China’s One Belt, One Road initiative is the fusion of two development schemes—the land-based Silk Road Economic Belt, and the 21st Century Maritime Silk Road. Together they comprise infrastructure between 65 countries containing 63% of the world population, more than 35% of global merchandise trade, and 30% of global GDP. To date about $ 150 billion in investment has been committed.
Seven years ago, around 70% of passengers in US-China air trips were American. But today, more than 50% of travelers are Chinese. Flying used to be a luxury mode for travel in China, but now is for the masses. Data shows that by 2029 China will overtake the US as the world’s largest passenger market. The increasing passenger demand has not only brought Chinese airlines big successes in the past decade but also some real challenges like lengthy delays and poor service. In fact, Chinese airlines are struggling to keep up with growth in demand, and compared to foreign counterparts, they are not as global nor as profitable as they should be.
Just a few years ago, China was a major obstacle to a global agreement on climate change. But the attitude of the government has changed, to the delight of all. But it will take more than good will to clean up and it will be a long time before the smog lifts. In this sense, the idea that China will be a ‘Green Leader’ anytime soon says more about how far they have to go than how far they have come. Yet in recognizing the problems and directing investments towards new technologies, China has stumbled upon a realistic expectation of leadership in the energy technologies of the low-carbon future.
Thirty years ago, there was such nationalist angst in the United States over Japanese buyouts of American companies that Hollywood even made a movie about it. In Ron Howard’s 1986 comedy Gung Ho, the fictional Assan Motors Corporation swoops in to buy an idled auto plant in a desperate Pennsylvania company town. The film was a comedy and of course ended with cooperation prevailing and the plant being saved. There is an obvious parallel with the situation today with the US agonizing over Chinese investments in a remarkably similar way to how it worried about Japanese takeovers in the 1980s.
Chinese people love to try new technologies. Over the past year, virtual reality exploded across the country, attracting attention as well as investment from people who see a potential wave of the future: Analysts predict that China’s VR market will be worth $8.5 billion by 2020. But the real-world business of VR, which surged largely on the back of heavy investment, is less solid than it could be. Some people expect the technology to bring revolutionary changes to many industries like gaming, films and shopping but currently a huge portion of the VR market is still for video games and the business model is not yet solidly defined.
Debt is a ticking-time bomb for the Chinese economy. In the past three years central government stopped local governments from financing through investment vehicles and set a cap for the issuance of bonds. But new forms of debt continue to be formed. Local officials appear not to care about borrowing more, as long as the money can be used in projects that may translate to political achievements. And with those achievements, officials will be promoted to a higher level–as will the debt burden. A more worrisome thought will be: can those additional government debts and investments support China’s long-term growth?
Over the past year, the housing price in many Chinese cities has doubled. The property industry, which contributed to the economy’s growth, is now ‘hijacking’ China’s economic growth model. Instead of investing in real businesses, individuals and companies are betting on increasing property prices. In this interview, Professor Xu Chenggang talks about the government’s role in real estate regulation, the major challenges of pushing reforms in China and how state-owned enterprises and local governments should roll out these reforms.
After incredible growth in recent years, e-commerce in China seems to be slowing down. One reason behind this is the high penetration rate. By 2016, 62% people in Tier 3 and 4 cities were shopping online, while the number in Tier 1 and 2 cities stood at 89%. On the other hand, consumers in China have also changed over time, now the middle class are shifting their money from cheap products to premium services and goods where experience and recognition ties take priority. So does it mean online retail will go gloomy and physical stores may return to the spotlight?
China’s economic growth over the past few decades has impressed the world. But the world’s second largest economy now faces a difficult transformation: from relying on exports and investments to developing domestic demand. That’s not easy. Government-led stimulus is only a temporary solution and only looked reasonable in the first few years after the recent global financial crisis. In fact, the main problem facing the Chinese economy has been the weak demand in domestic market which manifested clearly in 2006, and became more obvious when growth slowed down.
In China, while state-owned enterprises dominate the monopoly industries like petroleum and telecom, the country’s private economy is still the major source for growth in production, employment and exports. Private companies are very sensitive to market changes: When profit margins shrink, they will jump out quickly. Expectations are low while the Chinese economy is under the ‘New Normal’, but the government is still concerned about private investment stagnation. The top economic agency has created a work team to look into the problem and made 60 proposals to solve the slow-down issue. But will top-down methods work?