The Chinese Communist Party (CCP) has fallen short of the economy’s needs — again. It has arranged lots of meetings, and its leaders have made lots of speeches, full of upbeat rhetoric, but they have shown no imagination and offered little of substance to deal with China’s serious and manifold economic challenges – a metastasizing property crisis, export shortfalls, youth unemployment, depressed levels of consumer confidence, and a reluctance by private business to invest in the future.
Beijing has put forward little of substance to deal with the property crisis. After years during which the authorities neglected the economic and financial fallout of the property crisis, they have at last acted but with only two small gestures. First is the People’s Bank of China’s (PBOC’s) to cut interest rates farther than it already has. Oddly enough, right after making this promise to the CCP’s Two Sessions meeting, the bank at its own meeting decided to hold interest rates steady. Even if coming months see rate cuts, there is ample reason to doubt their effectiveness. After all, the PBOC has cut interest rates five times over the last 24 months and yet housing sales and construction have continued to fall, with sales down 33% from year-ago levels in the first two months of this year and new construction down 30%. Against such a record, it is only reasonable to ask if interest rate cuts answer the needs of the matter.
Beijing has also launched a program that it calls the “white lists.” In it, local governments identify failing property developments for financing that the state-owned banks will provide after they review the proposal. In principle, it is not a bad idea. It certainly has more promise than small additional PBOC interest rate cuts. The program would have been more effective had Beijing instituted it two years ago when the crisis first emerged and had not yet had time, as it has, to undermine confidence in the future of real estate investing and in financial arrangements generally. Any help such a program can offer now is limited accordingly but also because its scale is too small. Consider the $17 billion equivalent earmarked for “white lists” so far is barely over 5% of the $300 billion in liabilities Evergrande announced in 2021 that it could not cover, much less the weight of the failures that have followed that announcement.
Otherwise, China’s leadership has turned away from the property crisis yet again. This is a shame, because the nation’s property problems lie at the root of other severe economic challenges. The failures in property development have not only restrained Chinese finance and depressed housing sales and construction, but they have also forced down real estate values, and since real estate is the primary asset for most Chinese, this loss of value has cut deeply into household wealth and is the primary reason why consumer confidence has cratered and households are so reluctant to spend.
Rather than recognize these sorts of economic interactions and take policy beyond the small gestures outlined above, China’s leadership has decided simply to change the subject. All but ignoring the property crisis and the problems of Chinese households, leaders at the CCP’s Two Sessions conference talked mostly about bolstering manufacturing. This they asserted is where China would take what they called “a new leap forward.” Beijing’s thinkers spoke glowingly of the “modernization of the industrial system” through “science and education.” Speakers emphasized artificial intelligence, new energy vehicles, hydrogen power, biomanufacturing, commercial space flight, new materials, and innovative drugs.
Though modernization in business and industry is always a good idea, problems remain. For one, the resources allocated to this heroic effort are inadequate to make much difference. Beijing has allocated 10.4 billion yuan ($1.5 billion) for modernization and training, a pittance in an $18 trillion economy.
Nor has Beijing offered anything concrete beyond this small amount on how to promote this change. Indicative are remarks by Premier Li Qiang. According to the official translation of his talk, China will “spur industrial innovation by making innovations in science and technology.” This is meaningless. It effectively says that the nation will innovate by innovating. That is not a plan; it is a logical circle.
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Nor does this new emphasis make an appearance in Beijing’s only major policy proposal: infrastructure spending, China’s default stimulus for decades now. The plan calls for 3.9 trillion yuan ($541 billion) in special purpose bonds for local government to finance projects and an additional 1 trillion yuan ($138.9 billion) in bonds issued by the government in Beijing to finance other projects. So far, Beijing has not revealed specifics on planned projects. The fact that the government plans to issue “ultra-long-term” bonds for financing suggests that the planners do not expect an early payoff. Some suggestions of huge projects on the scale of the Three Gorges Dam development have surfaced. That project started in the 1990s and was not operational until 2015.
Then there is the question of where all this new innovative manufacturing will go. Since Beijing has done nothing to deal with the problem of household finances and depressed levels of consumer spending, the only viable outlet for all this modern and efficient manufacturing would be exports. But there China faces significant efforts by American, European, and Japanese businesses to diversify their supply chains away from China as well as a growing hostility to China trade in Washington, Brussels, and Tokyo.
It would seem from all these questions and loose ends that Beijing has failed to think through its plans, to recognize that the pieces of the economy link one to the other and that even a powerfully centralized state such as China cannot develop one area without reference to the rest of the economy. This failure all but ensures that China’s economic and financial problems will persist for some time yet.
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.
