Taipei, Taiwan – China may be headed for negative economic growth in certain sectors and regions this year as it struggles with the worst economic indicators since the start of the pandemic, economic analysts have warned.
China’s Communist Party (CCP) has locked down tens of millions of people since the start of 2022 to contain the spread of the Omicron variant, severely impeding key economic sectors, including services and manufacturing.
The draconian measures have disrupted production at factories operated by firms from Foxconn to Tesla and Toyota, and crimped retail sales as millions have been forced to stay at home.
As Beijing warns against deviating from its controversial “dynamic Covid Zero” strategy, there are few signs of a respite from the economic bleeding on the horizon.
On Tuesday, WHO Director-General Tedros Adhanom Ghebreyesus said China’s strategy is not sustainable and a “shift would be very important,” in a rare public criticism of the country’s handling of the pandemic.
Shanghai, a key financial and manufacturing hub, has been under some form of lockdown since late March, while much of Beijing is at a standstill as authorities scramble to roll out increasingly strict controls to avoid a city-wide lockdown.
‘Worst set of numbers’
“The takeaway of what we’re seeing in China right now is hands down the worst set of numbers that we have seen in terms of economic performance since the initial downturn that took place in 2020,” Shehzad Qazi, managing director of China Beige Book, which surveys about 1,000 businesses in China each quarter, told Al Jazeera.
China Beige Book’s April results showed that revenue and margin growth had fallen across China’s manufacturing, retail, and services sectors, with new hiring returning to early pandemic levels and borrowing sharply down.
None of this bodes well for Beijing’s ambitious target of 5.5 percent gross domestic product (GDP) growth in 2022, said Qazi, as the pursuit of ‘zero COVID’ at all costs renders traditional economic tools, such as monetary stimulus, largely ineffective.
“Credit can only be put to use if you have normal economic activity, or you have businesses that are functioning,” Qazi said, adding that the CCP is “very limited in what it can do if you’re simultaneously forcing people to stay home”.
Far from adjusting the draconian pandemic strategy, authorities have in recent days tightened restrictions in Shanghai and Beijing. More than 373 million people across 45 cities were under some form of lockdown as of mid-April, according to an analysis by Japan’s Nomura Holdings.
Qazi said he expects the economy to shrink in the second quarter of 2022 if such measures continue, although a full-blown recession is less certain. China last reported a quarter of negative growth in April 2020 but has not experienced a recession — defined as two consecutive quarters of contraction — since the 1970s.
Even without a full-scale recession, lockdowns could create uneven growth between northern and southern China as well as among industries, said Gary Ng, Asia-Pacific economist for Natixis, a French investment and corporate bank.
“Even though it may not enter into a recession as a whole country, if we look at certain provinces, I wouldn’t be surprised to see negative growth for some of the provinces with strict lockdowns,” Ng told Al Jazeera.
China’s economy is slowing down as lockdowns in major cities, including Shanghai, weigh on growth [File: Qilai Shen/Bloomberg]
While Shenzhen, a manufacturing hub neighbouring Hong Kong, exited its lockdown earlier this year relatively unscathed as factories continued to operate, Ng said exporting the “Shanghai model” elsewhere could have serious economic ramifications.
Tommy Wu, lead economist for Oxford Economics in Hong Kong, said one particularly concerning metric is the effect of lockdowns on logistics and supply chains, with truck flow data at about 30 percent of normal levels.
Wu said he expects the disruptions to last through the second quarter of 2022 with a “ripple effect” on Asian and global supply chains and uneven growth across China’s economy.
“It’s not as bad as 2020, but this is still pretty significant, more significant than what we’ve seen over the past couple of years,” he said.
“I think the official statistics will still tell you a very weak growth … but I would say that there will be contraction at least in some sectors like consumption and also manufacturing.”
Beijing has called attention to growing economic risks in the lead-up to a key National Congress in October without acknowledging that its zero-tolerance policies have been anything less than successful.
This year’s party congress holds particular significance as Chinese leader Xi Jinping is set to seek an unprecedented third term in office.
At a Politburo meeting last month, China’s top leaders emphasized the importance of infrastructure spending and construction to economic recovery, despite the government’s efforts in recent years to reduce the huge debts on the balance sheets of state-run firms.
“China may actually trade off its deleveraging call with basically the short term economic growth in the short run,” said Ng, adding that loose monetary policy could also help companies weather the storm.
Natixis has estimated that for China to hit its 2022 GDP targets, infrastructure investment would need to grow by nearly 18 percent, harkening back to pre-2017 levels. Some of that growth has already started as infrastructure spending grew 8.5 percent in the first quarter compared with 2021, but it still has a way to go, the bank said.
On the consumption side, Ng authorities may look to reduce down payments and interest rates for first-time and even second-time homebuyers.
The real estate sector is expected to recover from a low point at the end of 2021 and the start of the year – when major companies like Evergrande defaulted on loans – while there are signs of a possible reprieve for beleaguered tech companies.
After Beijing launched a sweeping regulatory crackdown on the tech sector in 2020, imposing restrictions on data collection, service fees, and even app usage in pursuit of “common prosperity”, state media has in recent weeks flagged the need for greater support for the industry.
China Beige Book’s Qazi said the issue may return to the national agenda in 2023 or 2024, but for now, the CCP is focused on maximum stability and calm financial markets as it heads into its October meeting.
In the meantime, “zero COVID” appears here to stay.
Oxford Economics’s Wu said it may begin to shift towards a more “dynamic” definition of the strategy as Beijing finds itself both unable to admit defeat and also in need of economic recovery.
Under such an adjustment, provincial and city governments could start to gradually lift lockdowns by area as individual districts are cleared of COVID cases and relax more extreme measures, he said, while continuing with mass testing.
“This year, even though I think it’s really challenging to meet that [growth target], they will try as hard as possible,” Wu said. “It’s an important political year so it’s important for them to balance things out.”
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.
