(Adds details on growth forecast)
By Julie Gordon
VANCOUVER, April 5 (Reuters) - China's transition to a more
sustainable pace of growth is welcome, but it will take time and
could be marked by periods of economic and financial volatility,
a top Bank of Canada official said on Tuesday.
A shock emanating from China would likely have a relatively
small impact on Canada's economy, said Senior Deputy Governor
Carolyn Wilkins. While Canada would mainly be affected through
lower commodity prices and trade, the country's banks have
little direct exposure to China, the world's second-largest
economy.
"The slowing of China's growth to a more sustainable pace is
not only inevitable, it's also desirable," Wilkins said in
remarks detailing China's challenge of shifting from an
export-driven economy to one supported by domestic consumption.
"The economic strategy that the Chinese have pursued over
the last 15 years cannot continue indefinitely."
Overall, Canada is well positioned to manage the risks
China's transition poses, she said.
Wilkins' remarks were the last scheduled by a central bank
official ahead of next week's interest rate decision. The bank
is expected to keep rates where they are and update its economic
forecasts to include government spending measures. BOCWATCH
A simulation done by Bank of Canada researchers found that
if economic growth in China were one percentage point lower than
the bank expected, that would result in Canadian growth being
0.1 percentage point lower than otherwise, Wilkins said.
If a similar shock were to happen in the United States,
Canada's largest trading partner, the effect on the Canadian
economy would be six times greater.
Statistics Canada data released on Tuesday showed Canada's
bilateral trade with China totaled just C$5.4 billion ($4.1
billion) in January, compared with C$63.6 billion with the
United States in the same month.
Bank research shows China has the potential to grow at an
average annual rate of around 6 percent over the next 15 years,
Wilkins said. Demand for commodities should remain high, a
positive for Canada, even if China's growth is slower and less
reliant on natural resources.
She said uncertainty about China's future has had a
surprisingly large effect on investor confidence recently and
that a significant and sudden depreciation of the yuan could be
disruptive to the global financial system.
China's stock market slumped last summer and sold off again
in January this year, roiling financial markets. China's
economic growth in 2015 cooled to a 25-year low, although
Beijing has promised there will be no hard landing.
($1 = $1.32 Canadian)
(Writing by Leah Schnurr; Editing by David Ljunggren and Dan
Grebler)