Canada should ‘rely less on commodity growth and put the emphasis on other sectors,’ analyst says
China’s staggering economic growth has been, in many ways, a boon for Canada.
Put simply, China need lots of the things we have to offer like wood, metals, and potash. It also has a voracious appetite for oil. While we still send the vast majority of our oil south, China’s consumption had in part kept oil prices high, which benefitted our resource-based economy.
Yesterday’s stock plummet in Shanghai, however, could further rattle already struggling commodities markets – ultimately hitting at Canadian producers.
The sell-off and ensuing market chaos was also an indication that doubts remain about China’s ability to maintain its projections for growth amid historic internal reforms that could considerably lower demand for many of the things Canada is offering.
“We are a commodities producer that relies on global economic growth and for the past 10 years or so that growth has come largely from China,” says Ian Nakamoto, director of research at the Toronto investment firm MacDougall, MacDougall & MacTier.
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Throughout the 2000s, that growth coincided with a nationwide construction boom. The government poured money into infrastructure projects like high-speed rail, sprawling industrial parks and vast new roadways, formerly rural outposts developed into bustling urban centres.
But the focus and capital has now shifted from fuelling a commodities-dependent economy to establishing a consumer-driven one.
“It’s an impetus for Canadian policymakers and industries to rely less on commodity growth and put the emphasis on other sectors,” says Nakamoto.
Indeed, commodity prices are down across the board. The Economist magazine reported last week that the prices of all major commodities have fallen between 10 and 20 per cent this year, heralding the end of a so-called super-cycle that began in 2000.
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