4 thoughts on “China Looking Forward – Road Bumps Ahead

    Robert says:

    I don’t see how China’s economy will even grow 7 percent.

    First, China is growing mostly on FDI and exports. Exports have decreased in share of GDP, but FDI is still a major share. The only way China is going to keep manufacturing and even some services is to continue their mercantilist, protectionist policies. We have seen recently that China is holding on to many of these, including subsidies for green technology. However, there is already a backlash from decades of protectionism. Many western countries, and increasing numbers of developing countries, are looking to get around the China monopoly. We have already seen FDI from the US contract at serious levels.

    If the US and other pacific nations enact the TPP, it is over for China. Yes, China is a large country. But, the TPP together is an even larger potential economy. The TPP will further reduce Chinese exports and FDI into China as south asia could take up more of the market. This is another area where Chinese mercantilist policies will come back to hurt them. Why would I do business with xenophobic China when I can do business with better trading partners.

    China wages are going up. But, the quality of their workers is not. Chinese universities hardly prepare their students for the work force. There is no research, no training, barely any studying, and a lot of book reading. The Chinese have not realized that work experience and book reading are different kinds of knowledge. So far, Chinese youth have very little work experience and too much book reading experience. I don’t need a worker who can pass a test. I need a worker who can show up on time and do his/her job with a smile.

    On top of all this, China is still a xenophobic nation. The reason that many western countries have grown so fast in the past is due to immigration. Multiple nationalities lead to multiple ideas and innovation. China discriminates against foreign workers and even more so now with the recent tax laws. If China lacks foreign workers, they will end up like other xenophobic asian countries, korea and japan. Korean and Japan both have many great companies that can’t branch out into the rest of the world for the simple reason that they are not international enough. Some big japanese companies realized this in the 80’s and internationalized. But the trends in China are showing they are heading more toward xenophobia, thus moving less toward internationalization. That would lead to more companies like Baidu; successful in china but can’t branch out into the rest of the world.

    I predict China’s economy to lower to 5 to 6 percent within 2 years. I also predict China to completely stagnate if the TPP is realized. Sure China might benefit from exports to south east asia in the short term. But the TPP will force china to be more competitive. The Chinese don’t like being competitive on fair terms, so I think it will be a long, slow growth transition.

    Chris Devonshire-Ellis says:

    @Robert, some fascinating observations there. The only comment I would make is that it’s rather generalized, however that’s understanding given the limits of comments in reply. I see Chinas GDP and overall economic performance and growth being at it’s most uneven across the country for decades. I do see slowdowns in cities such as Shanghai, whereas growth will come from the inland regions. Intra-Provincial competitiveness, something we’ve not seen raise it’s head for 15 years, will rear it’s head again, and some unofficial trade tariffs may reappear on transiting goods. All told I think China Inc. will achieve 7-8% next year, but sone cities will be doing 15% and others just 5% (as you suggested). The trick is to spot which cities offer the most potential. It may not be the first tier behemoths we are familiar with.
    Thanks – Chris

    KL Chin says:

    I think Robert’s comments raise some concerns, whilst it is largely generalised, they are points worth considering. I totally agree with Chris’s view, there are still untapped opportunities at central and western China, I dare to add that the muslim povinces are areas which are largely untapped. As to the hot spots for development and Cities with great potential, I think Chongqing is one of such city.

    Chris Devonshire-Ellis says:

    @KL – totally agree. There are dynamic opportunities in Xinjiang especially – it’s just that white Christians are going to find that culturally difficult – cracking Xinjiang requires fluent Mandarin and Russian, Uyghur, a working knowledge of Central Asia and strong understanding of the Koran. In short, entrepreneurial Muslims. They exist and many are getting very wealthy. See my recent piece here: “The Man From Ashgabat”: https://www.china-briefing.com/news/2011/11/24/the-man-from-ashgabat-xinjiangs-key-to-central-asia.html
    Best wishes – Chris

Comments are closed.