The Chinese government is trying to set the economy up for a stronger start to 2020, with a multi-pronged policy push ranging from easier monetary settings to freer trade.
The latest pledge came late Monday, when Premier Li Keqiang signaled that further cuts in the amount of cash that banks have to park as reserves will be forthcoming. In theory, that will free up funds to lend to private-sector companies that have struggled to access loans this year.
The funding promise follows a wide-ranging set of initiatives to boost the non-state sector announced at the weekend, and a fresh round of tariff cuts designed to spur domestic demand released on Monday.
After a bruising year that’s seen economic output growth slow to the weakest pace in almost 30 years, modest signs of stabilization have begun to appear in incoming data. On top of that, trade negotiators this month succeeded in staving off another increase in tariffs on Chinese exports by U.S. President Donald Trump.
Speaking in the western city of Chengdu on Monday, Li said the government will continue to cut the reserve ratio for banks and look into increasing re-lending and re-discounting quotas, steps that can also help reduce overall borrowing costs for small firms.
“Beijing may cut the required-reserve ratio slightly earlier than we previously expected given an increasing risk of locally-based credit contraction in some regions, and upcoming liquidity shortage in January 2020,” said Lu Ting, chief China economist at Nomura International Ltd.. The moves would come “in the coming weeks before the lunar new year holiday, to stabilize liquidity conditions, credit supply and growth,” he said.
The private sector this year has faced difficulty accessing credit, amid a multi-year effort to reduce financial risk and rising defaults among corporate bond issuers. Despite an increase in overall credit growth, there’s evidence that not all lending is going to productive purposes.
Upgraded Outlook
Nevertheless, economists have upgraded their outlook for economic growth in 2020. Gross domestic product expansion will come in at 5.9% as easing trade tensions and the prospect of lower bank borrowing costs boost confidence, according to a survey of analysts and traders last week.
Survey respondents see policy makers maintaining a measured pace of easing into next year, trimming the price of central bank medium-term lending by 15 basis points with the first cut coming in the first quarter.
In the meantime, the leadership also stressed more opening-up of the economy, and is seeking to forge stronger partnerships with some trading members.
“To defend free trade is the only way to revitalize the economy,” Li said on Tuesday at a China-Japan-South Korea summit in Chengdu. He called for deeper cooperation between the three countries to counter the “downward economic pressure” posed by the changing global economic and political situation. He also urged the speeding up of negotiations toward a trilateral free trade agreement, which in his words, would allow China to further open its services sectors.
“China is willing to open up its finance, medical care, elderly care and other services sectors to foreign investors, including scrapping the caps on ownership requirements, step by step,” he reiterated.
Lower Tariffs
The Ministry of Finance on Monday published a list of 859 types of products that will enjoy tariffs lower than the standard rates for this year. It included frozen pork as a key item aimed at alleviating shortages of the meat due to the outbreak of African swine fever.
In 2018, imports of the listed items totaled some $389 billion, or about 18% of China’s total imports of $2.14 trillion, according to Bloomberg calculations.
Steps announced Sunday by the State Council, China’s cabinet, aim to help private firms gain better market access and equal regulatory treatment to their state-owned peers. Among actions to be taken are the further opening of key industries to non-state investors, including energy and finance, and also facilitating equity and bond sales by private-sector businesses.
The private sector, which accounts for 9 out of every 10 new jobs created in China, has been hardest hit thanks to what critics say is a regulatory regime that tilts business conditions in favor of state-owned companies.
VANCOUVER – Canada’s labour minister says striking grain terminal workers in Metro Vancouver and their employers have reached a tentative labour deal.
Steven MacKinnon announced the agreement between Grain Workers Union Local 333 and the Vancouver Terminal Elevators’ Association in a post on social media platform X, but provided no other details.
The union confirmed the tentative deal in a statement on Facebook, saying its members will conduct the ratification vote by Oct. 4.
The notification from the union also says picket lines were to be removed Saturday and members will return to work pending ratification, ending the strike that had paralyzed grain shipments from Metro Vancouver’s port.
The dispute had previously led to picket lines going up at six Metro Vancouver grain terminals on Tuesday as about 600 workers went on strike.
Canadian grain producers had urged a resolution in the dispute, noting about 52 per cent of the country’s grains moved through Metro Vancouver terminals last year en route to being exported.
Farmers say the strike, happening during crop harvesting, would result in as much as $35 million per day in lost exports.
The Western Grain Elevator Association said on Friday that talks had stalled after two days of negotiations this week, with the employer saying it had increased its offers to settle “outstanding issues.”
The employers group had said they’ve reached the end of their “financial ability to conclude an agreement that industry can absorb” with the last offer, and it was up to the federally appointed mediator to report the results to MacKinnon for the next steps.
MacKinnon says in his tweet that both parties put in “the work necessary to get a deal done.”
This report by The Canadian Press was first published Sept. 28, 2024.
TORONTO – Canada’s main stock index dipped lower Friday despite strength in energy stocks, while U.S. markets were mixed as the Dow eked out another record but tech stocks dragged.
The mood Friday was mixed after a strong week for equities in both Canada and the U.S., said Andrew Buntain, vice-president and portfolio manager at Fiduciary Trust Canada.
The S&P/TSX composite index closed down 77.01 points at 23,956.82, one day after it . It closed over 24,000 for the first time on Thursday.
The strength this past week wasn’t just in North American markets, noted Buntain, as Chinese stocks enjoyed a rally after the country’s central banks announced a suite of measures intended to boost the economy.
Meanwhile, an undercurrent of broadening strength continued this week as investors spread out their interest beyond a narrow set of tech giants, said Buntain.
“Some of the sectors that have been ignored for several years have been some of the better performers this year,” he said.
“We’re very encouraged by that.”
In New York on Friday, the Dow Jones industrial average was up 137.89 points at 42,313. The S&P 500 index was down 7.20 points at 5,738.17 after setting an all-time high on Thursday, while the Nasdaq composite was down 70.70 points at 18,119.59.
A report Friday on one of the U.S. central bank’s preferred measures of inflation — the personal consumption expenditures price index — showed continued cooling.
The Federal Reserve started lowering its key interest rate last week, and is expected to keep going this fall and into 2025.
However, the Fed’s next interest rate decision isn’t until November, noted Buntain, so there’s plenty of data for the central bank to take in yet — including next week’s labour report.
The job market has been an increasingly key focus for the central bank after recent reports showed cooling in that area of the economy. Friday’s report also showed consumer spending in August didn’t meet economists’ expectations.
In Canada, where the Bank of Canada is set for its next rate decision later in October, Friday brought a GDP report that was a little stronger than expected, said Buntain.
“The Bank of Canada has already delivered three cuts and signalled maybe some further reductions,” he said.
If inflation continues to move lower, Buntain added, the Bank of Canada could even announce an outsized half-percentage-point cut, echoing the Fed’s move last week.
The Canadian dollar traded for 74.08 cents US compared with 74.22 cents US on Thursday.
The November crude oil contract was up 51 cents at US$68.18 per barrel and the November natural gas contract was up 15 cents at US$2.90 per mmBTU.
The December gold contract was down US$26.80 at US$2,668.10 an ounce and the December copper contract was down four cents at US$4.60 a pound.
— With files from The Associated Press
This report by The Canadian Press was first published Sept. 27, 2024.
OTTAWA – Statistics Canada says real gross domestic product grew 0.2 per cent in July, following essentially no change in June, helped by strength in the retail trade sector.
The agency says the growth came as services-producing industries grew 0.2 per cent for the month.
The retail trade sector was the largest contributor to overall growth in July as it gained one per cent, helped by the motor vehicles and parts dealers subsector which gained 2.8 per cent.
The public sector aggregate, which includes the educational services, health care and social assistance, and public administration sectors, gained 0.3 per cent, while the finance and insurance sector rose 0.5 per cent.
Meanwhile, goods-producing industries gained 0.1 per cent in July as the utilities sector rose 1.3 per cent and the manufacturing sector grew 0.3 per cent.
Statistics Canada’s early estimate for August suggests real GDP for the month was essentially unchanged, as increases in oil and gas extraction and the public sector were offset by decreases in manufacturing and transportation and warehousing.
This report by The Canadian Press was first published Sept. 27, 2024.
