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China economy slows; officials say recovery ‘unstable and uneven’ – Al Jazeera English

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Officials say GDP grew at its slowest place in a year in the third quarter, amid power cuts, property woes and COVID-19 concerns.

China’s economy grew at the slowest pace in a year in the three months that ended in September, buffeted by power shortages, supply bottlenecks and sporadic outbreaks of COVID-19, increasing pressure on policymakers amid rising concern about the health of the property sector.

Data released on Monday showed gross domestic product (GDP) grew 4.9 percent in the third quarter, compared with a year earlier, the slowest since the third quarter of 2020. The growth was also below economists’ expectations with a Reuters poll of analysts expecting GDP to rise 5.2 percent and a poll by the AFP news agency predicting growth at 5 percent.

“We must note that current international environment uncertainties are mounting and the domestic economic recovery is still unstable and uneven,” National Bureau of Statistics (NBS) spokesman Fu Linghui said on Monday.

China’s economy, the world’s second-largest, expanded 7.9 percent in the second quarter, and 18.3 percent in the first quarter, which benefitted from comparison with the COVID-19-induced slump of early 2020.

Meanwhile, industrial production growth slowed further to 3.1 percent on-year in September.

“Growth was dragged down by a slowdown in real estate, amplified recently by spillover from Evergrande’s travails,” Oxford Economics’ head of Asia economics Louis Kuijs told AFP.

There are increasing concerns about the property sector with industry giant Evergrande struggling with more than $300bn in debt [Thomas Peter/Reuters]

The struggles of property giant Evergrande – struggling with debts amounting to more than $300bn – have been made prospective buyers cautious.

Kuijs noted there was an “additional hit in September” from electricity shortages and production cuts due to the strict implementation of climate and safety targets by local governments.

He added that the damage was visible in the slowdown of industrial output.

Victor Gao, vice president of the Center for China and Globalization in Beijing, told Al Jazeera the latest data was on the “lower side” but added that China remained “confident” it could reach growth of about 8 percent for the year.

“That would make China one of, if not the, best performers among the larger economies in the world,” he said.

Chinese leaders, fearful that a persistent property bubble could undermine the country’s long-term ascent, are likely to maintain tough curbs on the sector even as the economy slows but could ease some measures if needed, policy sources and analysts said.

“In response to the ugly growth numbers we expect in coming months, we think policymakers will take more steps to shore up growth, including accelerating infrastructure development and relaxing some aspects of overall credit and real estate policies,” Kuijs told the Reuters news agency.

Premier Li Keqiang said on Thursday that China has ample tools to cope with economic challenges despite the slowing growth, and the government is confident of achieving full-year development goals.

Retail sales picked up to 4.4 percent – from 2.5 percent in August – with fewer virus containment measures in China, which has imposed swift local lockdowns over a handful of coronavirus cases.

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China cuts reserve requirement ratio as economy slows – BNN

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China cut the amount of cash most banks must hold in reserve, acting to counter the economic slowdown in a move that puts the central bank on a different policy path than many of its peers.

The People’s Bank of China will reduce the reserve requirement ratio by 0.5 percentage point for most banks on Dec. 15, releasing 1.2 trillion yuan (US$188 billion) of liquidity, according to a statement published Monday. 

The reduction was signaled by Premier Li Keqiang last week when he said that authorities would cut the RRR at an appropriate time to help smaller companies, and is the second reduction this year. The decision comes after recent data showed the economy and industry stabilizing, although Beijing’s tightening curbs on the property market have led to a slump in construction and worsened a liquidity crisis at developer China Evergrande Group and other real-estate firms. 

The cut is a “regular monetary policy action,” the PBOC said, pre-empting expectations that the decision was the start of of an easing cycle. “Prudent monetary policy direction has not changed,” it said, adding that the bank “will continue with a normal monetary policy, maintaining the stability, consistency and sustainability of policy, and won’t flood the economy with stimulus.”

However, with the U.S. Federal Reserve and other global central banks looking to tighten policy, the move to add stimulus by the PBOC makes the divergence between China and much of the rest of the world even clearer. 

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What Bloomberg’s Economists Say

“We think the reduction would help offset the headwinds facing the economy, particularly in the first quarter of 2022. We maintain our view that an additional 50-100 basis points of RRR cut would come next year.”

– David Qu, economist

Separately, the Communist Party’s Politburo said China will continue to implement a proactive fiscal policy in 2022, and prudent monetary policy will be flexible and appropriate, and maintain reasonably ample liquidity, the official Xinhua News Agency. The Monday meeting of the Politburo will be followed by the Central Economic Work Conference sometime this month, which will flesh out economic policy plans for the next year. 

The cut will be applied to all banks except those that are already on the lowest level of 5 per cent, which are mostly small rural banks, according to the statement. The weighted average ratio for financial institutions will be 8.4 per cent after the cut, down from 8.9 per cent previously, the PBOC said in a separate statement.

Some of the money released by the RRR cut will be used by banks to repay maturing loans from the PBOC’s medium-term lending facility, and some of it will be used to replenish financial institutions’ long-term capital, the central bank said. There are almost 1 trillion yuan worth of the 1-year loans maturing on Dec. 15, the day the cut takes effect. 

Even with the deepening housing market slump, authorities had been restrained in adding new support policies, holding monetary policy steady and maintaining a measured pace of fiscal spending. However, the PBOC signaled an easing bias in the latest monetary policy report last month, while the State Council urged local governments to speed up spending. 

“The aim of the RRR cut is to strengthen cross-cyclical adjustment, enhance the capital structure of financial institutions, raise financial services capabilities to better support the real economy,” the PBOC said. The cut will effectively increase long-term capital for banks to serve the real economy, and the PBOC will guide banks to step up their support for small businesses, it said. 

A cut in the reserve ratio doesn’t directly lower borrowing costs, but quickly frees up cheap funds for banks to lend. The reduction will lower the capital cost for financial institutions by about 15 billion yuan each year, which will lower the overall financing cost of the economy, the PBOC said.

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China think-tank warns of economic slowdown – Aljazeera.com

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Advisers to Beijing will recommend a 2022 growth target that’s lower than the target that had been set for 2021.

Ongoing stress in China’s property sector is likely to slow down the country’s economic growth next year, a government think-tank has warned.

The world’s second-largest economy is expected to have expanded by about 8 percent this year, according to the annual blue book on the economy from the Chinese Academy of Social Sciences (CASS), a top government think-tank. It warned that the property downturn was likely to persist and weigh on the expenditures of local governments next year.

China’s economy is expected to grow about 5.3 percent in 2022, bringing the average annual growth rate forecast for 2020-2022 to 5.2 percent, CASS said on Monday.

Advisers to the government will recommend that authorities set a 2022 economic growth target lower than the target set for 2021 – or “above 6 percent” – Reuters reported, amid growing headwinds from a property downturn, weakening exports and strict COVID-19 curbs that have impeded consumption.

It urged the central government to proactively engineer a soft landing for the property sector, to avoid failed land auctions in big cities and to fend off risks of quickly falling property prices in smaller cities, the report said.

China’s move to wean property developers away from rampant borrowing has translated into loan losses for banks and pain in credit markets, as cash-strapped builders fall into distress, increasing risks across the economy.

Property behemoth China Evergrande is facing one of the country’s largest defaults, prompting the authorities to step in and oversee risk management at the company.

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Canadian employers, facing labor shortage, accommodate the unvaccinated

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Canada’s tight labor market is forcing many companies to offer regular COVID-19 testing over vaccine mandates, while others are reversing previously announced inoculation requirements even as Omicron variant cases rise.

Canadian Prime Minister Justin Trudeau’s government adopted one of the strictest inoculation policies in the world for civil servants and has already put more than 1,000 workers on unpaid leave, with thousands more at risk.

Airlines, police forces, school boards and even Canada’s Big Five banks https://www.reuters.com/world/americas/canadas-major-banks-require-employees-entering-premises-be-vaccinated-2021-08-20 have also pledged strict mandatory vaccine policies. But following through has proven less straightforward, especially as employers grapple with staffing shortages and workers demand exemptions.

Job vacancies in Canada have doubled so far this year, official data shows, and vaccine mandates can make filling those jobs harder, potentially putting upward pressure on wages. That could fuel inflation https://www.reuters.com/world/americas/canadas-annual-inflation-rate-hits-47-oct-highest-since-feb-2003-2021-11-17, already running at a near two-decade high.

“It’s already difficult to find staff, let alone putting in a vaccine mandate. You’d cut out potentially another 20%” of potential workers, said Dan Kelly, chief executive of the Canadian Federation of Independent Business.

There are pitfalls to employing the unvaccinated. Companies run a higher risk of COVID-19 outbreaks and many vaccinated employees are uncomfortable working with those who have not had the jab, said industry groups and marketing experts.

At Luda Foods, a Montreal-based soup and sauce maker, president Robert Eiser said he has 14 open jobs, no vaccine mandate and no plans to restrict new hires to the vaccinated.

“I don’t know that I want to reduce the (labor) pool, which is already quite low,” said Eiser. “We need to attract people to meet the demand. If we don’t, our competitors will.”

Data released on Friday underpinned Canada’s tight labor market, with a hefty 153,700 jobs https://www.reuters.com/markets/us/canada-posts-hefty-job-gains-outlook-clouded-by-omicron-variant-2021-12-03 added in November. It also showed a growing mismatch between available workers and unfilled jobs. And job postings are far above pre-pandemic levels. (Graphic: Canada job postings surge above pre-pandemic level Canada job postings surge above pre-pandemic level, https://graphics.reuters.com/HEALTH-CORONAVIRUS/CANADA2/klvyknzklvg/chart.png)

WALKING BACK

The province of Quebec backtracked on a vaccine mandates for healthcare workers last month, saying they could not afford to lose thousands of unvaccinated staff. Ontario, which was also eyeing a mandate, said it would not go ahead.

Toronto-Dominion Bank and Bank of Montreal have both softened their vaccine policy to allow regular testing for workers who missed their Oct. 31 inoculation deadline.

In Canada, 86% of adults are fully inoculated, though that drops under 80% among 18-40 year olds. At least 15 cases of the new Omicron https://www.reuters.com/markets/rates-bonds/canada-has-reported-total-11-cases-omicron-variant-health-official-2021-12-03 variant in Canada have been reported in the past week.

John Cappelli, vice president of onsite managed services in Canada for global recruitment firm Adecco, said half of his clients are mandating vaccines with the other half allowing regular testing for the unvaccinated.

But he expects the Omicron variant will prompt more workplaces to get strict on vaccination, even as they grapple with the tightest job market he’s seen in his 25-year career.

“We are now starting to see our first workplace (COVID-19) cases in five months,” he said.

The number of Canadian job postings on search website Indeed mentioning vaccine requirements has quadrupled since August. (Graphic: Canada job postings and vaccine mandates, https://graphics.reuters.com/HEALTH-CORONAVIRUS/CANADA3/byvrjqrlmve/chart.png)

In the hard-hit manufacturing sector, where 77% of firms say their top concern is attracting and retaining workers, vaccine mandates are more rare.

Dennis Darby, CEO of Canadian Manufacturers and Exporters, said most of Canada’s factories have operated safely throughout the pandemic. While CME encourages vaccination, “some companies are still using rapid testing if somebody doesn’t want to get vaccinated,” he added.

But companies risk a hit to their reputation if they are overt in efforts to tap into the unvaccinated as a labor pool, said Wojtek Dabrowski, managing partner at Provident Communications.

“If you go out and say, ‘We are intentionally seeking to hire unvaccinated people,’ many customers are equating that with you being anti-science and anti-safety,” said Dabrowski.

 

(Reporting by Julie Gordon and Steve Scherer in Ottawa, additional reporting by Rod Nickel in Winnipeg and Nichola Saminather in Toronto; Editing by Alistair Bell)

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