Advertisement
Opinion

2016 promises to be a make-or-break year, as a new China struggles to be born

Andrew Leung says the decisions by leaders in Beijing this year, amid a difficult transition phase, will have lasting effects on the economic, social, financial and geopolitical spheres, both at home and abroad

4-MIN READ4-MIN
No Caption Available.
Andrew Leung
On the economic front alone, China has to deal with overcapacity, state-owned enterprise reform, currency and interest rate liberalisation, debt and deflation management, old-age health care and a greener and more sustainable economy.
On the economic front alone, China has to deal with overcapacity, state-owned enterprise reform, currency and interest rate liberalisation, debt and deflation management, old-age health care and a greener and more sustainable economy.
China has opened 2016 with another market crash in its roller-coaster ride. Meanwhile, capital outflows continue amid concerns about the yuan’s potential downward slide and the risk of slowing growth under the “new normal”. Although a hard landing is unlikely, at least according to a Goldman Sachs Investment Strategy Group report, growth in 2016 is forecast to range between 5.8 per cent and 6.8 per cent, testing Premier Li Keqiang’s (李克強) suggested 6.5 per cent as the required minimum.

Environmentally, the signs have not been propitious. Beijing sounded the highest possible “red alert” in December as the capital was repeatedly choked by smog.

READ MORE: Chinese military aircraft likely to land at new airport in disputed area of South China Sea in coming months, says ex-PLA officer

At the same time, China’s neighbourhood remains problematic. The recent test flight that landed on reclaimed land in the disputed Spratly Islands in the South China Sea has further rattled the US and its allies.

Advertisement
However, fixating on China’s travails misses the point. Indeed, these may be birth pangs as a new China struggles to be born. Contradictions abound, reminiscent of Charles Dickens’ “It was the best of times, it was the worst of times.” The old is withering away while the new is being sprung upon the unwary across a wide front.
Beijing is attempting to battle its infamous bad air quality with the implementation of a pollution law this month. Photo: AFP
Beijing is attempting to battle its infamous bad air quality with the implementation of a pollution law this month. Photo: AFP

According to Natixis, a French corporate and investment bank, the die is cast for a series of tectonic shifts towards a new China. With the yuan having appreciated by some 50 per cent since 2005, exports such as office machines, footwear, textiles and clothing are plummeting. However, a more expensive Chinese currency will boost the consumer power of a rapidly expanding urban population; 81 million more urbanites will be added by 2020, pushing the urbanisation rate from 54.8 per cent to 60 per cent.

READ MORE: Deflationary pressures to continue ‘haunting China’s economy’ this year: economists

Dynamic consumption growth is expected in leisure and other quality-of-life products and services. Industry is likely to be driven more by research-based innovation, particularly in the internet, semi-conductor, robotics, and nuclear energy sectors. Meanwhile, China is becoming a more proactive and outward-looking global player. Backed by new financial institutions like the Asian Infrastructure Investment Bank, China’s “One Belt, One Road” transcontinental initiative is beginning to take shape.

Advertisement
Advertisement
Select Voice
Select Speed
1.00x