PICTURE THE moment of confusion in a taxi in Guiyang, a city in south-western China. Your columnist had asked the driver to go to the new district. “The new new district or the old new district?” he asked. It was, it emerged, the old new district—a place that seven years ago, on an earlier visit to Guiyang, had looked like the sort of ghost town then dominating horror stories about China’s economy, full of giant empty buildings. This time, however, the problem was the exact opposite. What was meant to be a quick jaunt turned into a traffic-clogged headache, the taxi crawling along in a sea of red tail lights. The old new district had filled in, and then some.
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One reason why it is good for journalists to stay in a country for a long stint is that it helps breed humility. Assumptions that once appeared iron-clad gather rust as the years roll by. That is true for most places. But it is especially so when covering something as complex as China’s economy, which your columnist had the privilege to do over the past decade.
This, to be clear, is not a mea culpa for being overly gloomy. There were also times of excess optimism about China’s capacity for change. Take rebalancing. As far back as 2007 Wen Jiabao, then China’s prime minister, decried its economy as “unstable, unbalanced”—evidence, it seemed, that leaders grasped the problem and were ready to act. Yet the economy only became more unstable, culminating in a nearly epic meltdown in 2015. And it is as unbalanced as ever, with investment running far ahead of consumption. Nevertheless, it is hard to escape the conclusion that in the economic realm, China got more right than wrong over the past decade. How else to score its performance when, despite many predictions of doom, it doubled in size during that time?
A common riposte is that this success is illusory—that the government has simply delayed the comedown from its debt-fuelled high. The deferral of pain is certainly part of the mix. Perhaps the safest bet in economics is that when growth slows sharply, China will unveil yet more infrastructure projects and call on banks to make still more loans. And if those projects or loans fail, officials have few qualms about orchestrating bail-outs and roll-overs.
What is less appreciated is that China’s ability to engage in such engineering is itself a measure of success. The government can lean on its banks because they are enormously profitable to begin with. The telltale signs of an overdrawn economy—high inflation, rampant unemployment and corporate malaise—exist in pockets in China, but they are the exception, not the rule.
This point was driven home when your columnist moved from Beijing to Shanghai in 2014. Each city has its charms, but Shanghai unquestionably offers a more flattering picture of the economy. Beijing, a showcase for political power, is blotted by the hulking headquarters of state-owned enterprises. Day trips take reporters to China’s greatest economic calamities, from overbuilt Tianjin to coal-mine carnage in Inner Mongolia. In Shanghai, which functions remarkably well for a city of 25m, reporters instead hop over to see high-tech innovators in Hangzhou, nimble exporters in Wuxi and ambitious entrepreneurs in Wenzhou. They show that even as the tenth year of Xi Jinping’s rule approaches, two of the fundamental underpinnings of China’s economic dynamism remain intact: red-blooded competition in the private sector and the restless quest of millions upon millions of ordinary people to improve their lot in life.
These days, saying nice things about China’s economy comes with baggage, not least because of the Communist Party’s insistence that its growth record is proof of its superior political system. It is true that the government has had a crucial hand in the country’s development, starting with the fact that it has been “Infrastructure Week” just about every week in China since 1990.
The correct response to the party’s boasting is not to deny China its success, but to insist on proper attribution. Japan, South Korea and Taiwan were its forerunners in using repressed financial systems to enable investment and in relying on exports to become more competitive. China has repeated all this, albeit at a far greater, and arguably more impressive, scale. At the same time, its sustained rapid growth of the past four decades has less to do with the wisdom of the Politburo than with the work of a brilliant Saint Lucian economist, Sir Arthur Lewis, who in the 1950s explained that shifting labour from low-value farming to higher-value industry can, if managed right, engender just such a catch-up process.
And now for something completely different
The coming decade is sure to prove more challenging. With 65% of Chinese people already in cities and the population close to peaking, Mr Lewis would point out that there is little scope for further gains from turning farmers into factory workers. Parallels between China and the Asian dynamos of yesteryear are breaking down. China is older and more indebted than they were at the same stage. Whereas most countries seek to strengthen the rule of law as they mature, Mr Xi is cultivating stronger party control.
Add to that a treacherous external environment. Faced with the threat of economic decoupling from the West, it is only rational for China to pursue greater self-reliance. Thanks to its size and sophistication, it may well triumph in key sectors, from semiconductors to robotics. But the sorry history of import substitution globally should make clear that this is a sub-optimal strategy involving much waste and eventually leading to lower growth.
All this is almost enough to turn you into a China bear: to predict not an almighty crash but rather an ineluctable slide towards stagnation. In conversations with analysts and investors, versions of this narrative crop up again and again. That it has become something like the consensus view is the single biggest reason why your columnist, after a long run in China, suspects that its economy will fare considerably better. ■
This article appeared in the Finance & economics section of the print edition under the headline “A decade of Chinese lessons”
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.
