Finance Minister Bill Morneau says the Liberal government is keeping a close eye on China’s financial problems and what they could spell for an already-slowed global economy.
“We’re very keenly interested in what’s going on in China and recognizing that their pace of growth is slowing,” Morneau told CTV’s Question Period. “They’re having a really material impact on global growth, so it’s something to watch.”
Experts are warning that China’s slowed economy may push the already-unstable global economy into another recession. A Bloomberg report last week said that Chinese borrowers are taking on “record amounts of debt” to repay interest on their existing financial obligations. Bloomberg cited Hua Chuang Securities Co., which predicts that the amount of loans, bonds and shadow finance arranged to cover interest payments will rise five per cent this year.
And on Thursday, Chinese officials cut interest rates on loans by small lenders that finance entrepreneurs and lowered the amount of reserves banks must hold, indicating domestic concern about the country’s economic problems.
Morneau said China’s instability could be particularly bad news for the Canadian economy, which is already dealing with the effects of plummeting oil prices.
“China, of course, has a really significant impact on commodities and on oil prices. So it has a double impact on Canada.”
The minister said the government is looking for new ways to get more Canadian oil to market, especially given U.S. President Barack Obama’s recent rejection of the massive Keystone XL pipeline project.
“Obviously we were disappointed that the U.S. said that they weren’t going to approve Keystone. So, now we’re going to need to think about other ways to achieve the same goal. We are working in that regard and will continue to do so.”
Morneau said the government is committed to keeping its economic campaign promises, even in a “low-growth environment.” He said the Liberals’ plan to do so through major infrastructure investments, which will create jobs along the way, as opposed to shorter-term, pork-barrel projects.
“It’s about getting at the things that are going to have the biggest impact,” said Morneau. “That means being careful about where you invest and not doing it for politically-expedient reasons, but doing it for reasons that are going to benefit this generation, and the next generation, and the one after that, by making our country better.”
Morneau revealed in a fiscal update Friday that the government inherited far more debt than expected from the previous Conservative government, downgrading Canada’s overall growth from two per cent in April to 1.2 per cent. The government’s full economic forecast will be outlined in its first budget; Morneau said the government hasn’t decided when that will be.
