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Most Major Economies Are Shrinking. Not China’s. – The New York Times



The Chinese economy grew 2.3 percent last year, the country’s National Bureau of Statistics announced on Monday in Beijing.

SHANGHAI — As most nations around the world struggle with new lockdowns and layoffs in the face of the surging pandemic, just one major economy has bounced back after bringing the coronavirus mostly under control: China.

The Chinese economy rose 2.3 percent last year, the country’s National Bureau of Statistics announced on Monday in Beijing. By contrast, the United States, Japan and many nations in Europe are expected to have suffered steep falls in economic output.

China’s strength seemed improbable a year ago, when the virus emerged in the central Chinese city of Wuhan. As travel and business ground to nearly a halt, the economy shrank 6.8 percent in the January-March period compared with 2019, the first contraction in nearly half a century.

Since then, the economy has improved steadily, finishing the year with growth of 6.5 percent in the last three months compared to the same period in 2019. While the recovery remains uneven, factories across China are running in overdrive to fill overseas orders and cranes are constantly busy at construction sites — a boom in exports and debt-fueled infrastructure investments that is expected to drive the economy in the coming year.

At stalls in the Wuhan Taiyuan Textile Market in Hubei Province, garment factory managers have been ordering large bolts of cloth to fill domestic and international apparel orders. At Xuzhou Construction Machinery Group in Jiangsu Province, the plants have been running day and night to keep up with demand for new earthmovers and pile drivers. And at Huahong Holding Group, a large exporter in Zhejiang Province of framed prints and oil paintings, profits have doubled.

“This is the only major economy that quickly recovered from the pandemic and could run business normally,” said Zhou Linlin, a Shanghai financier on Huahong’s board. “So all these orders from everywhere are coming to China.”

The stock market in Shanghai was up nearly 1 percent late on Monday. It had already climbed 16 percent over the past year as domestic and foreign investors placed large bets on a continued economic recovery.

People are going to restaurants again, particularly in affluent cities like Beijing.
Noel Celis/Agence France-Presse — Getty Images

The overall resilience of China’s economy, though, masks pockets of weakness.

Jobs abound for blue-collar workers, but have been scarce for recent college graduates with little experience. Service businesses like hotels and restaurants did well late last year in big coastal cities like Beijing and Shanghai, but never fully recovered in inland provinces. Makers of consumer electronics or personal protective equipment have benefited from the pandemic, but exporters to poor countries devastated by disease have not.

Zhang Shaobo, the owner of a Halloween mask factory in Yiwu, received word last March that one of his most consistent export customers in India was sick with the coronavirus. By May, the man was dead. New customers from Mr. Zhang’s main markets in India and South America also stopped coming to China to look at his latest products.

He laid off all but four of his 20 factory workers, and began making preparations to close his shop at Yiwu’s wholesale market. With business so weak, he said, “I am not going to keep renting it.”

China’s top leader, Xi Jinping, acknowledged the economic challenges in a speech published on Friday by a Communist Party journal, Qiushi.

“There are profound adjustments underway to the international economy, technology, culture, security and politics, and the world has entered a period of turbulent change,” Mr. Xi said in the speech, which was delivered in August. “In the coming period, we face an external environment of increased headwinds and counter-currents, and we must prepare to respond to a series of new risks and challenges.”

Those challenges could worsen in the weeks ahead. After considerable success in taming the coronavirus, China has suffered a series of small outbreaks of late. The government has mobilized swiftly, by building hospitals, imposing mass testing and putting at least 28 million people under lockdown.

The authorities are starting to reimpose a wide variety of health checks that are discouraging consumers from spending money. Even before the recent outbreaks, not everyone was prospering. Consumer confidence never fully recovered last year. Chinese families have proved particularly wary of big-ticket expenditures, like home remodeling projects or new furniture.

Growth in retail sales faltered in December, slowing to 4.6 percent from 5 percent the month before. Ning Jizhe, the commissioner of the National Bureau of Statistics, attributed this to the renewed spread of the virus, saying that, “this has brought some uncertainty to the economy.”

Lin Jinting, a manual laborer in Wuhan, can usually earn nearly $100 a day carrying heavy loads home for shoppers. Now, many are deferring major purchases, and work is scarce.

“I came here at 8 o’clock this morning and I haven’t had any orders today,” he said on a recent afternoon.

Keeping the virus at bay has been critical to China’s economic success over the past year. While the pandemic ravages other nations, Beijing’s aggressive top-down approach kept the virus from spreading rapidly across the country.

In China, there have been nearly 100,000 total reported cases and fewer than 5,000 deaths, mostly centered in Wuhan; about 150 cases a day have been reported in the current outbreaks. In the United States, there have been over 220,000 cases a day and 3,300 daily deaths.

Mary Wu, a 26-year-old saleswoman in Jiande in southeastern China, was only allowed to leave her apartment once every three days during a lockdown last spring. Local schools closed for her children, aged 4 and 9. But life quickly returned to normal, schools reopened and Ms. Wu and her family began eating out again.

Ms. Wu even sent her elder child to extra classes to make sure that he caught up on any ground he lost. She no longer worries much about the virus.

“We all wear masks,” she said.

Alex Plavevski/EPA, via Shutterstock

With the virus largely under control, Beijing has relied on its old playbook to rev up the economy.

When Wuhan was still under lockdown, the authorities moved to get manufacturing up and running again in other areas. They provided long-haul buses to get workers back from their home villages to factories after Chinese New Year. State-owned banks extended special loans to factories, while many government agencies gave partial refunds of business taxes that had been paid before the pandemic.

Already the world’s largest manufacturer, China widened its lead this year. Despite the trade war and tariffs, American and European companies turned to China parts and goods, when factories elsewhere struggled to meet demand. Factories within China turned to nearby suppliers to replace imports as transoceanic supply lines became less dependable.

The “Made in China” label has been especially popular as people stuck in their homes have redecorated and renovated. At the Xingxing Refrigeration factory in Taizhou, managers can’t hire workers fast enough to keep up with strong demand for freezer chests for people who want to store more food during pandemic lockdowns.

Keith Bradsher/The New York Times

The consumer electronics sector in China is especially strong right now, for white-collar and blue-collar workers alike. When American managers were no longer able to travel to China last spring to oversee tech projects, demand surged for electronics project managers who were already in China.

“Companies were scooping up anyone they could find,” said Anna-Katrina Shedletsky, the chief executive of Instrumental, a remote quality monitoring system used by global brands to track and manage electronics manufacturing.

Beijing also ramped up its infrastructure spending. Every major city in China was already connected with high-speed rail lines, enough to span the continental United States seven times, but new lines were rapidly added last year to smaller cities. New expressways crisscrossed remote western provinces. Construction companies turned on floodlights at many sites so that work could continue around the clock.

Exports and infrastructure fueled much of the growth over the past year. China’s exports grew 18.1 percent in December compared with the same month a year earlier, and were up 21.1 percent in November. Fixed-asset investment in everything from high-speed rail lines to new apartment buildings climbed 2.9 percent last year.

Both are expected to power the economy in 2021.

The Chinese Academy of Social Sciences predicted last week that the country’s economy would expand 7.8 percent this year. If it does, it would be China’s strongest performance in nine years.

Liu Yi, Coral Yang and Amber Wang contributed research.

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Trudeau Liberals eye security threats to Canada's economy with government-wide plan – CTV News



The Trudeau government is pressing ahead with efforts to counter economic-based threats to national security, such as theft of valuable intellectual property and damage to critical energy and information networks.

In its newly published plan for the coming year, Public Safety Canada says it will lead the government-wide development of a comprehensive framework to deal with the broad range of risks to Canada’s economic well-being.

The move comes as security agencies warn Canadians of the rising danger of hostile nations pilfering trade secrets and cybercriminals demanding ransom for sensitive files.

The government says in a few short years, the threat landscape — once dominated by the scourge of international terrorism — has evolved dramatically as potential adversaries develop new and aggressive tactics made possible by the rapid spread of technology.

Canada has already taken steps during the economic uncertainty of the COVID-19 pandemic to more strictly scrutinize foreign investments.

National security expert Wesley Wark says the federal plan will require improved economic intelligence-gathering and related threat assessments, which currently have no central focus within the Canadian security-and-intelligence community.

This report by The Canadian Press was first published March 1, 2021.

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Trudeau's tighter COVID-19 rules hit Canada's economic growth – BNN



Prime Minister Justin Trudeau’s claims there isn’t a trade-off between Canada’s strict lockdowns and economic growth will be tested this week with the release of new output data.

Analysts expect gross domestic product shrank by more than 5 per cent last year, a middling result among advanced economies. The U.S., with far less restrictive pandemic measures last year, shrank by just 3.5 per cent.

Canada’s lagging performance is expected to continue into 2021. Economists see a stronger rebound in the U.S. this year because of its faster pace of COVID-19 vaccinations, looser virus-related curbs and President Joe Biden’s stimulus plan.

“It’s pretty obvious there is a trade-off,” Doug Porter, chief economist at Bank of Montreal, said in a phone interview.

The good news is investors and analysts don’t appear worried. The Canadian dollar is one of five major currencies that’s appreciated against the U.S. greenback this year. And the rise in government bond yields has been faster in Canada than the U.S., another sign of optimism about growth.

Despite the underperformance, Canada’s outlook remains positive.

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Economists anticipate growth of 4.7 per cent this year. That’s slower than the U.S., but also the fastest in two decades. GDP data due Tuesday from Statistics Canada are also likely to show more resilience to the latest wave of restrictions this winter, in part because of a booming housing market.

A rally in commodities, meanwhile, is another major tailwind for the resource-producing economy. The Bank of Canada’s index of commodity prices — which tracks commodities produced in Canada and sold in world markets — has more than doubled since its lows in April to the highest levels since 2014. Excluding energy, the index is at an all-time high.

Bouncing Back

The debate is switching toward upside risks to forecasts.

A massive accumulation of excess savings is one wild card. While other countries have seen a similar pickup in household savings during the pandemic, the trend has been more pronounced in Canada because of its stricter lockdowns and generous government aid programs. There were fewer opportunities to spend, even as Canadian incomes surged.

Many economists, including those at the Bank of Canada, have chosen to make conservative assumptions about how much of a rush Canadians will be in to draw down those extra savings.

Others, including Finance Minister Chrystia Freeland, are more bullish.

The reservoir of savings is so large, a bigger worry may be a rebound that is too strong, putting pressure on the central bank to raise interest rates.

While there’s debate over who will hike first — the Federal Reserve or the Bank of Canada — markets are pricing in more aggressive increases in the policy rate north of the border amid expectations Governor Tiff Macklem will have less tolerance for price pressures.

“There is a narrower inflation mandate for the Bank of Canada than the Fed,” Derek Holt, an economist at Bank of Nova Scotia, said by phone.

Add rising wealth from a surging housing market and it may not require much to trigger a post-pandemic boom. Which would be great news for a Trudeau government that may face an election soon, but poses another challenge.

Freeland wants to keep the spending taps open for the next few years on the grounds the economy will need continued support. That’s getting harder to argue.

“With a large stock of excess household savings waiting on the sidelines, plus already highly supportive policy, governments do not need to spend much more to propel a strong economic recovery in the year ahead,” Porter said in a report to investors Friday. “An effective vaccine rollout would be the single most important contributor to growth.”

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Pandemic Binge Helped Turkish Economy Outperform Most Peers – BNN



(Bloomberg) — Turkey’s economy outperformed all but one major competitor in the final quarter, as rate cuts and a spending-and-credit binge beat back pandemic restrictions even as the lira collapsed.

Gross domestic product rose 5.9% from a year earlier, more than all G-20 nations except China. The median of 20 forecasts in a Bloomberg survey was for 6.9% growth. The seasonally and working day-adjusted figures showed an expansion of 1.7% in the last quarter from the previous three months. The economy grew 1.8% in 2020.

The growth push weakened the currency by 20% in 2020 and kept headline inflation in double digits for the entire year. The data expose the challenge facing central bank Governor Naci Agbal as he looks to cool growth and restore price stability without triggering a steep slowdown in activity and a jump in unemployment.

The government had pushed banks to ramp up lending to help businesses and consumers ride out the Covid emergency. The credit boom was coupled with a front-loaded easing cycle that helped prime the economy.

Agbal raised the benchmark interest rate by a cumulative 675 basis points to 17% following his appointment in November, signaling a return to more market-friendly monetary policy. The lira has strengthened 15% since his appointment.

The International Monetary Fund raised its growth forecast for Turkey’s economy to 6% in 2021 amid the coronavirus vaccine rollout, while warning the pandemic response worsened pre-existing financial risks despite leading to a strong rebound in economic activity.

“With some stability in the currency market, Turkish exporters can finally enjoy the price competitiveness accumulated over recent years,” said JPMorgan Chase & Co.’s London-based analyst Yarkin Cebeci. “Depending on the pace of vaccinations, tourism will most probably be stronger than last year as well.”

©2021 Bloomberg L.P.

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