(Bloomberg) — China’s top economic officials defended the nation’s plan to grow the economy by around 5% this year and hinted at a potential liquidity boost, one day after the ambitious target was met with skepticism by some economists due to a perceived lack of sufficient policy support.
Pan Gongsheng, governor of the People’s Bank of China, said there’s still room to cut the reserve requirement ratio for banks, which would allow lenders to keep smaller reserves and therefore encourage lending. Zheng Shanjie, chairman of the National Development and Reform Commission, struck a confident tone on the country’s growth outlook, saying the GDP goal is a “positive target that can be attained through vigorous effort.”
They took questions at a press briefing on the sidelines of the National People’s Congress in Beijing on Wednesday alongside three other top officials: the finance and commerce chiefs, as well as new top securities regulator Wu Qing.
The officials’ comments were scrutinized by investors seeking details on how President Xi Jinping’s government will repeat last year’s expansion in more challenging circumstances without broad stimulus. Markets were disappointed by the lack of forceful steps announced at the opening of the legislature on Tuesday, with analysts surveyed by Bloomberg ahead of the meeting only expecting the economy to expand by 4.6% in 2024.
Pan’s dovish comments appeared to stoke hopes for further easing by the Chinese central bank. China’s government bonds extended rallies, with the yield on 10-year notes falling to a two-decade low. Economists surveyed by Bloomberg last month forecast a RRR reduction by 25 basis points in the third quarter this year after it was last cut by 0.5 percentage points in February.
Promoting a moderate recovery in prices is an important consideration for the PBOC’s policy making, he said. Pan reiterated the central bank has sufficient monetary policy room and ample tools and noted the dollar’s weakening momentum, which will allow China to loosen its monetary policy without causing more capital flight. He didn’t indicate a time frame for the RRR cut.
Wang Tao, head of Asian economic research at UBS Group AG, called the Chinese leadership’s approach “pragmatic” but added they “won’t do whatever is necessary to meet the 5% target”.
“If there is a threat to the system, to stability in the economy, then they will act,” she said. “The objective is more in terms of macro-stability and facilitating structural transition.”
The joint press briefing was the first time in at least a decade that so many economic chiefs shared a stage for one conference during the legislative session. Previously, officials typically held briefings in smaller groups, except for pandemic years when many skipped such conferences.
Zheng of the NDRC, China’s top economic planning agency, said China’s plan to issue 1 trillion yuan ($139 billion) of ultra-long special central government bonds in 2024 will drive investment and consumption, and that most of the 1 trillion yuan sovereign debt issued in October will be used this year. That issuance in 2023 raised the budget deficit from 3% to 3.8% of GDP, with funds used for disaster relief and construction.
Both Zheng and Commerce Minister Wang Wentao revealed China’s exports increased about 10% year-on-year in the first two months of 2024, giving that data a day before its official release and after exports last year posted their first annual decline since 2016.
That was the latest example of officials front-running key data releases, as authorities seek to stabilize the economy and guide the stock market. In January, Premier Li Qiang revealed China’s economy grew around 5.2% in 2023 a day before the official figure was due. That month, Pan disclosed a cut in the reserve requirement ratio about two weeks before it took effect, in a rare move.
Officials managing China’s massive economy are grappling with record low consumer confidence, falling home prices and an increasingly competitive job market. That’s weighed on consumption and led to a price war among retailers, which has been hampered by weakening overseas demand.
The central bank is expected to deliver more moderate cuts to interest rates this year. The PBOC has used surprise easing steps — such as a record cut to a key mortgage reference rate — to squeeze more value out of its policy actions in recent months.
Finance Minister Lan Fo’an said officials would strengthen coordination with other tools such as monetary, employment and industrial policies. Those comments came after Premier Li’s yearly report to China’s highest-profile annual political meeting kept fiscal stimulus broadly the same as last year, and avoided bold moves to boost consumption or lift a slumping property sector.
He added that China’s local debt risks have been “mitigated holistically” since authorities ramped up efforts to tackle the problem with measures including the issuance of local special refinancing bonds, which reduced the repayment pressure and lowered interest payment burdens, Lan said.
–With assistance from Tom Hancock and Josh Xiao.
(Updates with more details and context throughout)
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.
