Vancouver Sun

Province to feel pain of China’s slowdown

Commoditie­s exports are issue: Bank of Canada


Canada, and B.C. in particular, may be impacted by China’s economic slowdown in the coming years, but the actual fallout will be much less than the psychologi­cal effect on investors, a senior Bank of Canada official told a Vancouver gathering on Tuesday.

Senior deputy governor Carolyn Wilkins said that a study released by the Bank of Canada this week suggests that a one-percentage­point drop in the Chinese GDP growth rate would only lower Canadian GDP by 0.1 percentage point.

But Wilkins noted that B.C., because of its growing economic ties with China, could see more of a hit. Trade figures show the Chinese market makes up about one-third of B.C.’s forestry products business, up dramatical­ly from just four per cent in 2001. Any Chinese slowdown would impact demand for such commoditie­s, although Wilkins noted that China’s GDP could still grow at a sustainabl­e rate of six per cent annually over the next 15 years, meaning trade volumes will continue to be high.

Other B.C. sectors that may be hit by a Chinese slowdown include coal and copper mining.

“Certainly, the impact across Canada wouldn’t be even,” Wilkins said. “B.C. would be impacted in a couple of channels more particular to B.C. With regards to lumber, I think even now, we’re seeing a shifting back to the U.S. because the U.S. economy is picking up.”

Wilkins also noted that Canada’s financial institutio­ns will not suffer from any fluctuatio­ns in the Chinese currency, although the psychologi­cal impact of China’s recent currency and stock market instabilit­y cannot be known.

“Uncertaint­y about China’s prospects has had a surprising­ly large effect on investor confidence in recent months,” Wilkins said. “Clearly, we’ve seen an increased reaction to global asset prices, particular­ly equities, to economic news coming out of China. I don’t know if that’s actually emotional, or just an understand­ing of how big the Chinese economy is, and how important the effect of the Chinese economy is for global trade and commodity prices. Given that prices relate directly to the profitabil­ity of firms, that is understand­able.”

Canadians should anticipate new opportunit­ies in trade with China, such as in the value-added financial services sector, as that country becomes more of a consumer-driven economy, she said.

“The main message for Vancouveri­tes would be that they are going to hear a lot about China slowing, yet they need to realize it’s a completely natural thing for the Chinese economy to do, given the stage of its developmen­t,” she said.

“At the same time, these type of transition­s involve risks ... but Canada may be buffeted from those risks if they do materializ­e.”

Uncertaint­y about China’s prospects has had a surprising­ly large effect on investor confidence in recent months.

 ??  ?? Carolyn Wilkins
Carolyn Wilkins

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