China’s mediocre economic growth, paired with the issue’s neglect during the recent 20th National Congress of the Chinese Communist Party, has raised concerns about the country’s lack of attention to economic policy.
According to experts, that disregard by the world’s second-largest economy could have a damaging impact on Canadian business and beyond.
China announced on Monday that its gross domestic product had risen 3.9 per cent in the third quarter compared with the same period a year earlier. The figure fell below Beijing’s 5.5 per cent growth target and well behind the eight per cent experts say is required to support future population and economic growth in China.
Beijing had delayed releasing its GDP data on Oct. 18, the second day of the party’s congress. It’s likely that Beijing wanted to keep economic growth and its consequences out of the headlines during the congress, which ended on Oct. 22, said John Gruetzner, co-founder of Asia-focused business advisory firm Intercedent and a fellow with the Canadian Global Affairs Institute.
The weeklong party congress, held twice a decade to appoint new leaders, assess the constitution and affirm China’s ideological orientation, is perhaps the most significant event on the Chinese Communist Party’s calendar. It ended with President Xi Jinping securing an unprecedented third term as party leader, presiding over a cabinet loyal to his ambitions of consolidating power, deterring opposition and extending term limits.
A man standing at a public display case reads newspaper coverage of the 20th Communist Party Congress, in Beijing on Monday. The weeklong party congress, held twice a decade, is perhaps the most significant event on the party’s calendar. (Thomas Peter/Reuters)
Canada’s exports to China rose in 2021
Withholding data that’s as significant to trade relations as GDP was “pretty much unprecedented for any major trading country,” said Charles Burton, a senior fellow at the Macdonald-Laurier Institute, a former counsellor at the Canadian Embassy in China and an associate professor of Chinese and comparative politics at Brock University in St. Catharines, Ont., until 2020.
“I’m not sure what signal China’s sending to global trading partners by not providing us with the normal kind of interaction we would expect, which would be a statement of China’s economic prospects,” Burton said prior to the GDP release.
China’s 3.9 per cent third-quarter growth was a bounceback from spring’s measly growth of 0.4 per cent. In the end, “the number came back stronger than many had anticipated, including us,” said Andrew Hencic, senior economist with TD Bank. Its economists had estimated growth of 2.8 per cent.
New vehicles ready for export are parked at a dockyard in Yantai, in eastern China’s Shandong province, on Oct. 13. China’s 3.9 per cent GDP growth in the third quarter was a big improvement from spring’s sluggish growth of 0.4 per cent. (Chinatopix/The Associated Press)
“Looking forward, we’ll see to what extent that moment can be carried through,” Hencic said. That’s especially true as countries around the world, including Canada, are anxious to see whether, to their detriment, Xi will place national security and politics ahead of economic performance.
“It’s clear that over a period of time, one-party states ultimately tend to hit a wall,” Gruetzner said. “If you don’t have multiple inputs into your economic and social policy, you’re ultimately going to have an economic growth problem.”
Canada counts China as its third-most valuable trading partner, behind the United States and the European Union, but second if EU countries were counted individually. Canada’s exports to China grew steadily throughout 2021 to $28.8 billion, according to the University of Alberta — the highest amount since before the COVID-19 pandemic and $10 billion more than was exported in 2016.
The agriculture, meat, paper and mining industries, which drive Canadian exports to China, must be cognizant of how GDP slowdowns might impact their investments in China’s economy, Gruetzner said.
Miners work underground at Vale’s Thompson mine in northern Manitoba. Along with the mining industry, agriculture, meat and paper drive Canadian exports to China. Canada counts China as its third-most valuable trading partner, behind the United States and the European Union. (Katie Nicholson/CBC)
Iron ore, oil, coal and copper prices, in particular, react “very, very quickly” to shifts in Chinese GDP growth, he said. “There’s a whole portion of the Canadian economy that requires China to have the demand. Certainly in the western provinces.”
Share prices in Canadian fertilizer company Nutrien, based in Saskatoon, and Teck Resources Ltd., an agricultural feed developer and metals company headquartered in Vancouver, both saw dips on the Toronto Stock Exchange the day of China’s GDP release ($113.07 to $108.33, and $48.05 to $46.95, respectively).
GDP growth in China faces obstacles
China’s zero-COVID policy and housing crisis have continued to hold back the world’s second-largest economy from a full economic recovery post-pandemic, Burton said. Both will likely impact China’s export-oriented economy and “could be quite disturbing for Canadian business and the global economy in general,” he said.
Although Beijing’s zero-COVID policy has kept total infections in the country of 1.4 billion people to just over one million, it’s hampered the efficiency of China’s ports, decommissioned half of its highways and instituted a total shutdowns of cities that together account for 40 per cent of China’s GDP, according to a report from Alicia Garcia Herrero, the chief economist for Asia-Pacific at French investment bank Natixis.
China strengthened its commitment to the zero-COVID policy this week, sealing buildings, locking down districts and placing millions at home as the country on Friday reported 1,000-plus cases for three consecutive days.
People wearing face masks stand in line at a COVID-19 testing site in Beijing on Oct. 12. Although China’s zero-COVID policy has kept cases relatively low in the country of 1.4 billion people, it’s come at the expense of the economy. (Mark Schiefelbein/The Associated Press)
China’s housing sector is also in the midst of a serious crisis. A lack of government funds has led to several delays in housing construction, and Chinese borrowers who paid for their homes in advance have been left without their investment, Burton said. Local governments in China traditionally fund operations through land auctions and have felt the consequences in their coffers.
Were Chinese economic growth to stay below eight per cent, there would be consequences for the country’s ability to meet its more than $9 trillion US debt obligations, as well as youth unemployment, Gruetzner said.
Reports from China’s 20th Communist Party Congress suggest that the government will nonetheless prioritize national security and military growth in the face of U.S. competition ahead of focusing attention on the economy for its own sake and that of its trading partners, Burton said.
WATCH | China’s leader calls for military growth at Communist Party Congress:
Xi kicks off Communist Party Congress, calls for China’s military growth
13 days ago
Duration 3:25
China’s Communist Party kicked off its 20th Congress in Beijing, with President Xi Jinping calling for faster military growth. Xi also touted his government’s COVID-19 policies and refused to rule out the use of force against Taiwan.
China is on record as wanting to redirect its agricultural and commodity imports away from Western suppliers and toward those in South America and Africa, Gruetzner said.
Burton said both should be a consideration for Canada as it openly reassess trade relationships in the region.
Workers wearing face masks ride on tricycle carts loaded with goods in Beijing last month. China’s zero-COVID policy and housing crisis have continued to hold back the world’s second-largest economy from a full economic recovery post-pandemic, one analyst says. (Andy Wong/The Associated Press)
Canada plans to release Indo-Pacific policy
During a speech in Washington, D.C., on Oct. 12, Deputy Prime Minister Chrystia Freeland suggested Western democratic countries prioritize free trade with one another and limit opportunities for states actively working against their values. Governance in Russia and China, for example, has become increasingly consolidated and autocratic.
Those considerations could be a feature of the upcoming Indo-Pacific policy statement, which Canada’s minister of foreign affairs, Mélanie Joly, said would be released following the Chinese party congress and before the end of the year.
Mélanie Joly, Canada’s minister of foreign affairs, right, and U.S. Secretary of State Antony Blinken speak at the federal government’s official guest house in Ottawa on Thursday. Joly announced that Canada plans to seek membership to the Indo-Pacific Economic Framework for Prosperity. (Blair Gable/Pool/The Associated Press)
“In the coming decades, developments in the Indo-Pacific region will have profound impacts on the lives of Canadians from coast to coast to coast,” Joly said in a news release, adding that Canada is committed to strengthening its presence in the region.
“There will be a strong section on implications for the economy” within the coming policy statement, Burton said. “A lot of businesses would like to see what the government’s intentions are before they consider their choices with regard to investment in China.”
NANAIMO, B.C. – Former Bank of Canada governor Mark Carney will chair a Liberal task force on economic growth, the party announced Monday as Liberal MPs meet to strategize for the upcoming election year.
Long touted as a possible leadership successor to Prime Minister Justin Trudeau, Carney was already scheduled to address caucus as part of the retreat in Nanaimo, B.C., this week.
The Liberals say he will help shape the party’s policies for the next election, and will report to Trudeau and the Liberal platform committee.
“As chair of the Leader’s Task Force on Economic Growth, Mark’s unique ideas and perspectives will play a vital role in shaping the next steps in our plan to continue to grow our economy and strengthen the middle class, and to urgently seize new opportunities for Canadian jobs and prosperity in a fast-changing world,” Trudeau said in a statement Monday.
Trudeau is expected to address Liberal members of Parliament later this week. It will be the first time he faces them as a group since MPs left Ottawa in the spring.
Still stinging from a devastating byelection loss earlier this summer, the caucus is now also reeling from news that its national campaign director has resigned and the party can no longer count on the NDP to stave off an early election.
Last week, NDP Leader Jagmeet Singh ended his agreement with Trudeau to have the New Democrats support the government on key votes in exchange for movement on priorities such as dental care.
All of this comes as the Liberals remain well behind the Conservatives in the polls despite efforts to refocus on issues like housing and affordability.
Some Liberal MPs hope to hear more about how Trudeau plans to win Canadians back when he addresses his team this week.
Carney appears to be part of that plan, attempting to bring some economic heft to a government that has struggled to resonate with voters who are struggling with inflation and soaring housing costs.
Trudeau said several weeks ago that he has long tried to coax Carney to join his government. The economist and former investment banker spent five years as the governor of the Bank of Canada during the last Conservative government before hopping across the pond to head up the Bank of England for seven years.
Carney is just one of a host of names suggested as possible successors to Trudeau, who has insisted he will lead the party into the next election despite simmering calls for him to step aside.
Those calls reached a new intensity earlier this summer when the Conservatives won a longtime Liberal stronghold in a major byelection upset in Toronto—St. Paul’s.
But Trudeau held fast to his decision to stay and rejected calls to convene his entire caucus over the summer to respond to their concerns about their collective prospects.
The prime minister has spoken with Liberal MPs one-on-one over the last few months and attended several regional meetings ahead of the Nanaimo retreat, including Ontario and Quebec, which together account for 70 per cent of the caucus.
While several Liberals who don’t feel comfortable speaking publicly say the meetings were positive, the party leader has mainly held to his message that he is simply focused on “delivering for Canadians.”
Conservative House leader Andrew Scheer was in Nanaimo ahead of the meeting to express his scorn for the Liberal strategy session, and for Carney’s involvement.
“It doesn’t matter what happens in this retreat, doesn’t matter what kinds of (communications) exercise they go through, or what kind of speculation they all entertain about who might lead them in the next election,” said Scheer, who called a small press conference on the Nanaimo harbourfront Monday.
“It’s the same failed Liberal policies causing the same hardships for Canadians.”
He said Carney and Trudeau are “basically the same people,” and that Carney has supported Liberal policies, including the carbon tax.
The three-day retreat is expected to include breakout meetings for the Indigenous, rural and women’s caucuses before the full group convenes later this week.
This report by The Canadian Press was first published Sept. 9, 2024.
TORONTO – Canada’s main stock index was down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.
The S&P/TSX composite index was down 239.24 points at 22,749.04.
In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.
The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.
The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.
The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.
This report by The Canadian Press was first published Sept. 6, 2024.
OTTAWA – Canada’s national unemployment rate was 6.6 per cent in August. Here are the jobless rates last month by province (numbers from the previous month in brackets):
_ Newfoundland and Labrador 10.4 per cent (9.6)
_ Prince Edward Island 8.2 per cent (8.9)
_ Nova Scotia 6.7 per cent (7.0)
_ New Brunswick 6.5 per cent (7.2)
_ Quebec 5.7 per cent (5.7)
_ Ontario 7.1 per cent (6.7)
_ Manitoba 5.8 per cent (5.7)
_ Saskatchewan 5.4 per cent (5.4)
_ Alberta 7.7 per cent (7.1)
_ British Columbia 5.8 per cent (5.5)
This report by The Canadian Press was first published Sept. 6, 2024.
