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China Pledges Credit Boom to Push Economy Out of Virus Slump – Yahoo Canada Finance

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(Bloomberg) — China’s central bank wants the total flow of credit to rise by almost a fifth this year, as part of efforts to push the economy out of the coronavirus-induced slump.

That’s to be achieved through record special-purpose bond issuance as well as a 19% increase in bank loans, according to People’s Bank of China Governor Yi Gang. In all, total social financing flow should rise to at least 30 trillion yuan ($4.2 trillion) this year, Yi said during a speech in Shanghai Thursday.

That would represent a 17% expansion from 2019’s 25.6 trillion yuan in new credit including government bond issuance, according to Bloomberg calculations. Even so, the depth of China’s first-quarter contraction and the chance that the virus shutdowns will return in earnest imply that the increase may not be enough.

The expansion is “very modest considering the need of stimulus for recovery after the damage from Covid-19,” said Iris Pang, an economist at ING Bank NV in Hong Kong. “It is like a credit growth after a small crisis. We are now in a deep recession.”

China’s top bank regulator, Guo Shuqing, also reiterated Thursday that officials “won’t flood” the economy with cash. Nevertheless, Chinese equities erased losses Thursday after the comments on optimism over the stimulus outlook.

Yi repeated an earlier statement from Premier Li Keqiang that banks will need to sacrifice 1.5 trillion yuan in profits this year. That will happen in three ways– lowering interest rates, using monetary policy tools to directly finance the real economy, and reducing banks’ charges, Yi said.

“In the second half of the year, we expect monetary policy to keep ensuring reasonable and ample liquidity,” Yi said. “We need to pay attention to the side effects of the policies, keep the total amount appropriate and consider in advance good timing for an exit from the policy tools.”

China Asks Banks to Forgo $211 Billion to Help Boost Economy

The comments came after China’s cabinet signaled that the central bank will act to make more liquidity available to banks so they can lend more, including by cutting the amount of money they have to keep in reserve. China will reduce the reserve requirement ratio and use its relending policy to keep liquidity ample, state television reported Wednesday, citing a State Council meeting chaired by Premier Li.

Negative Rates

Sheng Songcheng, a former PBOC official and an influential commentator on policy, said on the sidelines of the Lujiazui Forum in Shanghai Thursday that he doesn’t think the central bank should take the further step of cutting the rate that anchors what banks pay depositors for their savings. That had been floated by a state-owned newspaper earlier this week.

“China is in de-facto negative rates as the 1-year deposit rate is lower than inflation,” he said. Cutting that would hurt the interests of ordinary people, and it’s almost impossible to spur consumption through that route, he said.

Overall, markets have not responded positively to the PBOC’s recent policy signals.

While the country’s central bank injected short-term funds into the financial system Thursday and cut the cost on the loans, the moves were insufficient to calm a bond market that’s getting increasingly concerned about liquidity. China’s benchmark repo rate rose for a third session signaling tighter liquidity, and the yield on 10-year government bonds rose to 2.9%, set for the highest since Jan. 23.

“The People’s Bank of China needs to start using some policies to guide market expectations and to show investors that the easing cycle will be in place for the coming six months,” said Larry Hu, head of China economics at Macquarie Securities Ltd.

(Adds former official comments)

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Minimum wage to hire higher-paid temporary foreign workers set to increase

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OTTAWA – The federal government is expected to boost the minimum hourly wage that must be paid to temporary foreign workers in the high-wage stream as a way to encourage employers to hire more Canadian staff.

Under the current program’s high-wage labour market impact assessment (LMIA) stream, an employer must pay at least the median income in their province to qualify for a permit. A government official, who The Canadian Press is not naming because they are not authorized to speak publicly about the change, said Employment Minister Randy Boissonnault will announce Tuesday that the threshold will increase to 20 per cent above the provincial median hourly wage.

The change is scheduled to come into force on Nov. 8.

As with previous changes to the Temporary Foreign Worker program, the government’s goal is to encourage employers to hire more Canadian workers. The Liberal government has faced criticism for increasing the number of temporary residents allowed into Canada, which many have linked to housing shortages and a higher cost of living.

The program has also come under fire for allegations of mistreatment of workers.

A LMIA is required for an employer to hire a temporary foreign worker, and is used to demonstrate there aren’t enough Canadian workers to fill the positions they are filling.

In Ontario, the median hourly wage is $28.39 for the high-wage bracket, so once the change takes effect an employer will need to pay at least $34.07 per hour.

The government official estimates this change will affect up to 34,000 workers under the LMIA high-wage stream. Existing work permits will not be affected, but the official said the planned change will affect their renewals.

According to public data from Immigration, Refugees and Citizenship Canada, 183,820 temporary foreign worker permits became effective in 2023. That was up from 98,025 in 2019 — an 88 per cent increase.

The upcoming change is the latest in a series of moves to tighten eligibility rules in order to limit temporary residents, including international students and foreign workers. Those changes include imposing caps on the percentage of low-wage foreign workers in some sectors and ending permits in metropolitan areas with high unemployment rates.

Temporary foreign workers in the agriculture sector are not affected by past rule changes.

This report by The Canadian Press was first published Oct. 21, 2024.

— With files from Nojoud Al Mallees

The Canadian Press. All rights reserved.

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PBO projects deficit exceeded Liberals’ $40B pledge, economy to rebound in 2025

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OTTAWA – The parliamentary budget officer says the federal government likely failed to keep its deficit below its promised $40 billion cap in the last fiscal year.

However the PBO also projects in its latest economic and fiscal outlook today that weak economic growth this year will begin to rebound in 2025.

The budget watchdog estimates in its report that the federal government posted a $46.8 billion deficit for the 2023-24 fiscal year.

Finance Minister Chrystia Freeland pledged a year ago to keep the deficit capped at $40 billion and in her spring budget said the deficit for 2023-24 stayed in line with that promise.

The final tally of the last year’s deficit will be confirmed when the government publishes its annual public accounts report this fall.

The PBO says economic growth will remain tepid this year but will rebound in 2025 as the Bank of Canada’s interest rate cuts stimulate spending and business investment.

This report by The Canadian Press was first published Oct. 17, 2024.

The Canadian Press. All rights reserved.

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Statistics Canada says levels of food insecurity rose in 2022

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OTTAWA – Statistics Canada says the level of food insecurity increased in 2022 as inflation hit peak levels.

In a report using data from the Canadian community health survey, the agency says 15.6 per cent of households experienced some level of food insecurity in 2022 after being relatively stable from 2017 to 2021.

The reading was up from 9.6 per cent in 2017 and 11.6 per cent in 2018.

Statistics Canada says the prevalence of household food insecurity was slightly lower and stable during the pandemic years as it fell to 8.5 per cent in the fall of 2020 and 9.1 per cent in 2021.

In addition to an increase in the prevalence of food insecurity in 2022, the agency says there was an increase in the severity as more households reported moderate or severe food insecurity.

It also noted an increase in the number of Canadians living in moderately or severely food insecure households was also seen in the Canadian income survey data collected in the first half of 2023.

This report by The Canadian Press was first published Oct 16, 2024.

The Canadian Press. All rights reserved.

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