been extremely cautious about stimulus, but if things continue the way they’re going, Beijing may have little choice but to return to the infrastructure stimulus playbook to goose growth,” Joe Mazur, a politics and finance analyst at Trivium China, told Al Jazeera.
Taylor Loeb, a finance and politics analyst also at Trivium China, said economic conditions have reached the point where “support policies are going to have to cast a wider net”.
“That means cuts to banks’ reserve requirement ratios (RRRs), a measure that gives the financial sector more agency in who they lend to,” Loeb told Al Jazeera.
“We’re also seeing a quickened rollout of the SPBs that typically fund local government infrastructure projects. SPB funds, like RRR cuts, run the risk of ending up in unproductive projects – as happened throughout the 2010s – but that may be a risk central policymakers have to take to juice the economy.”
Holz, the HKUST professor, suggested Beijing could possibly entertain drastic measures to reach its goal, such as doubling the salaries of state and Communist Party employees.
“It would create a budget deficit on the order of, roughly, 20 percent, but that would not become fully apparent until after the 20th National Congress of the Chinese Communist Party,” he said.
Chinese President Xi Jinping has ruled out moving away from a zero-tolerance approach to the coronavirus [File: Andy Wong/AP]
Even so, many economists are sceptical that anything in Beijing’s toolkit will be sufficient to avert a significant slowdown in growth.
On Friday, Morgan Stanley slashed its growth forecast for the Chinese economy this year to 4.6 percent, down from 5.1 percent.
“The policy stimulus will not be that effective as long as mobility is restricted on a broad scale,” Tommy Wu, lead economist at Oxford Economics in Hong Kong, told Al Jazeera.
“The government will have to reduce their emphasis on their growth target and be realistic about how the domestic headwinds and a challenging external environment will affect China’s economy through this year.”
If China’s opaque leadership can’t stomach adjusting its economic goals, particularly in a politically sensitive year, it could seek to change the narrative instead.
“Party Secretary Xi Jinping’s likeliest calculation will be that the easiest solution to the conundrum is to blame COVID-19 for not being able to reach the growth target, keep the death rate low with the help of extensive lockdowns, and secure his tenure as party secretary at the 20th party congress. The PRC’s real growth rate in 2022 could be anything, 0 percent or even negative,” Holz said.
“And should public discontent with lockdowns reach unprecedented dimensions, he could cite new scientific evidence and let the COVID wave roll as long as he can present himself as the rational, well-meaning leader that deserves another term as party secretary and president.”
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.
