Best of the Week
Most Popular
1. Market Decline Will Lead To Pension Collapse, USD Devaluation, And NWO - Raymond_Matison
2.Uber’s Nightmare Has Just Started - Stephen_McBride
3.Stock Market Crash Black Swan Event Set Up Sept 12th? - Brad_Gudgeon
4.GDow Stock Market Trend Forecast Update - Nadeem_Walayat
5.Gold Significant Correction Has Started - Clive_Maund
6.British Pound GBP vs Brexit Chaos Timeline - Nadeem_Walayat
7.Cameco Crash, Uranium Sector Won’t Catch a break - Richard_Mills
8.Recession 2020 Forecast : The New Risks & New Profits Of A Grand Experiment - Dan_Amerman
9.Gold When Global Insanity Prevails - Michael Ballanger
10.UK General Election Forecast 2019 - Betting Market Odds - Nadeem_Walayat
Last 7 days
You Should Be Buying Gold Stocks Now - 6th Dec 19
The End of Apple Has Begun - 6th Dec 19
How Much Crude Oil Do You Unknowingly Eat? - 6th Dec 19
Labour vs Tory Manifesto Voter Bribes Impact on UK General Election Forecast - 6th Dec 19
Gold Price Forecast – Has the Recovery Finished? - 6th Dec 19
Precious Metals Ratio Charts - 6th Dec 19
Climate Emergency vs Labour Tree Felling Councils Reality - Sheffield General Election 2019 - 6th Dec 19
What Fake UK Unemployment Statistics Predict for General Election Result 2019 - 6th Dec 19
What UK CPI, RPI and REAL INFLATION Predict for General Election Result 2019 - 5th Dec 19
Supply Crunch Coming as Silver Miners Scale Back - 5th Dec 19
Gold Will Not Surpass Its 1980 Peak - 5th Dec 19
UK House Prices Most Accurate Predictor of UK General Elections - 2019 - 5th Dec 19
7 Year Cycles Can Be Powerful And Gold Just Started One - 5th Dec 19
Lib Dems Winning Election Leaflets War Against Labour - Sheffield Hallam 2019 - 5th Dec 19
Do you like to venture out? Test yourself and see what we propose for you - 5th Dec 19
Great Ways To Make Money Over Time - 5th Dec 19
Calculating Your Personal Cost If Stock, Bond and House Prices Return To Average - 4th Dec 19
Will Labour Government Plant More Tree's than Council's Like Sheffield Fell? - 4th Dec 19
What the UK Economy GDP Growth Rate Predicts for General Election 2019 - 4th Dec 19
Gold, Silver and Stock Market Big Picture: Seat Belts Tightened - 4th Dec 19
Online Presence: What You Need to Know About What Others Know About You - 4th Dec 19
New Company Tip: How To Turn Prospects into Customers with CRM Tech - 4th Dec 19
About To Relive The 2007 US Housing Market Real Estate Crash Again? - 3rd Dec 19
How Far Will Gold Reach Before the Upcoming Reversal? - 3rd Dec 19
Is The Current Stock Market Rally A True Valuation Rally or Euphoria? - 3rd Dec 19
Why Shale Oil Not Viable at $45WTI Anymore, OPEC Can Dictate Price Again - 3rd Dec 19
Lib Dem Election Dodgy Leaflets - Sheffield Hallam Battle General Election 2019 - 3rd Dec 19
Land Rover Discovery Sport Brake Pads Uneven Wear Dash Warning Message at 2mm Mark - 3rd Dec 19
The Rise and Evolution of Bitcoin - 3rd Dec 19
Virtual games and sport, which has one related to the other - 3rd Dec 19
The Narrative About Gold is Changing Again - 2nd Dec 19
Stock Market Liquidity & Volume Diminish – What Next? - 2nd Dec 19
A Complete Guide To Finding The Best CFD Broker - 2nd Dec 19
See You On The Dark Side Of The Moon - 2nd Dec 19
Will Lib Dems Win Sheffield Hallam From Labour? General Election 2019 - 2nd Dec 19
Stock Market Where Are We?  - 1st Dec 19
Will Labour's Insane Manifesto Spending Plans Bankrupt Britain? - 1st Dec 19
Labour vs Tory Manifesto Debt Fuelled Voter Bribes Impact on UK General Election - 30th Nov 19
Growing Inequality Unrest Threatens Mining Industry - 30th Nov 19
Conspiracy Theories Are Killing This Nation - 30th Nov 19
How to Clip a Budgies / Parakeets Wings, Cut / Trim Bird's Flight Feathers - 30th Nov 19
Hidden Failure of SIFI Banks - 29th Nov 19
Use the “Ferrari Pattern” to Predictably Make 431% with IPOs - 29th Nov 19
Tax-Loss Selling Drives Down Gold and Silver Junior Stock Prices - 29th Nov 19
We Are on the Brink of the Second Great Depression - 29th Nov 19
How to Spot REAL Amazon Black Friday Bargains and Avoid FAKE Sales - 29th Nov 19

Market Oracle FREE Newsletter

UK House prices predicting general election result

Chinese Economy in 2018 and Beyond

Economics / China Economy Dec 26, 2017 - 12:56 PM GMT

By: Dan_Steinbock

Economics
In the coming years, China shall aim at high-quality development, while seeking to forestall financial and international risks.

The recent Central Economic Work Conference marked a historical point in China’s economic development. After Mao’s struggle for the mainland’s sovereignty, and Deng’s economic reforms and opening-up, President Xi’s team seeks complete much of the transition to post-industrial society by the early 2020s.

What does it all mean for Chinese economy in 2018?


New economic guidelines at home

A “moderately prosperous society” will become the reality as China’s growth is likely to remain at 6.8-6.3 percent until the end of the decade. “High-speed” growth, which was typical to intensive industrialization, is now morphing into “high-quality” growth. Due to China’s huge size, the repercussions will reverberate around the world.

China’s rebalancing from exports and investment to consumption and innovation is likely to be completed around 2030. Meanwhile, per capita incomes are expected to double by 2020. Xi’s Chinese dream is predicated on greater economic focus on quality and equality of development.

Investments in social equity mean less uneven coverage of pension and health care insurance nationwide, better public services, rejuvenation of rural areas, scaling of farming operations, increased spending on high school education and vocational training, affordable housing and extended rural land leases – and an aggressive push to eradicate poverty in China.

A key aspect of the shift is Beijing’s expansive goal to restore blue skies over the mainland by cutting pollutants dramatically by 2020, coupled with efforts to attract investors to put substantial funds into environmental rehabilitation.

The new stress on environmental protection means new technologies in green manufacturing and clean energy; cleaning up air, water and soil pollution; developing green finance; emissions-reduction per targets; and tighter environmental rules.

Forestalling financial risks

While the Fed’s Ben Bernanke initiated US central bank’s exit from quantitative easing, Janet Yellen has tightened monetary policies, which Jerome Powell is likely to sustain starting in February 2018. As the European Central Bank is likely to gradually follow in the footprints, monetary tightening will spread.

Chinese policymakers seek to maintain a proactive fiscal and a neutral monetary policy stance, ruling out major stimulus packages and monetary easing. Yet, the People’s Bank of China (PBOC) can rely on Chinese growth to continue 3-4 times faster than in most other major economies.

In the coming year, policymakers seek to keep the yuan’s exchange rate basically stable. For years, the currency’s internationalization was pushed hard in the world stage. After market volatility in 2015, the progress has been slower but more solid. In turn, the gold-backed petro-yuan is likely to bring substantial institutional changes.

While the Chinese stock market experienced a slight correction recently, the status quo is now more stable than in 2015. The PBOC will take an active stance in managing financial-market risks through macro-prudential measures, rather than with policy rate tools. In 2018, it is likely to maintain a broadly neutral stance. Currently, the benchmark lending rate remains 4.35%.

With moderate tightening, inflation pressure has been subdued to less than 2% and growth is steady, probably around 6.8% by the year-end.

Recently, the International Monetary Fund (IMF) noted that China’s credit is high by international levels. The mainland’s total social debt is almost 270% as percentage of the GDP. Yet, despite continued absolute rise, credit-taking is decelerating and the government's effort to deleverage corporates has started to bite.

Today, China’s leverage is significantly higher than that of emerging economies (189% of GDP). But unlike them, China is transitioning to a post-industrial society. Moreover, advanced economies’ leverage (268% of GDP) exceeds that of China, which is implementing structural reforms that major advanced countries continue to delay.

International risks

In addition to economic and financial threats, the coming months will introduce new unilateral “America First” pressures. Following US-Chinese friction on intellectual property, the US Commerce Department has launched a trade investigation into Chinese exports of sheet aluminum to the US.

The Trump administration will pursue a more aggressive trade agenda in 2018, while its corporate tax reform, which is likely to penalize the Republicans in mid-term elections, has significant trade implications as well. Most recently, the Trump administration’s new security strategy named China as a competitive rival.

In contrast, China is fostering inclusive multilateralism in its economic, security and trade policies, while the One Belt One Road initiative is proceeding faster than expected. The huge infrastructure is estimated at $4 trillion to $8 trillion over time, which is about 30-60 times the cost of the Marshall Plan at the turn of the 1950s.

Relying on its multilateral and new “major-country diplomacy,” China’s international statecraft complements its domestic economic policies. But it must navigate in the “new normal” - a high-risk international environment in which, ironically, America is now the greatest risk in the global economy.

Dr Steinbock is the founder of the Difference Group and has served as the research director at the India, China, and America Institute (USA) and a visiting fellow at the Shanghai Institutes for International Studies (China) and the EU Center (Singapore). For more information, see http://www.differencegroup.net/

© 2017 Copyright Dan Steinbock - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules