What China’s massive urbanization drive means for Canada’s economy – by John Shmuel (National Post – October 2, 2013)

The National Post is Canada’s second largest national paper.

China’s premier, Li Keqiang, announced earlier this year upon taking office that he
wants to modernize China’s economy. Part of that will involve facilitating the movement
of 400 million rural Chinese to the country’s cities over the next decade. A lot of
expectation is pinned on this mass urbanization. (John Shmuel – National Post)

There’s an ambitious plan underway in China , one that will represent one of the largest migrations of humans in history. China’s premier, Li Keqiang, announced earlier this year upon taking office that he wants to modernize China’s economy. Part of that will involve facilitating the movement of 400 million rural Chinese to the country’s cities over the next decade.

A lot of expectation is pinned on this mass urbanization. Officials in the country hope it will transform China’s economy, the world’s second largest, into one that resembles those of the developed world, instead of the credit-focused, export-driven economy that China is today.

It’s also a transformation that, if successful, will hugely benefit Canada’s economy and companies. “It’s not a transformation that will happen next year, but over the next three to five years, and we’ll see profound changes in China as they move quickly to alter their economic model,” said Stéfane Marion, chief economist and strategist for National Bank Financial. “This provides an opportunity for Canadian expertise to get involved over a wide spectrum of the economy.”

China’s growth over the past 10 years has been fuelled by massive flows of money into equally massive construction projects across the country, including dams, highways, bridges and towering skyscrapers to accommodate the flood of rural Chinese moving into cities. Canada has benefitted greatly from the frenzied building, which has required a huge volume of commodities — commodities Canada has been more than happy to export.

The S&P/TSX Composite, half of which is comprised of resource companies, outperformed other major indices around the world during China’s boom years. Base metal miners and oil and gas companies saw their stocks soar as China, the world’s largest commodities consumer, showed an insatiable appetite for Canadian resources.

That’s changed, however. Resource stocks have slumped in the last two years as China’s commodity imports have cooled. While China’s economy previously grew by more than 10% in seven of the last 10 years, Chinese officials say they now expect it to grow by 7.5% this year and only 7% in 2014.

“China is beginning to internalize the environmental cost of breakneck industrialization over the past 20 years and they certainly know they cannot continue at this pace,” Mr. Marion said. “That’s why we’re seeing these new government policies that want to spur consumer demand and more organic growth.”

For the rest of this article, click here: http://business.financialpost.com/2013/10/01/what-chinas-massive-urbanization-drive-means-for-canadas-economy/

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