BEIJING — China’s leaders struck a cautious tone about the outlook for the country’s economic rebound, after ending most Covid restrictions on business activity late last year.
Beijing announced Sunday a target of “around 5%” growth in gross domestic product for 2023, with only a modest increase in fiscal support.
“The government’s conservative growth target of 5% for 2023 recognizes that the pickup in China’s growth continues to face headwinds,” Martin Petch, vice president and senior credit officer, Moody’s Investors Service, said in a note. “These include the impact of slower global growth on China’s exports and risks associated with the property sector and local government debt.”
“The government’s only mild expansion in fiscal support and more targeted monetary measures indicate that long-term issues including constraining leverage and financial stability remain important elements of the long-term policy mix,” Petch said.
There are still quite a few factors restraining the recovery and growth of consumption … Resuming growth in real estate investment is an uphill battle.
National Development and Reform Commission report
Premier Li Keqiang’s government work report delivered Sunday pointed out growing uncertainties in the international environment. A separate report from the economic planning agency — the National Development and Reform Commission (NDRC) — went into grimmer detail about challenges domestically.
“There are still quite a few factors restraining the recovery and growth of consumption,” the report said. “Resuming growth in real estate investment is an uphill battle.”
“Some local governments are finding economic recovery difficult and are facing prominent fiscal imbalances,” the report said. “Debt risks from local governments’ financing platforms need to be addressed immediately.”
Consumption is key
Consumption can become the primary driver of economic growth this year, Li Chunlin, deputy director at the NDRC, told reporters Monday.
He added the commission has many tools to boost consumer spending.
GDP only grew by 3% last year, well below the official target, as Covid controls and the real estate slump dragged down growth. Retail sales fell by 0.2% in 2022.
A shopping mall in Qingzhou, Shandong province, broadcasts the opening ceremony of China’s National People’s Congress on Sunday, March 5, 2023.
The impact from the pandemic has weakened, and recovery in retail sales alone can drive growth, said Zong Liang, chief researcher at the Bank of China.
Overall, while there’s a need for some increase in fiscal support, it’s important not to “blindly” expand such support, he said, noting that leaves room for future policy moves. That’s according to a CNBC translation of his Mandarin-language remarks.
This year, pressure on the economy has significantly declined, and the economy can grow off a low base, said Xu Hongcai, deputy director of the Economics Policy Commission at the China Association of Policy Science. “The key is to improve the quality of growth.”
An overall recovery in the economy can help fiscal revenues grow, and boost demand for workers, he said. But he pointed out that “this year, the biggest pressure is on overseas trade.”
Many economists expect China’s exports to, at best, barely grow this year. That’s due to a drop in demand for Chinese goods as a result of slowing U.S. and European economies.
A ‘fiscal buffer’
China announced Sunday its deficit-to-GDP ratio is expected to increase to 3% from 2.8% last year. The country also increased an annual quota of special-purpose bonds by 150 billion yuan to 3.8 trillion yuan, or about $551.12 billion.
The measures are not aggressive, serving more as a “fiscal buffer,” said Susan Chu, senior director at S&P Global Ratings.
“Because China is not completely back to a consumption-driven [economy],” she said. “There’s a lot of external challenges, property slowdown.”
FREDERICTON – New Brunswick‘s finance minister says the province recorded a surplus of $500.8 million for the fiscal year that ended in March.
Ernie Steeves says the amount — more than 10 times higher than the province’s original $40.3-million budget projection for the 2023-24 fiscal year — was largely the result of a strong economy and population growth.
The report of a big surplus comes as the province prepares for an election campaign, which will officially start on Thursday and end with a vote on Oct. 21.
Steeves says growth of the surplus was fed by revenue from the Harmonized Sales Tax and federal money, especially for health-care funding.
Progressive Conservative Premier Blaine Higgs has promised to reduce the HST by two percentage points to 13 per cent if the party is elected to govern next month.
Meanwhile, the province’s net debt, according to the audited consolidated financial statements, has dropped from $12.3 billion in 2022-23 to $11.8 billion in the most recent fiscal year.
Liberal critic René Legacy says having a stronger balance sheet does not eliminate issues in health care, housing and education.
This report by The Canadian Press was first published Sept. 16, 2024.
OTTAWA – Finance Minister Chrystia Freeland says the government is making some changes to mortgage rules to help more Canadians to purchase their first home.
She says the changes will come into force in December and better reflect the housing market.
The price cap for insured mortgages will be boosted for the first time since 2012, moving to $1.5 million from $1 million, to allow more people to qualify for a mortgage with less than a 20 per cent down payment.
The government will also expand its 30-year mortgage amortization to include first-time homebuyers buying any type of home, as well as anybody buying a newly built home.
On Aug. 1 eligibility for the 30-year amortization was changed to include first-time buyers purchasing a newly-built home.
Justice Minister Arif Virani is also releasing drafts for a bill of rights for renters as well as one for homebuyers, both of which the government promised five months ago.
Virani says the government intends to work with provinces to prevent practices like renovictions, where landowners evict tenants and make minimal renovations and then seek higher rents.
The government touts today’s announced measures as the “boldest mortgage reforms in decades,” and it comes after a year of criticism over high housing costs.
The Liberals have been slumping in the polls for months, including among younger adults who say not being able to afford a house is one of their key concerns.
This report by The Canadian Press was first published Sept. 16, 2024.
OTTAWA – Statistics Canada says manufacturing sales rose 1.4 per cent to $71 billion in July, helped by higher sales in the petroleum and coal and chemical product subsectors.
The increase followed a 1.7 per cent decrease in June.
The agency says sales in the petroleum and coal product subsector gained 6.7 per cent to total $8.6 billion in July as most refineries sold more, helped by higher prices and demand.
Chemical product sales rose 5.3 per cent to $5.6 billion in July, boosted by increased sales of pharmaceutical and medicine products.
Sales of wood products fell 4.8 per cent for the month to $2.9 billion, the lowest level since May 2023.
In constant dollar terms, overall manufacturing sales rose 0.9 per cent in July.
This report by The Canadian Press was first published Sept. 16, 2024.
