What might happen in China
Strategy January 2016
Millions of people being relocated from cities, fewer jobs,
greater centralization, and more movie blockbusters are
just some of the author’s predictions for the year.
In debates about whether growth is a percentage point up or down, we too often lose sight of
the absolute scale of China’s economy. No matter what rate the country grows at in 2016, its
share of the global economy, and of many specific sectors, will be larger than ever. My snapshot
of China in 2016? An increasingly diverse, volatile, $11 trillion economy whose performance is
becoming more and more difficult to describe as one dimensional.
The ...view middle of the document...
Perhaps the only challenge will be to interpret the plan’s intent
clearly through the new “party speak” now coming to dominate government pronouncements.
The GDP growth target will still be 6 percent–plus, which will be softened a bit but not
eliminated by parallel quality-of-life goals: the environment, health, income, and the like.
Achieving the growth target will remain the core objective of fiscal and monetary policies, so
The China Orr-acle: Gordon’s predictions
Don’t get distracted by talk of Chinese
economic growth moving a percentage
point here or there. The country’s
economy is still massive—as are its
potential opportunities. Here’s a quick
take on what I see happening in 2016.
he 13th five-year plan—few
surprises . . . but look for a solid
GDP growth target, green initiatives,
and action on productivity.
ewer jobs, flatter incomes—and,
potentially, less confidence . . .
with white-collar workers being
he maturing of investing in China:
More options for Chinese investors
and foreign investment managers . . .
but remember the volatile mind-set
of local investors.
anufacturing in China is changing,
not disappearing . . . with the
winners becoming even more
competitive on a global scale.
gricultural imports are rising and
rising . . . bringing opportunities for
countries from Australia to Russia
to the United States.
ore centralization . . . as efforts
to devolve authority are shown to
oving people at scale—the
middle class, not peasants . . .
because China’s cities are
bursting at the seams.
ovies in China: $$$ . . . a Chinese
movie will gross $500 million
domestically for the first time.
hina continues to go global, with
the United Kingdom as a new focal
point . . . the love affair between
the two countries will continue, but
others want in on the action.
nd finally . . . China will win
soccer’s World Cup! Maybe not
yet, but real money—domestic and
foreign—is now flowing into the
country’s soccer leagues.
expect lower interest rates and pressure on the exchange rate versus the US dollar in 2016.
Financial reforms aimed at moving more of the economy toward a market-based allocation of
capital will continue.
Meanwhile, there will be more progress on interest-rate deregulation, on the IPO process
(registration rather than approval), on permitting new entrants (especially from the tech sector
and from abroad) into financial services, and on reimplementing laws suspended in the
summer of 2015. The plan will promote decentralization, but the reality is likely to be greater
centralization. More infrastructure will be built, mainly to enhance intraregional development—
for example, around Greater Beijing.
Green initiatives, reinforced by December 2015 commitments made in Paris and the “red alert”
in Beijing that same month, will take center...