Free Trial
Subscription:
China Economic Review
Business Services & Logistics
Defence
Consumer Goods & Services
Financial Services
Food & Drink
Healthcare & Medical Devices
Materials & Manufacturing
Regional Markets
Custom Research
Events & Conferences
Contact
About
Terms & Conditions
Privacy
Home >
China Business Forecast Report Q2 2010
Management Report
Published: February 2010
Pages: For full details, please email keithw@cmsinfo.com
Tables: For full details, please email keithw@cmsinfo.com
From: GBP 480.00 Buy Now!
Research from: Business Monitor International
Sector: Regional Markets
After bouncing back strongly from the impact of the global financial crisis, the Chinese economy isfaced with the prospect of tighter monetary conditions in 2010, which will put the growth recovery tothe test. We expect a slowdown in the economy in H210 as the government normalises monetarypolicy amid rising consumer price inflation. China remains vulnerable to public unrest in 2010 andbeyond, despite the relative absence of major disturbances in 2009 as the economy slowed.
In 2009, one of our key concerns was that the slowing economy would lead to substantial joblosses, thus triggering major unrest. Although around 23mn migrant workers had lost their jobsby early 2009, the government’s fiscal stimulus plans have had a major impact, with the numberof unemployed migrant workers falling to 4.2mn by the end of June. Another growing challengefor the Chinese government is organised crime. Gangsterism is becoming increasingly rife andcriminal groups are said to be spreading their influence into municipal and provincial administrations,effectively creating local mafia fiefs. Where local authorities are perceived as not havingdone enough to crack down on this, citizens have staged protests outside administrative offices,raising concerns about loss of confidence in public institutions.
Our core view of a slowdown in the Chinese economy in H210 remains in place, although thereare increasing risks that policy tightening could cause a sooner-than-expected downturn. Sincethe onset of the recovery, we have emphasised (to a large extent) that the massive expansionon the money supply meant growth would be borrowed from the future, and we maintain that themedium-term growth outlook will be characterised by dealing with the impact of 2009’s malinvestmentsuch as overcapacity and banking system instability. As we have explained previously, whilesharp monetary tightening in the near term (not our core view) would likely induce a slowdownbefore H210, this would help to limit the damage down the line from further excessive credit creation.Although we continue to see China’s business environment on a healthy long-term path and thecountry will continue to attract overseas investors, recent events highlight the still-high level of riskassociated with operating within the Party of China’s regime. Google’s recent threat to withdrawits services from China over concerns about over-zealous internet censorship laws is a case inpoint. The party’s commitment to prioritising political control over a friendlier business environmentwill continue to hold back China’s score in our business environment ratings.
Our core view of a slowdown in the Chinese economy in H210 remains in place, although thereare increasing risks that policy tightening could cause a sooner-than-expected downturn. Sincethe onset of the recovery, we have emphasised (to a large extent) that the massive expansionon the money supply meant growth would be borrowed from the future, and we maintain that themedium-term growth outlook will be characterised by dealing with the impact of 2009’s malinvestmentsuch as overcapacity and banking system instability. As we have explained previously, whilesharp monetary tightening in the near term (not our core view) would likely induce a slowdownbefore H210, this would help to limit the damage down the line from further excessive credit creation.Although we continue to see China’s business environment on a healthy long-term path and thecountry will continue to attract overseas investors, recent events highlight the still-high level of riskassociated with operating within the Party of China’s regime. Google’s recent threat to withdrawits services from China over concerns about over-zealous internet censorship laws is a case inpoint. The party’s commitment to prioritising political control over a friendlier business environmentwill continue to hold back China’s score in our business environment ratings.