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An installation celebrates the Year of the Monkey at Ditan Park in Beijing. Photo: EPA

Gong Xi Fa Cai! What to expect in China’s Year of the Monkey

The Year of the Monkey is expected to be another turbulent year for the world’s second largest economy. Here, SCMP reporters gaze into their crystal balls for what might lie ahead.

POLITICS: Political jockeying and more crackdowns

The Communist Party will be focused on preparations for a new leadership team, to be unveiled at the 19th Party Congress next year. Apart from President Xi Jinping (習近平) and Premier Li Keqiang (李克強), the rest of the Politburo Standing Committee will have reached retirement age. The new appointments will be keenly observed for clues as to who Xi intends to succeed him.

Two of Xi’s signature campaigns – the drives against corruption and in favour of frugality in public life – are likely to continue to reshape the nation.

They are useful tools for Xi to consolidate power and cement his authority. The anti-graft drive’s focus on regional targets may broaden.

In the face of unprecedented challenges at home and abroad, the government will tighten political, social and ideological controls, further crack down on critics and suppress advocates of Western ideas.

It might also tighten the reins on the media, including the internet, and on academic freedoms.

– Cary Huang

DIPLOMACY: Conflicts and tensions to escalate

Following Xi’s maiden presidential visit to the Middle East, Beijing is expected to increase its role as a broker in the region’s conflicts. Beijing has already hosted representatives from Syria and Afghanistan for talks. But other than calling for dialogue, China’s options are limited, partly because it does not want to be seen as interfering in the internal affairs of other nations.

Chinese President Xi Jinping with Iranian President Hassan Rowhani during Xi’s first visit to Tehran in January. Photo: Reuters

With the Beijing-led Asian Infrastructure Investment Bank having just started operations, China is expected to boost its economic diplomacy by funding infrastructure projects overseas.

Tensions in the South China Sea are also expected to rise, as China is likely to continue building structures in the disputed waters. How the United States and China handle the issue – especially the Pentagon’s deployment of warships within 12 nautical miles of Chinese-controlled islands – will be the biggest concern.

– Teddy Ng

DEFENCE: Band(s) of Brothers?

The top priority of the military will be to rebuild morale and its integrity following its restructuring into five theatre commands. Xi set the tone this month by visiting Jinggangshan, the cradle of the communist revolution in China. The Eastern Theatre Command’s land force quickly followed his lead and visited Gutian in Fujian (福建) province, where the Red Army pledged obedience to the party in 1929, and saluted the party flag. Other commands are expected to make similar displays of fidelity.

Officers from the Eastern Command salute the flag in Gutian in Fujian province on Wednesday. Photo: SCMP Pictures

It will be a bumpy road: the old ways of managing operations, carrying out orders through personal connections and using favoured contractors, has been upended. Xi wants to turn the PLA into a fighting force that meets international standards, with all the efficiencies and accountability that entails.

– Minnie Chan

ECONOMY: Pandora’s Box to open?

There’s actually little disagreement between billionaire investor George Soros and Beijing decision-makers over China’s economic prospects in 2016 – both agree growth will be lower in 2016 than that of 2015. Where they disagree is on how much and how quickly.

One thing is for sure, China will never admit an economic “hard-landing”, though investors may find plenty of evidence for one – from factory closures to rising unemployment and financial strains.

Xi’s war on “zombie” companies, which is necessary for China’s long-term economic health, is likely to intensify the short-term pain.

China’s old way of driving growth, via wasteful investment and cheap exports, should have been abandoned in 2008, but instead the government launched an unprecedented fiscal stimulus.

In 2016, China’s determination to reform its economy – which has long been pledged – will once again face the test.

Another billionaire investor, Warren Buffett, once said: “It’s only when the tide goes out that you learn who has been swimming naked.”

We might be about to see plenty of naked swimmers.

– Zhou Xin

UNEMPLOYMENT: What’s the real picture?

Of all of China’s official economic indicators, the registered urban jobless rate is possibly the least reliable. The rate, released quarterly, has barely ever moved from 4.1 per cent in recent years, regardless of the economic cycle. Another jobless rate compiled by the statistics agency, which is increasingly being cited by the premier, claims a level of about 5 per cent.

Neither of these official rates are likely to change much throughout 2016.

However, history suggests there will be pressures on employment, given economic growth is decelerating, the manufacturing sector is losing orders and real estate construction is weak.

Job prospects in China’s rust-belt steel and coal towns will remain gloomy in 2016, while periods of labour-related unrest are likely to continue in the Pearl River Delta.

A structural mismatch between labour demand and supply may remain. China’s booming services sector may create more jobs to keep overall employment in balance, some economists believe. But how easy is it for a former coal mine worker in Shanxi (山西) to get a job as a security guard in Beijing, or for a Guangdong shoe factory worker to get a job serving tables in a Shanghai restaurant?

– Zhou Xin

A-shares: Beware the bear!

The mainland’s stock market, after witnessing a sharp fall at the beginning of 2016, is expected to continue a bear run in the Year of Monkey amid a crisis of confidence.

A depreciating yuan, the imminent launch of the new initial public offering (IPO) mechanism and a bleak outlook for corporate earnings are set to exacerbate weak sentiment with millions of retail investors suffering paper losses following a market rout last year.

Local investors are increasingly betting on a further downturn in the A-share market.

Corporate earnings are likely to stay flat in 2016 despite Beijing’s increased efforts to navigate a transition to a consumer-led growth.

– Daniel Ren

Consumption: Bittersweet for retailers

Online stores are continuing to take business from their brick-and-mortar counterparts.

While overall consumption growth is expected to further slow in 2016, bringing problems for both sectors, shopping malls and big stores face their own particular woes.

Hypermarkets could see custom slow, but business at smaller formats such as mini-marts and convenience stores should remain stable.

People will continue to spend more on tourism, leisure, food and health-related products.

Domestic brands will continue to gain ground on foreign ones.

Women will continue to take a greater role in driving spending. Consulting firm Mintel found more than half of Chinese mothers control the family budget and that women are more willing to try new products and experiences than men.

– Mandy Zuo

E-commerce: Click, click, click to buy, buy, buy

The personal computer era is over. Mobile-commerce, which enables people to buy everything from anywhere via the internet, is dominating the online sector and this trend shows no sign of stopping.

Retail on WeChat, the most popular social media platform, is expected to grow steadily. The mobile platform is also becoming an important tool of advertising and communication for businesses.

Online to offline (O2O) business will continue to boom as mainlanders show growing interest and loyalty in professional home services such as home cleaning and massage.

With growing demand from mainland consumers for prime goods overseas, fiercer competition is expected in cross-border business. Internet giants, entrepreneurs and small businesses will flock to the sector, which the Ministry of Commerce projects will grow an average 30 per cent in the next few years.

– Mandy Zuo

P2P lending: More closures, collapses and runaway owners

The long-awaited regulations reining in peer-to-peer lending are expected to bring an industry shakeup that will knock out a significant number of players.

Industry data showed the number of P2P lending platforms dropped a second consecutive month to 2,566 at the end of January from 2,595 in December.

The draft rules, released by the China Banking Regulatory Commission at the end of 2015, define P2P lending platforms as internet financing intermediaries and forbid them from selling wealth management and other financial products that attract investors with promises of high returns.

With the regulator’s vows to cleanse the market, more absconding owners and frauds are likely to be uncovered, which will hurt investors’ confidence in the market.

However, some industry players see a bright side to the shakeup – reasoning that those who survive will get a bigger piece of the market. The optimists say the weakness of the stock market will encourage investors to look for fixed-income investment products which offer better yields.

– Kwong Man-ki

Tourism: Slowdown, what slowdown?

Despite the economic slowdown, the depreciation of the yuan and turmoil in the stock markets, Chinese tourists passed a milestone last year – making a record 120 million outbound trips and spending US$104.5 billion to make China the world’s leading source of tourists.

The boom is expected to continue this year, thanks to a relaxation in visa policies in more countries as well as a strong yuan against the euro and yen.

Britain launched a two-year visa system for Chinese nationals last month, while France has shortened the visa delivery process for Chinese tourists to 24 hours from 48 hours.

Neighbouring countries like South Korea and Japan are reportedly considering easier visa policies to woo Chinese holiday-makers.

Beijing is also encouraging domestic tours. Last year, it said it would be encouraging government employees to take two-and-a-half days off at the weekend to create “favourable conditions for employees to spend their holidays”. At least six provinces, including Anhui (安徽), Guizhou (貴州), Jiangxi (江西) and Chongqing (重慶) have announced similar policies with the aim of stimulating local tourism.

– Laura Zhou

Childbirth: More buns in the oven

The Year of the Monkey is traditionally regarded an auspicious year for giving birth, so it will prove popular with people planning families. Some of those may have delayed their plans from the Year of the Goat, which is decidedly inauspicious.

More of the newborns are likely to be second children, as parents seek to benefit from the new policy allowing all couples to have two children.

However, figures predict the number of first-born children to steadily decline, partly due to a diminishing number of child-bearing-age women and partly because more women are delaying giving birth to further their careers.

Even so, about 17 million babies are expected to be born this year and that will put enormous pressure on the country’s overcrowded and overloaded healthcare system.

The shortage of paediatricians will become more acute and more women will have to give birth at lower-level hospitals due to a limited number of beds.

More disputes, in some cases violent, are expected at gynaecology, obstetrics and paediatrician departments across the country.

– Zhuang Pinghui

URBANISATION: Millions to relocate

Urbanisation will maintain its pace with millions relocating, most of them rural residents.

They will continue to move to cities near rivers, railway lines and coastlines and more of them will be migrating with spouses and children.

The policy of issuing residence permits to migrants and granting urban household registrations to rural residents are helping them to access public services and integrate in urban life.

– Zhuang Pinghui

ENVIRONMENT: More smoggy days?

As the new five-year plan period (2016-2020) begins, cities will need to set targets on how to improve water and air quality. But whether much can be done to reduce smog problems – especially in heavily polluted city clusters near Beijing and Shanghai – depends largely on how determined local governments are to slash overcapacity in heavy industries.

At the end of 2015, Beijing’s persistent smog pushed the city authorities to pledge better management of small-scale coal burning. If other cities follow suit, the move could impact China’s environmental footprint.

Meanwhile, courts should expect more environment-related lawsuits as the newly revised Air Pollution Prevention Law took effect in January. The law allows public interest litigation against polluting factories.

– Li Jing

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