Readers consuming the flood of media reports on the dire state of China over the last few weeks may be convinced that the country’s economy is doomed.
And perhaps not just the economy. China scholar Charles Burton this week offered the view that the leadership of Chinese autocrat Xi Jinping may itself be threatened as rising youth unemployment adds to popular disillusionment with the leadership in Beijing.
Burton, in an opinion piece for The Globe and Mail, reminds us that in 1930, as he was struggling to hold his revolution together against pessimists, Mao Zedong, the communist founder of the People’s Republic of China, quoted the Chinese proverb that “a single spark can start a prairie fire.”� Could disenchanted youth be a new spark for the next Chinese revolution?
The property sector accounts for 30 per cent of China’s economy. So citizens, mom and pop investors, and businesses hoping for a commercial rebound after the government’s draconian pandemic lockdown have been disappointed. Consumers are reconsidering spending plans as deflation begins to bite.
It’s all being framed by some as China’s Lehman moment, when trouble in the U.S. property market turned into the crash of Lehman Brothers, one of the world’s most influential banks, resulting in the 2008 collapse of the U.S. economy. Others are instead characterizing it as China’s Minsky moment — a similar phenomenon when excessive investment leads to a crash — caused in this caseby too much debt.
An aerial view shows 39 nearly completed buildings developed by China’s Evergrande Group marked for demolition in Danzhou, Hainan, China on Jan. 6, 2022. (Aly Song/Reuters)
Others yet are comparing it to the overinvestment by Japanese banks, supported by their government, causing what had been seen as the 1980s Japanese economic miracle to be transformed into its 1990s “lost decade.”
“We could possibly be at a crossroads where things could turn in a direction we haven’t seen for a while,” said Steve Tsang, director of the China Institute at the University of London’s School of Oriental and African Studies, in a phone conversation this week.
Most China watchers, including those I spoke to, stop short of expecting anything like a new Chinese revolution. But as Gordon Houlden, director emeritus at the University of Alberta’s China Institute, told me, accidents can happen.
‘Despotic capitalism’
After 30 years of spectacular market-led economic growth that raised living standards, based partly on a glut of public spending, the country is suffering from financial indigestion.
And while the whole world may have a similar malady, as outlined by commentator Martin Wolf in his recent book on the important links between politics and business, what he calls “China’s form of despotic capitalism” may be dangerously brittle.
“The move towards an Orwellian ‘Big Brother’ society, in which surveillance technology is employed by the party-state down to the very last individual, may work. But it is terrifying, threatening to crush the human desire for autonomy and self-expression,” Wolf wrote in The Crisis in Democratic Capitalism, published earlier this year.
BRICS members push for broader international role, expanded membership
Expanding the membership to BRICS — made up of Brazil, Russia, India, China and South Africa — is on the agenda as leaders from those countries meet in Johannesburg without President Vladimir Putin. The group is also lobbying for a bigger presence on the international stage.
“Arbitrary state power makes all private property insecure and so threatens the market economy.”
As Tsang and others have observed, China’s moment ofinstability arrives just as the structural advantages that powered its economic boom are waning. That includes new signs of a declining population.
“Instead of having a demographic bonus, it’s now starting to suffer from a demographic deficit,” said Tsang. “All the easy to reach fruits have been picked.”
Tsang says there are signs that the country may not attain the kind of economic growth that could complete its transition from a developing country into something more like high-income Japan, South Korea, Europe and North America. In other words, it will fail to break out of what is called the “middle income trap.”
Other advantages that sparked the boom and made the country the factory to the world are also disappearing, such as Western technical transfers and investment, says Tsang, as countries like Canada look for more reliable partners. Local government borrowing that spurred investment, including in the glutted housing sector, has reached a breaking point. And that retrenchment has damaged the enthusiasm that acted as a virtuous circle of new investment and spending.
“The real estate market… has a huge impact on people’s feel-good factor,” said Tsang. “Things that have been very beneficial to China are being turned on their heads.”
‘A thousand supposed collapses’
So, will the latest structural and property crisis lead to some sort of Chinese economic or political collapse? Gordon Houlden is skeptical.
“I’ve lived through a thousand supposed collapses of the Chinese economy and we’re not there yet,” said the longtime China watcher from Penticton, B.C., last week.
It is true that a Google search for news stories warning of China’s imminent Minsky moment shows they go back at least a decade.
As we’ve seen with the Canadian property market, in economics coverage, doom sells. And while major cracks in Canadian housing or the Chinese economy could still happen, it is reasonable to assume there will be more dire warnings than there are collapses.
“If you said the Chinese economy has got some serious structural problems — particularly debt, slower growth, aging population? Absolutely,” said Houlden. “Does this mean we are on the brink of some gigantic meltdown? I don’t think so.”
But can accidents happen? “Absolutely,” he said, and China and its leadership must overcome a list of difficult conundrums, including that its startling growth rates of more than 20 per cent were simply unsustainable. Inevitably, growth has declined.
“To me that’s simply coming back to real-world growth rates that are more or less the same as more mature economies,” said Houlden.
A woman wearing a face mask walks past a bank’s electronic board showing the Hong Kong share index in Hong Kong, on Aug. 10, 2022. (Kin Cheung/The Associated Press)
Broken promises
The issue, according to Burton and others, is that current and future rates of growth may not be enough to satisfy the “post-Tiananmen bargain” — a tacit agreement that popular agitation for more democracy was relinquished in exchange for a promise of government-led widespread prosperity. The endless boom is not turning out the way the Chinese people expected.
By that way of thinking, in order to keep its mandate to govern, the Xi-led government must struggle to prevent its economy from declining further, including by depending less on exports and creating a strong domestic consumer economy.
“That hasn’t worked out as well as they thought,” said Houlden, “partly because Chinese are prodigious savers, and when things get a little bit dicier, they save even more.”
Like Tsang, Houlden notes the effects of declining population that he says are unlikely to be reversed. Government spending, especially at the regional level, cannot continue at recent levels. Dependence on imports has proven hard to break. But he says China has advantages including that, unlike the U.S., its borrowing is domestic.
Houlden says he is not an optimist but a realist and that even at relatively low levels of growth, the enormous Chinese economy remains on track to exceed that of the United States over the next decade.
“I call it the ‘tyranny of the headlines.’ When we see indications of the Chinese economy slowing we say ‘Oh my God! Collapse! The miracle’s over.’ It’s not,” said Houlden.
Like Wolf, he thinks restricting information about the economy from the people trying to make the economy function, as we’ve seen with banning of youth employment statistics, is not productive. He says previous leaders assumed a strong economy required a more open economy and more widespread knowledge of how it was functioning.
“Xi is a different kind of cat,” said Houlden, but he says he sees a recent pullback on attempts to micromanage the economy.
“I think that there may have been some recognition by Xi and his advisers that there’s a risk that they can kill the golden goose by over-regulation,” he said.
Like Houlden, Tsang says Xi will be willing to make changes in the short term to try to get the economy back on track to growth.
“This guy is first and foremost focused on staying in power,” said Tsang pointing to Xi’s reversal on stringent lockdowns after widespread public demonstrations. “So if he sees those problems as potentially going to threaten his hold on power, he’ll make changes.”
But Tsang is worried that the kind of fixes Xi will be willing to try just won’t work, and if China’s economic downturn stretches out from months to a year or more, it will be very hard to disguise the fact that Xi’s economic strategy has failed.
“If and when that point is reached, Xi will turn to much harsher repression and xenophobia to stay in power,” predicted Tsang.
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)
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.
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.
