President Xi Jinping’s policy of zero tolerance toward COVID kept cases down during the first two years of the pandemic. But the infectiousness of the omicron variant is making it much harder to pull off.
It’s estimated that 87 of the 100 largest cities in China are now under some kind of restricted movement. Shanghai is under an intense lockdown, severely impacting living conditions for its 25 million inhabitants.
This is starting to impact global financial markets and supply chains. BRINK spoke to David Dollar, an expert on the Chinese economy at Brookings, to assess the economic impact.
DOLLAR: It seems like the zero-tolerance policy is starting to have a negative effect on the Chinese economy. According to official data released last week, China’s economy expanded 4.8% in the first three months of this year compared to the same period last year. However, much of that growth was recorded in January and February only. There’s no question the Chinese economy has slowed down, and there are anecdotal reports about certain ports suffering big backlogs and cities that have shut down.
China’s a big country, so shutting down a couple of cities doesn’t necessarily have an overwhelming effect, but it is definitely going to be negative for China’s growth.
BRINK: Its impact will depend on how long this goes on — do you have any sense of whether the government is determined to stick to the policy?
DOLLAR: China has an important Communist Party congress in November, so I would be surprised if they changed policy before November. But President Xi has sent out a message to local officials to pay attention to growth, and there are examples of cities modifying their quarantine policies, for example, by moving from a three-week quarantine to one week. Or in Shenzhen, the factory that produces a lot of Apple products was allowed to keep operating. So I would say, you see some local flexibility, but they are basically sticking to their zero-tolerance policy.
BRINK: Are you seeing any sign of this rippling through global supply chains yet?
DOLLAR: The Ukraine [conflict] is having a big effect on the global economy, and the spread of COVID in China is an additional negative factor, but on a smaller scale, so far. However, the longer it goes on, the more it’s going to take away from China’s annual growth rate.
The financial markets hate the uncertainty around the Ukraine [conflict], the effect on the global economy, and what’s happening with China.
One thing about China, which we saw with the first wave of COVID, is if things shut down for a month or two, then they seem to work extra hard to recover. And that’s kind of a natural tendency, but China’s particularly good at it. Oftentimes, they get close to annual targets, they have a couple of bad months, and then they work super hard for a few months. But if the spread of cases continues throughout the year, then of course, you’re not going to be able to make up for this during 2022.
BRINK: I’ve seen some projection suggesting it could knock a point off the GDP growth. Do you think that is overly pessimistic?
DOLLAR: They set a target for the year of around 5.5% growth in GDP, and they made that decision before the Ukraine [conflict]. Frankly, even leaving aside COVID, that already seemed like a very ambitious target, given the challenges that they were already facing domestically with their real estate and the tech crackdown.
When you add in the Ukraine [conflict], the notion that COVID could take a point or more off of that 5.5 target seems realistic. The financial markets hate the uncertainty around the Ukraine [conflict], the effect on the global economy, and what’s happening with China. So it’s not surprising to see stock markets bouncing around a lot.
When it comes to Ukraine, China happens to be the poster child for a country that imports a lot of petroleum, natural gas and wheat. And the [conflict] has affected prices globally, so it doesn’t even matter where China is importing its oil and gas from — those prices have gone up very dramatically. That’s a big shock for the Chinese economy.
BRINK: How does this play with inflation if the Ukraine crisis drags on and there’s this continued zero COVID policy?
DOLLAR: Well, China has much lower consumer inflation than we do in the U.S., or even in Europe. And so, that actually puts them in a position where they can ease up their monetary policy, while we’re going to be tightening our monetary policy. So that gives them some room to stimulate the economy with both fiscal and monetary policies.
It’s a little bit of a mystery how their consumer pricing inflation has stayed so low. This latest spread of COVID has been going on long enough now that prices for a lot of services have gone down because people are not traveling or going to restaurants as much. So you’ve got price declines in services. And compared to Americans, people don’t drive nearly as much, so high gas prices don’t have as much effect on household budgets. So their inflation is quite modest and they’ve got room to stimulate.
Rural development grants to spark Nicola Valley economy – Global News
The province announced on Friday a series of rural development grants in the Nicola Valley to support economic development and diversification.
This is the next step in the StrongerBC Economic Plan and the ongoing recovery efforts in Merritt following the floods in November last year.
“People in Merritt have been through a lot in the past year, and they know how important business recovery is for community rebuilding,” said parliamentary secretary for rural and regional development Roly Russell in a press release.
The provincial government is providing a $1-million rural development grant to the Small-Scale Meat Producers Association to build a community abattoir in the Merritt area.
This will provide meat processing and cut-and-wrap services to local farmers and ranchers.
“This project represents significant job and economic opportunities for the region, while ensuring local ranches, abattoirs and businesses are part of a strong, resilient B.C. food system,” said minister of agriculture and food Lana Popham in a press release.
“With the recent changes to B.C.’s meat-licensing system and investments in facilities like the Nicola Valley community abattoir, this revitalization of the small-scale meat industry makes it easier to produce, buy and sell B.C. meat in our rural communities, and helps strengthen our food security and food resiliency.”
The abattoir will be a government-inspected licensed facility with a full range of services to process red meat.
According to the province, local producers have been impacted by the lack of processing capacity. Julia Smith who is a pork and beef producer in Merrit is hopeful this new facility will help her business as well as other local producers.
“My partner and I moved to the Nicola Valley in 2016 planning to expand our business to meet the growing demand for well-raised, local meat. But we soon found that the processors we relied upon were not able to keep up with our production and we had to scale the business back instead of growing it.”
More than 900 people still displaced following Merritt flooding last fall
“We were on the verge of giving up. But now we are ready to press on, because this facility will allow us, and other local family farms and ranches, to grow and thrive while providing greater food security for the community.”
The province is providing a $1-million rural development grant to the Scw’exmx Tribal Council toward Gateway 286 in Merritt.
“After an unbelievable year of fires, floods, and a pandemic, we welcome the B.C. government’s $1-million grant that will bolster our rural community, support good-paying jobs and much-needed economic development,” said Spayum Holdings LP director and Scw’exmx Tribal Council Terrence (Lee) Spahan in a press release.
“The Gateway 286 project is a 30-plus-year vision of past and present Nicola Valley Indigenous Chiefs and these monies will take our commercial and tourism development one more step closer to reality. This project will enhance the experience of the [traveling] public by providing much-needed services, and it will provide good-paying jobs and entrepreneurial opportunities for the residents of the Nicola Valley.”
Meanwhile, the City of Merritt is receiving a $500,000 grant related to economic recovery for communities that were affected by the flooding. The grant will go towards completing economic development projects and initiatives to support long-term economic recovery.
This is in addition to $329,000 in provincial funding for the City of Merritt to update flood-hazard mapping and develop new flood-mitigation plans.
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China's Economy Contracts Sharply as Covid Zero Cuts Output – BNN
(Bloomberg) — China’s economy contracted in April, with Covid outbreaks and lockdowns dragging the industrial and consumer sectors down to the weakest levels since early 2020 as millions of residents were confined to their homes and factories were forced to halt production.
Industrial output fell 2.9% in April from a year ago, worse than the median estimate of a 0.5% increase in a Bloomberg survey of economists. Retail sales contracted 11.1% in the period, weaker than a projected 6.6% drop. The unemployment rate climbed to 6.1%, higher than the forecast of 6%.
China’s economy has taken an enormous toll from the government’s stringent efforts to keep the virus at bay. Beijing has insisted on sticking with its Covid Zero strategy to curb infections, even though the high transmissibility of omicron puts cities at greater risk of repeatedly locking down and reopening compared to earlier strains.
“Covid outbreaks in April had a big impact on the economy, but the impact is short-term,” the National Bureau of Statistics said in a statement. “With progress in Covid controls and policies to stabilize the economy taking effect, the economy is likely to recover gradually.”
China’s benchmark CSI 300 stock index was down 0.3% as of 10:04 am local time. The onshore yuan was little changed at 6.7917 per dollar. The yield on the 10-year government bonds rose 1 basis point to 2.83%.
Fixed-asset investment increased 6.8% in the first four months of the year, largely in line with projected growth of 7%, likely supported by the government’s push to expand infrastructure spending.
The economic shocks from the zero-tolerance policy have pushed China’s ambitious full-year growth target of around 5.5% further out of reach, and is weighing on the global growth outlook.
Beijing has signaled that policy makers will step up support for the economy, with Premier Li Keqiang recently urging officials to ensure stability through fiscal and monetary policy.
The People’s Bank of China took steps on Sunday to ease a housing crunch by reducing mortgage rates for first-time homebuyers. It left the interest rate on one-year policy loans unchanged on Monday, as inflation pressure and worries about capital outflows reduce the scope for more easing.
Monetary stimulus is proving less effective because of the stringent virus restrictions, with data on Friday showing businesses and consumers had little appetite to borrow in April. Credit growth weakened sharply last month, with new yuan loans sinking to the lowest level since December 2017.
(Updates with comment from statistics office)
©2022 Bloomberg L.P.
Potential of Seaweed on Economy Being Explored in Upcoming Webinar – VOCM
A webinar on the potential of seaweed as an economic driver is coming later this month.
The webinar, put together by The Laurentic Forum Consortium, will look at how coastal communities can use an abundance of seaweed to boost the economy, as seaweed is being used as fertilizer, diet supplements, bioplastics, animal feed, pharmaceutical products, and much more.
Webinar moderator and the executive director of the Canadian Centre for Fisheries Innovation, Keith Hutchings, says seaweed farming could provide opportunities in Newfoundland and Labrador.
He says if utilized correctly, communities and regions can add one more industry to help sustain them.
The webinar is taking place May 19.
The Laurentic Forum consortium invites you to join us on May 19, 2022, to discuss the tremendous opportunity and potential associated with the seaweed industry.
— Laurentic Forum (@ForumLaurentic) May 11, 2022
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