BEIJING (Reuters) – Chinese President Xi Jinping warned top officials last week that efforts to contain the new coronavirus had gone too far, threatening the country’s economy, sources told Reuters, days before Beijing rolled out measures to soften the blow.
With growth at its slowest in nearly three decades, China’s leaders seem eager to strike a balance between protecting an already-slowing economy and stamping out an epidemic that has killed more than 1,000 people and infected more than 40,000.
After reviewing reports on the outbreak from the National Development and Reform Commission (NDRC) and other economic departments, Xi told local officials during a Feb 3 meeting of the Politburo’s Standing Committee that some of the actions taken to contain the virus are harming the economy, said two people familiar with the meeting, who declined to be named because of the sensitivity of the matter.
He urged them to refrain from “more restrictive measures”, the two people said.
Local authorities outside Wuhan – where the virus is thought to have first taken hold – have shut down schools and factories, sealed off roads and railways, banned public events and even locked down residential compounds. Xi said some of those steps have not been practical and have sown fear among the public, they said.
China’s state council information office did not immediately respond to requests for comment.
The official Xinhua News Agency, reporting on the Politburo meeting last Monday, called the coronavirus outbreak “a major test of China’s system and capacity for governance.” It added, without details, that “party committees and governments of all levels were urged to achieve the targets of economic and social development this year.”
Since the meeting, China’s central bank has vowed to step up support for the economy and prepared policy tools to offset the damage. The NDRC said at a weekend briefing that it was urging companies and factories to resume work, especially in “key industries” such as food and pharmaceuticals.
“In the context of the epidemic and the downward pressure on the economy, it is more important to maintain economic growth,” Pan Gongsheng, vice-governor of China’s central bank, said on Friday.
On Monday, Zhejiang province, an economic powerhouse in eastern China, ordered local authorities not to overreact by restricting everyday movement or shutting down “shops of chain stores and convenience stores that sell daily necessities such as vegetables, cooking oil as well as meat, eggs and dairy products,” according to a government release.
China has unveiled new tax policies as it tries to reduce the burden on industries hit heavily by the epidemic.
Reuters reported this month that policymakers in China are preparing measures, including more fiscal spending and interest rate cuts, amid expectations the outbreak will devastate first-quarter growth.
Many in China returned to work on Monday after the Lunar New Year holiday was effectively extended for about 10 days, but morning commutes were far less crowded than usual and numerous factories remained shut.
The ruling Communist Party’s propaganda department last week ordered state media to focus on “economic recovery”, according to a person with direct knowledge of the order, who declined to be named because of the sensitivity of the situation.
China’s official media has been trying to project calm. In a Monday editorial, the official People’s Daily urged the public to deal with the epidemic with a “positive mood”.
TORONTO – Canada’s main stock index was higher in late-morning trading, helped by strength in energy stocks, while U.S. stock markets also moved up.
The S&P/TSX composite index was up 34.91 points at 23,736.98.
In New York, the Dow Jones industrial average was up 178.05 points at 41,800.13. The S&P 500 index was up 28.38 points at 5,661.47, while the Nasdaq composite was up 133.17 points at 17,725.30.
The Canadian dollar traded for 73.56 cents US compared with 73.57 cents US on Monday.
The November crude oil contract was up 68 cents at US$69.70 per barrel and the October natural gas contract was up three cents at US$2.40 per mmBTU.
The December gold contract was down US$7.80 at US$2,601.10 an ounce and the December copper contract was up a penny at US$4.28 a pound.
This report by The Canadian Press was first published Sept. 17, 2024.
OTTAWA – Canada’s inflation rate fell to two per cent last month, finally hitting the Bank of Canada’s target after a tumultuous battle with skyrocketing price growth.
The annual inflation rate fell from 2.5 per cent in July to reach the lowest level since February 2021.
Statistics Canada’s consumer price index report on Tuesday attributed the slowdown in part to lower gasoline prices.
Clothing and footwear prices also decreased on a month-over-month basis, marking the first decline in the month of August since 1971 as retailers offered larger discounts to entice shoppers amid slowing demand.
The Bank of Canada’s preferred core measures of inflation, which strip out volatility in prices, also edged down in August.
The marked slowdown in price growth last month was steeper than the 2.1 per cent annual increase forecasters were expecting ahead of Tuesday’s release and will likely spark speculation of a larger interest rate cut next month from the Bank of Canada.
“Inflation remains unthreatening and the Bank of Canada should now focus on trying to stimulate the economy and halting the upward climb in the unemployment rate,” wrote CIBC senior economist Andrew Grantham.
Benjamin Reitzes, managing director of Canadian rates and macro strategist at BMO, said Tuesday’s figures “tilt the scales” slightly in favour of more aggressive cuts, though he noted the Bank of Canada will have one more inflation reading before its October rate announcement.
“If we get another big downside surprise, calls for a 50 basis-point cut will only grow louder,” wrote Reitzes in a client note.
The central bank began rapidly hiking interest rates in March 2022 in response to runaway inflation, which peaked at a whopping 8.1 per cent that summer.
The central bank increased its key lending rate to five per cent and held it at that level until June 2024, when it delivered its first rate cut in four years.
A combination of recovered global supply chains and high interest rates have helped cool price growth in Canada and around the world.
Bank of Canada governor Tiff Macklem recently signalled that the central bank is ready to increase the size of its interest rate cuts, if inflation or the economy slow by more than expected.
Its key lending rate currently stands at 4.25 per cent.
CIBC is forecasting the central bank will cut its key rate by two percentage points between now and the middle of next year.
The U.S. Federal Reserve is also expected on Wednesday to deliver its first interest rate cut in four years.
This report by The Canadian Press was first published Sept. 17, 2024.
FREDERICTON – New Brunswick‘s finance minister says the province recorded a surplus of $500.8 million for the fiscal year that ended in March.
Ernie Steeves says the amount — more than 10 times higher than the province’s original $40.3-million budget projection for the 2023-24 fiscal year — was largely the result of a strong economy and population growth.
The report of a big surplus comes as the province prepares for an election campaign, which will officially start on Thursday and end with a vote on Oct. 21.
Steeves says growth of the surplus was fed by revenue from the Harmonized Sales Tax and federal money, especially for health-care funding.
Progressive Conservative Premier Blaine Higgs has promised to reduce the HST by two percentage points to 13 per cent if the party is elected to govern next month.
Meanwhile, the province’s net debt, according to the audited consolidated financial statements, has dropped from $12.3 billion in 2022-23 to $11.8 billion in the most recent fiscal year.
Liberal critic René Legacy says having a stronger balance sheet does not eliminate issues in health care, housing and education.
This report by The Canadian Press was first published Sept. 16, 2024.
