Question

Explain the differences between Canada and China's economic prospects.

Answer 1

Both economies follow the market mechanism in resource allocation and foreign trade but the Chinese government have the major role in guiding that country’s corporations, foreign exchange and a restrictive trade policy. Canada follows a purely market-oriented system like the U.S. but strong international trade base with U.S. and China.Canada follows a strong institutional system with stable banking and financial system.

Canada’s economy has shown steady growth and expanding at an average rate of 1.8% annually over the last 10 years. In the global economic crisis, the Canadian economy was one of the most resilient, starts recovering during the third quarter of 2010. Canada has strong financial system and institutions, low inflation, sound fiscal management, and investments in knowledge and infrastructure. The share of services has risen steadily over the past decades, reaching 71.6% of real GDP in 2011. A distinctive feature of the Canadian economy is its primary sector, particularly significant share in the country’s total exports. Agriculture and agri-food, energy, forestry and mining account for over 50% of Canada’s total exports. Manufacturing sector contributes around 17% in the GDP.

China’s economy has grown very fast among all developing countries, at an average annual rate of 10.5% from 2001 to 2010. This growth has been driven by the strengthening of its manufacturing base and exports along with massive domestic and foreign investment in capital. Going forward, China’s economy will be driven mainly by domestic consumption, with favourable labour market conditions and other policy efforts to raise household disposable income. While manufacturing will remain the largest sector of the Chinese economy with the export-oriented sector. Recent crisis of China lies in high corporate debt, excessive dependence on foreign trade and financial instability (high house price and bad loan).