China’s Challenges
By The Futures Company
In the 7th century A.D., Wei Zheng, adviser to the Tang dynasty Emperor Taizong warned the Emperor about the dangers of squandering surpluses. He warned the Emperor, “If a tree is to grow tall, it must secure its roots. If a stream is to flow far, it must secure its source.”
Rapid GDP growth has made China stronger but has also made it vulnerable
Chinese politics has a long memory, and his words still reverberate around the Great Hall of the People in Beijing. They were quoted by Minister Zhou Shengxian in a recent article about environmental protection.
Rapid GDP growth has made China stronger, but also made it vulnerable; environmental degradation, resource pressures, production capacity gluts, real estate spikes and inflation all threaten its future prosperity. The challenge facing the Politburo in the coming decade is to ensure that growth can be sustained. In turn this means the imbalances in the economy need to be addressed.
The government is sensitive to instability. Premier Wen’s announcement early last year that the Chinese government’s growth target for the year had been reduced from 7.5% to 7% was an explicit recognition of these imbalances, while concepts such as ‘circular economy’, which seeks to decouple economic growth from resource use, have become entrenched in government thinking.
Concepts such as ‘circular economy’, which looks to decouple economic growth from resource use, are now entrenched in Chinese thinking
The upside of these imbalances, however, is opportunity. There are a number of industries or sectors which have potential for growth over the coming decade, through a combination of government intervention and consumer demand. These will benefit from the Chinese government’s attention to addressing three significant gaps in the way its economy functions. These are:
- quality control
- sustainability, and
- logistics
These are all problems created by China’s long period of growth. But only by addressing them can growth be sustained at anything like the historical levels we have seen. This is not just about structures, but also about building trust in institutions.
This paper sets out to analyze the opportunities that will emerge as China sets out on this path. It will do this by combining macro driver analysis and The Futures Company’s Global MONITOR 2011 China data.
For more details contact lloyd.burdett@thefuturescompany.com
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