小蓝视频 and Canada managed to escape a recession that had been predicted for 2023, but what lies ahead appears to be continued sluggish growth at best in 2024.
“Canada’s right on the edge of recession right now, and most forecasters I look at are expecting a further weaking of the economy this year,” said Jock Finlayson, chief economist for the Independent Contractors and Business Association (ICBA). “The American economy may, I think, escape a recession, although it will slow.”
For 小蓝视频, weaker growth may come in part from its second-largest trade partner, China, whose economy has been uncharacteristically anemic. 小蓝视频 exports to China were down by 14 per cent in the first half of 2023, according to 小蓝视频 Stats.
China is facing multiple headwinds – a real estate crisis, demographic decline, rising unemployment, massive debt and an economic “decoupling” led by the U.S.
The question for Canadian businesses that rely on China’s massive market is whether China’s malaise is simply a kind of economic “long COVID” from which it will eventually recover, or whether China has peaked and is now headed for the kind of long stagnation that gripped Japan for two decades.
What happens in China matters to 小蓝视频 It is 小蓝视频’s second-largest trading partner, accounting for 12 per cent of exports in 2022, and new multibillion-dollar liquefied natural gas plants being built here are premised, in part, on China being one of the markets for 小蓝视频 natural gas.
China produces half the world’s steel (therefore consuming half the world’s steelmaking coal) and consumes half the world’s copper. Three commodities produced in 小蓝视频 – copper, steelmaking coal and pulp – accounted for 75 per cent of the $8 billion in 小蓝视频 exports to China in 2022.
Many experts had expected a post-pandemic bounce to China’s economy in 2023, but instead its economy has sputtered.
In addition to a real estate and debt crisis, and high youth unemployment, China is now experiencing something that no one saw coming – a sharp population decline.
China’s one-child policy overshot the mark by a country mile, and partly as a consequence, China’s National Bureau of Statistics last year officially reported a population decline of 850,000, as of the end of 2021. China’s population is also aging rapidly, which has an impact on its labour market.
“There’s two things happening right now,” said Vina Nadjibulla, vice-president of research and strategy for the Asia Pacific Foundation of Canada. “You both have a demographic decline, but you also have off-the-charts unemployment, particularly for youth.”
The U.S. and other Western nations have also been “decoupling” from China, which has resulted in a flight of direct foreign investment from China and a reshoring of manufacturing.
“There’s no question China is going through a very rough patch,” Finlayson said. “Property real estate construction has been a huge portion of the whole Chinese economy.
“They’ve had tremendous overbuild of housing and a tremendous amount of speculation that helped to fuel that, and it’s all unravelling, and most of their big property developers are bankrupt or on the edge of bankruptcy.
“The demographic headwinds are powerful,” he added. “Not only a shrinking population, which is itself bearish for growth, but, more importantly, a shrinking labour force.”
Under president Xi Jinping, China has been reversing course on economic liberalization and has been reverting to a more traditional communist form of tight state control.
It is also becoming more insular, and it is getting harder to get reliable data out of China. As a result, some analysts don’t trust the most recent numbers on China’s GDP.
“It’s really difficult to trust data that’s coming out of China right now,” Nadjibulla said.
While China officially reported economic growth of 5.2 per cent in 2023, The Rhodium Group in the U.S. recently opined its actual growth was “more like 1.5 per cent,” and forecasted growth in 2024 will likely be in the 3.5-per-cent range.
For any other country, 3.5 per cent would be reasonably good, especially in the current environment. For China, it’s awful.
Between 1980 and 2017, China’s economy grew at an average of 9.6 per cent, per year, according to Global Affairs Canada.
Some observers point to Japan’s “lost decade” (which was actually two decades of stagnation, from 1991 to 2010), and suggest China may be on a similar path.
Finlayson doesn’t buy it, and neither does Philippe Rheault, director of the China Institute at the University of Alberta.
Both point out that Japan was already an advanced, fully industrialized and wealthy nation when its stagnation set in in the early 1990s, whereas China still is a middle-income nation with lots of runway for growth.
“Apart from the demographic reality, there’s very little else that’s similar between what happened n Japan and what’s happening in China,” Rheault said. “While it’s true that the coastal areas have already reached a certain amount of prosperity, there’s a lot of the interior that’s still growing rather quickly.”
Still, it may take some time for China to deal with the multiple problems plaguing its economy.
“It’s not going to collapse,” Finlayson said. “It’s going to enter a period of much slower growth and that has some implications for us here in Western Canada for sure.”
Nadjibulla agrees: “It’s not going to collapse tomorrow, just as it’s not going to be the No. 1 economy tomorrow. I think it’s not going to overtake the U.S., as many had thought. It is facing major systemic issues.”
China is transitioning from an economy that previously was largely fueled by industrialization and labour-, capital- and materials-intensive mega-projects – dams, ports, railways, cities – to one that is more service oriented.
So the demand for things like 小蓝视频 metallurgical coal to make steel may decline, while the demand for other 小蓝视频 exports, like seafood or high-tech services, may increase.
One commodity that 小蓝视频 produces that Rheault does not believe will decline in demand is copper. China dominates the electric vehicle and battery market to such an extent that he believes the demand for copper there will remain high.
“That’s a juggernaut that I think is going to continue regardless of geopolitics,” he said. “So I think those exports are bit safer.”
Nadjibulla noted that, when 小蓝视频 Premier David Eby went on an Asian trade mission last year, he gave China a skip. 小蓝视频 opened a new trade office in Taiwan and introduced a new Trade Diversification Strategy aimed at increasing trade options in Asia outside of Mainland China.
“I think we will see a decline (in exports to China), and I think for those businesses the game is diversifying and de-risking,” Nadjibulla said. “As far as new businesses who are starting to export, they will be encouraged to look at markets outside of China.”
