Thirty years ago, on March 29, 1993, China formally amended its constitution and adopted the “socialist market economy” as the country’s economic system.
It laid the foundation for the “development of the socialist rule of law,” and by incorporating the concept into the constitution, shaped the direction of China’s economic development, according to the People’s Daily, the newspaper of the Chinese Communist Party’s Central Committee.
“China’s first real major economic reform began in the rural areas in the 1980s, when state-run factories were converted into private ones and some local officials began their own small factories,” said Dexter Roberts, a senior fellow at the Atlantic Council’s Indo-Pacific Security Initiative.
Accelerating reforms
According to Jane Golley, an economist at the Australian National University (ANU), this first wave of economic opening-up boosted rural incomes and facilitated some migration of China’s vast rural population.
The agricultural reforms and the establishment of special economic zones also helped, she added.
The reform and opening-up process accelerated after Deng Xiaoping, China’s paramount leader at the time, embarked on his famous “southern tour” in early 1992, when he visited key coastal cities and delivered speeches highlighting the need to remain steadfast on the reform path.
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Following the tour, the focus of economic reform shifted from rural to urban areas.
Roberts from the Atlantic Council told DW that one important feature of China’s urban economic reform was that the Communist Party gave entrepreneurs and enterprises more autonomy to make decisions.
“Entrepreneurs took things into their own hands and they began to decide what they wanted to produce or what they wanted to sell,” he said.
Privatization and entry into WTO
In the subsequent years, China carried out a series of industrial reforms, including the prominent program of “Grasp the Large and Let Go of the Small,” in which the government tried to maintain control over some of the largest state-owned enterprises (SOE) while giving up control over smaller SOEs.
“Jiang allowed private entrepreneurs to become party members, which was a huge deal,” he noted.
In 2001, China joined the World Trade Organization, another pivotal moment that further opened the Asian nation up to the global economy. “It was a very long process that involved significant commitment [from China] to play the game more in line with the global economic order,” Golley from ANU said.
Andrew Collier, managing director at Orient Capital Research, said that joining the WTO accelerated Chinese growth and turned the country into a global industrial powerhouse.
During the first decade of this century, China relied on exports, infrastructure investment and the property market to maintain a high-level economic growth.
In 2010, China officially overtook Japan to become the world’s second-largest economy, based on nominal GDP.
However, problems began to surface as external demand dropped, debt started to pile up and corruption became rampant.
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Is Xi damaging China’s growth model?
And Xi Jinping, China’s leader since late 2012, has been reasserting the CCP’s control over the economy, weakening the hand of private businesspeople and tech entrepreneurs, whom he views as becoming too powerful and contributing to widening wealth inequality.
Roberts said Xi’s move risks “damaging China’s growth model for the last few decades.”
“His goal is to have an economy that still has a strong private sector but one that’s far more controlled,” he told DW. “I think that’s a bridge too far. He can’t have both of those things at the same time.”
Collier said Xi appears to have recognized the need for China to transform its investment-driven economic model to a consumer-driven model.
But his political decisions, which include doubling down on the state sector, will hurt Beijing’s ability to restructure its economy, he underlined.
“Xi is not interested in defunding the state sector in order to give consumers a larger share of the economy,” he pointed out.
“The crackdown on the platform economy is an indication of that. It’s a very successful sector and there may have been some market-dominance issues. But instead of addressing them in a regulatory matter, what China did is a wholesale cutback of the industry because it’s viewed as a threat to the Party.”
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The government has set a modest target for economic growth this year of around 5% after it cooled to only 3% last year, one of the weakest showings in nearly half a century.
“A lot of China’s growth is beset by debt and inefficient state investment,” Collier said. “The debt load is now becoming quite a burden and the inefficiency has increased. I’m very concerned about China’s ability to sustain medium-term growth or growth at all potentially.”
Economic activity, however, picked up in the first two months of this year, helped by increased consumption and infrastructure investment.
But exports are expected to remain weak amid a global downturn and the crisis-hit property sector is only slowly beginning to turn the corner.
Meanwhile, Xi is overseeing a broad reorganization of governing bodies that is set to give the ruling party direct control and supervision over financial affairs — by creating the Central Financial Commission.
To strengthen the ideological and political role of the party in China’s overall financial system, a separate Central Financial Work Commission will also be established.
Apart from strengthening the party’s control over the economy, Collier said there was no advantage with these reforms, as it was “not going to be positive for growth going forward.”
At the twice-a-decade party congress last year, Xi installed his loyalists to top positions in the CCP. He appointed his close ally Li Qiang as the new premier this month. Roberts said he doesn’t expect anyone in the senior leadership to stand up to Xi and act independently.
“It’s a huge problem having a lineup of leadership whose careers are so beholden to Xi,” he told DW. “I don’t expect Li Qiang to be independent and I wouldn’t expect him to stand up and challenge Xi Jinping.”
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.
