MONTREAL (CP) -- After enjoying years of stratospheric growth, China's economic expansion is expected to slow to 8.4% in 2009.
And while it's a figure that most countries would die to have, for the world's most populated country it would represent a drop from 11.8% growth 2007 when it accounted for a third of global economic growth.
Its economy is expected to increase by about 9.9% this year, while Canada's GDP is estimated to grow by 0.9% this year, followed by 1.9% Stuart Bergman, director of economics for Export Development Canada, said a slowing global economy will weaken demand for Chinese goods and weigh on key Canadian exports such as pulp and paper, chemicals, fertilizer, machinery, telecom and metals.
"It's not like there's any sector that will be hit real hard, it's just that what we're likely to see is maybe a slowdown in the growth rate," Bergman said in an interview.
China has become Canada's third-largest export market, replacing Japan, Statistics Canada reported in April. Exports to China accounted to nearly 20% of the total growth of Canada's exports in 2007.
But much of that growth was the result of stronger prices in 2008, not increasing volume, Bergman said. Reduced Chinese demand will likely further depress commodity prices, especially in 2009.
Canadian pulp producers have already begun to be affected. Prices have fallen 8% on the year and several producers have taken down time.
The Port of Vancouver said it has seen a dramatic drop in pulp exports to China over the last eight or nine months. In August, shipments were down 30 per cent from a year ago.
But all commodity shipments to China increased 13% in August and containers have increased by three per cent, said Chris Badger, chief of operations.
Forestry analyst Paul Quinn of RBC Capital Markets said the Chinese downturn is beyond the drop off that had been expected to occur once the 2008 Olympic Summer Games in Beijing concluded.
China, which has only emerged as a leading global economy in recent years, had spent heavily to prepare for the Beijing Games and use the event to showcase China's progress.
Rio Tinto sounded the alarm of reduced Chinese demand Wednesday, saying the China's voracious appetite for metals is waning as its economy "is pausing for breath after spectacular GDP growth."
CEO Tom Albanese said the slowdown is largely caused by last year's tightening of Chinese monetary policy to address inflation. Its economy has also been weakened by a bursting housing bubble and an battered stock market.
Paul Stothart of the Mining Association of Canada said the long-term prospects for mining exports remain strong despite the recent down cycle. Nickel and copper prices have fallen but remain significantly higher than during previous downturns.
"Chinese exports to the U.S. will likely decline in line with softer U.S. consumer demand, although some of this could be offset by internal market demand growth in China," he said.
While China's downturn will have an impact on Canada's chemical producers, the slowdown in the U.S. economy is a far greater concern, said David Podruzny, vice-president of the Canadian Chemical Producers' Association.
About 80% of chemicals and resins used for packaging, toys and auto parts are shipped directly south of the border. China accounts for about 10 per cent.
(c) The Canadian Press