Economy

Opinion | How Do We Manage China's Decline? – The New York Times

Published

1 year ago

August 30, 2023

Several years ago, the Harvard political scientist Graham Allison coined the term “Thucydides’ trap.” It was based on the ancient historian’s observation that the real cause of the Peloponnesian War “was the rise of Athens and the fear that this instilled in Sparta.” Allison saw the pattern of tensions — and frequent wars — between rising and ruling powers repeating itself throughout history, most recently, he believes, with the challenge that a rising China poses to American hegemony.

It’s an intriguing thesis, but in China’s case it has a glaring flaw: The main challenge we will face from the People’s Republic in the coming decade stems not from its rise but from its decline — something that has been obvious for years and has become undeniable in the past year with the country’s real estate market crash.

Western policymakers need to reorient their thinking around this fact. How? With five don’ts and two dos.

First, don’t think of China’s misfortunes as our good fortune.

A China that can buy less from the world — whether in the form of handbags from Italy, copper from Zambia or grain from the United States — will inevitably constrain global growth. For the U.S. chip maker Qualcomm, 64 percent of its sales last year came from China; for the German automaker Mercedes-Benz, 37 percent of its retail car sales were made there. In 2021, Boeing forecast that China will account for about one in five of its wide-body plane deliveries over the next two decades. A truism that bears repeating is that there is only one economy: the global economy.

Second, don’t assume the crisis will be short-lived.

Optimists think the crisis won’t affect Western countries too badly because their exports to China account for a small share of their output. But the potential scale of the crisis is staggering. Real estate and its related sectors account for nearly 30 percent of China’s gross domestic product, according to a 2020 paper by the economists Ken Rogoff and Yuanchen Yang. It is heavily financed by the country’s notoriously opaque $2.9 trillion trust industry, which also appears to be tottering. And even if China averts a full-scale crisis, long-term growth will be sharply constrained by a working-age population that will fall by nearly a quarter by 2050.

Third, don’t assume competent economic management.

Last month Donald Trump described the rule of China’s president, Xi Jinping, as “smart, brilliant, everything perfect.” The truth is closer to the opposite. As a young man, according to a peer from his youth, Xi was “considered of only average intelligence,” earned a three-year degree in “applied Marxism” and rode out the Cultural Revolution and its aftermath by becoming “redder than red.” His tenure as supreme leader has been marked by a shift to greater state control of the economy, the intensified harassment of foreign businesses and a campaign of terror against independent-minded business leaders. One result has been ever–increasing capital flight, despite heavy-handed capital controls. China’s richest people have also left the country in increasing numbers during Xi’s tenure — a good indication of where they think their opportunities do and do not lie.

Fourth, don’t take domestic tranquillity as a given.

Xi’s government’s recent decision to suppress data on youth unemployment — just north of 21 percent in June, double what it was four years ago — is part of a pattern of crude obfuscation that mainly diminishes investor confidence. But the struggles of the young are almost always a potent source of upheaval, as they were in 1989 on the eve of the Tiananmen Square protests. Never mind Thucydides’ trap; the real China story may lie in a version of what’s sometimes called Tocqueville’s paradox: the idea that revolutions happen when rising expectations are frustrated by abruptly worsening social and economic conditions.

Fifth, don’t suppose that a declining power is a less dangerous one.

In many ways, it’s more dangerous. Rising powers can afford to bide their time, but declining ones will be tempted to take their chances. President Biden was off the cuff but on the mark this month when he said of China’s leaders that “when bad folks have problems, they do bad things.” In other words, as China’s economic fortunes sink, the risks to Taiwan grow.

Sixth, do stick to four red lines.

American policymakers need to be unbending and uncowed when it comes to our core interests in our relationship: freedom of navigation, particularly in the South China Sea; the security of Taiwan and other Indo-Pacific allies; the protection of U.S. intellectual property and national security; and the safety of U.S. citizens (both in China and in the United States) and residents of Chinese ancestry. Helping Ukraine defeat Russia is also a part of an overall China strategy, in that it sends a signal of Western political resolve and military capability that will make Beijing think twice about a military adventure across the Taiwan Strait.

Seventh, do pursue a policy of détente.

We should not seek a new cold war with China. We cannot afford a hot one. The best response to China’s economic woes is American economic magnanimity. That could start with the removal of the Trump administration tariffs that have done as much to hurt American companies and consumers as they have the Chinese.

Whether that will change the fundamental pattern of Beijing’s bad behavior is far from certain. But as China slides toward crisis, it behooves us to try.

The Times is committed to publishing a diversity of letters to the editor. We’d like to hear what you think about this or any of our articles. Here are some tips. And here’s our email: letters@nytimes.com.

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Business

A timeline of events in the bread price-fixing scandal

Published

24 hours ago

September 19, 2024

Anne Joseph

Almost seven years since news broke of an alleged conspiracy to fix the price of packaged bread across Canada, the saga isn’t over: the Competition Bureau continues to investigate the companies that may have been involved, and two class-action lawsuits continue to work their way through the courts.

Here’s a timeline of key events in the bread price-fixing case.

Oct. 31, 2017: The Competition Bureau says it’s investigating allegations of bread price-fixing and that it was granted search warrants in the case. Several grocers confirm they are co-operating in the probe.

Dec. 19, 2017: Loblaw and George Weston say they participated in an “industry-wide price-fixing arrangement” to raise the price of packaged bread. The companies say they have been co-operating in the Competition Bureau’s investigation since March 2015, when they self-reported to the bureau upon discovering anti-competitive behaviour, and are receiving immunity from prosecution. They announce they are offering $25 gift cards to customers amid the ongoing investigation into alleged bread price-fixing.

Jan. 31, 2018: In court documents, the Competition Bureau says at least $1.50 was added to the price of a loaf of bread between about 2001 and 2016.

Dec. 20, 2019: A class-action lawsuit in a Quebec court against multiple grocers and food companies is certified against a number of companies allegedly involved in bread price-fixing, including Loblaw, George Weston, Metro, Sobeys, Walmart Canada, Canada Bread and Giant Tiger (which have all denied involvement, except for Loblaw and George Weston, which later settled with the plaintiffs).

Dec. 31, 2021: A class-action lawsuit in an Ontario court covering all Canadian residents except those in Quebec who bought packaged bread from a company named in the suit is certified against roughly the same group of companies.

June 21, 2023: Bakery giant Canada Bread Co. is fined $50 million after pleading guilty to four counts of price-fixing under the Competition Act as part of the Competition Bureau’s ongoing investigation.

Oct. 25 2023: Canada Bread files a statement of defence in the Ontario class action denying participating in the alleged conspiracy and saying any anti-competitive behaviour it participated in was at the direction and to the benefit of its then-majority owner Maple Leaf Foods, which is not a defendant in the case (neither is its current owner Grupo Bimbo). Maple Leaf calls Canada Bread’s accusations “baseless.”

Dec. 20, 2023: Metro files new documents in the Ontario class action accusing Loblaw and its parent company George Weston of conspiring to implicate it in the alleged scheme, denying involvement. Sobeys has made a similar claim. The two companies deny the allegations.

July 25, 2024: Loblaw and George Weston say they agreed to pay a combined $500 million to settle both the Ontario and Quebec class-action lawsuits. Loblaw’s share of the settlement includes a $96-million credit for the gift cards it gave out years earlier.

Sept. 12, 2024: Canada Bread files new documents in Ontario court as part of the class action, claiming Maple Leaf used it as a “shield” to avoid liability in the alleged scheme. Maple Leaf was a majority shareholder of Canada Bread until 2014, and the company claims it’s liable for any price-fixing activity. Maple Leaf refutes the claims.

This report by The Canadian Press was first published Sept. 19, 2024.

Companies in this story: (TSX:L, TSX:MFI, TSX:MRU, TSX:EMP.A, TSX:WN)

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Economy

S&P/TSX composite up more than 250 points, U.S. stock markets also higher

Published

24 hours ago

September 19, 2024

Anne Joseph

TORONTO – Canada’s main stock index was up more than 250 points in late-morning trading, led by strength in the base metal and technology sectors, while U.S. stock markets also charged higher.

The S&P/TSX composite index was up 254.62 points at 23,847.22.

In New York, the Dow Jones industrial average was up 432.77 points at 41,935.87. The S&P 500 index was up 96.38 points at 5,714.64, while the Nasdaq composite was up 486.12 points at 18,059.42.

The Canadian dollar traded for 73.68 cents US compared with 73.58 cents US on Thursday.

The November crude oil contract was up 89 cents at US$70.77 per barrel and the October natural gas contract was down a penny at US2.27 per mmBTU.

The December gold contract was up US$9.40 at US$2,608.00 an ounce and the December copper contract was up four cents at US$4.33 a pound.

This report by The Canadian Press was first published Sept. 19, 2024.

Companies in this story: (TSX:GSPTSE, TSX:CADUSD)

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Economy

Construction wraps on indoor supervised site for people who inhale drugs in Vancouver

Published

2 days ago

September 18, 2024

Anne Joseph

VANCOUVER – Supervised injection sites are saving the lives of drug users everyday, but the same support is not being offered to people who inhale illicit drugs, the head of the BC Centre for Excellence in HIV/AIDS says.

Dr. Julio Montaner said the construction of Vancouver’s first indoor supervised site for people who inhale drugs comes as the percentage of people who die from smoking drugs continues to climb.

The location in the Downtown Eastside at the Hope to Health Research and Innovation Centre was unveiled Wednesday after construction was complete, and Montaner said people could start using the specialized rooms in a matter of weeks after final approvals from the city and federal government.

“If we don’t create mechanisms for these individuals to be able to use safely and engage with the medical system, and generate points of entry into the medical system, we will never be able to solve the problem,” he said.

“Now, I’m not here to tell you that we will fix it tomorrow, but denying it or ignoring it, or throw it under the bus, or under the carpet is no way to fix it, so we need to take proactive action.”

Nearly two-thirds of overdose deaths in British Columbia in 2023 came after smoking illicit drugs, yet only 40 per cent of supervised consumption sites in the province offer a safe place to smoke, often outdoors, in a tent.

The centre has been running a supervised injection site for years which sees more than a thousand people monthly and last month resuscitated five people who were overdosing.

The new facilities offer indoor, individual, negative-pressure rooms that allow fresh air to circulate and can clear out smoke in 30 to 60 seconds while users are monitored by trained nurses.

Advocates calling for more supervised inhalation sites have previously said the rules for setting up sites are overly complicated at a time when the province is facing an overdose crisis.

More than 15,000 people have died of overdoses since the public health emergency was declared in B.C. in April 2016.

Kate Salters, a senior researcher at the centre, said they worked with mechanical and chemical engineers to make sure the site is up to code and abidies by the highest standard of occupational health and safety.

“This is just another tool in our tool box to make sure that we’re offering life-saving services to those who are using drugs,” she said.

Montaner acknowledged the process to get the site up and running took “an inordinate amount of time,” but said the centre worked hard to follow all regulations.

“We feel that doing this right, with appropriate scientific background, in a medically supervised environment, etc, etc, allows us to derive the data that ultimately will be sufficiently convincing for not just our leaders, but also the leaders across the country and across the world, to embrace the strategies that we are trying to develop.” he said.

Montaner said building the facility was possible thanks to a single $4-million donation from a longtime supporter.

Construction finished with less than a week before the launch of the next provincial election campaign and within a year of the next federal election.

Montaner said he is concerned about “some of the things that have been said publicly by some of the political leaders in the province and in the country.”

“We want to bring awareness to the people that this is a serious undertaking. This is a very massive investment, and we need to protect it for the benefit of people who are unfortunately drug dependent.” he said.

This report by The Canadian Press was first published Sept. 18, 2024.

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