The days of double-digit growth in China are long gone now. And as China shifts to a new economic model, the term ‘the New Normal’ is often used to describe this supposedly more sustainable economic growth. The consensus is that the New Normal will usher in a steadier, stronger, more sustainable economy led by consumption and services. But when you break it down to a granular level, what does the term really mean? More importantly, what does the New Normal mean for the level of economic growth being pursued in China? What implications does it have for rebalancing the economy and different industries?
Dating back to 1953, China’s system of Five-Year Plans has long been dismissed as anachronistic, but it remains crucial to guidance of the economy. Five-Year Plans occupy a central place in China’s complex system of governance. For just as China’s economy has reformed and adapted in the last 37 years, so too has the planning framework. There are clear signs that planning will remain an indispensable component of Chinese economic and political development for years to come.
In August, China’s currency the renminbi was suddenly devalued after market forces were introduced into the way its trading band was calculated, once again casting the spotlight on this most contentious of currencies. Typically, thanks to the interventions of US politicians, the conversation had centered on accusations that the renminbi has been kept artificially low as part of a ploy to boost Chinese exports. However, such a view hasn’t been supported by analysts, and in the Summer 2015 issue of CKGSB Knowledge several went on record as saying the renminbi was in fact overvalued. Take a look at how the value of the renminbi has changed through the years.
China’s economic growth has dropped to a 24-year low. There’s not much room for further decline as Beijing has reaffirmed its goal of doubling the GDP between 2010 and 2020. This means growth of 6.5% a year. The conventional methods of boosting growth are no longer deemed dependable. Beijing is now pinning its hopes on unlocking another round of “economic dividends” by carrying out reforms to make the entire system more market-driven. But can China carry out economic transformation without hurting growth? We ask Anthony Saich, Director of the Ash Center for Democratic Governance and Innovation at Harvard Kennedy School.
It is a truth universally acknowledged that a Chinese state-owned enterprise (SOE) in possession of industrial assets must be in want of reform. China’s reforms have released many assets into private ownership, but large blocks remain in corporations linked either to the central government or to a local government via chains of corporate ownership. The State Council’s latest guidelines on the reform of state-linked enterprises envisage more private ownership, some mergers, and a greater role for state asset management companies. But would that ensure better corporate governance?
China’s economic growth model has created a serious overcapacity problem that will continue to derail future growth unless tackled now.
Alan Krueger, former Chairman of the White House Council of Economic Advisors, shares his thoughts on the labor market, US economic recovery and the interplay with China.
Yukon Huang on the mechanics of the Asian Infrastructure Investment Bank, China’s role in its governance, and comparisons with the World Bank and the ADB.
A huge shift in trade and relations could be underway across Eurasia, and China’s New Silk Road policy is at the heart of it
As China changes, companies are being forced to adopt China Plus One strategies and look at other countries for manufacturing.