More debt, unemployed in 2016 - Arthur Kroeber

Arthur Kroeber

Economist Arthur Kroeber, previously an acknowledged bull on China, turns even bearish when he looks at the prospects for 2016. In Market Place he predicts "A turning point for the worse".

Market Place:

First, the bad news about China’s shifting economy: "The risk is that if the government doesn’t do enough structural reform, you wind up with lower and lower growth and higher and higher debt, and pretty soon you wind up looking like Japan in the early 1990s," said Arthur Kroeber, managing director of GaveKal Dragonomics in Beijing. 

He predicts that in 2016, China’s economy will see a turning point for the worse. "We expect to see factory closures, and bankruptcies, and write-offs in the heavy industrial sector to accelerate this year by quite a lot. We're entering a new era," Kroeber said. He estimates five to seven million layoffs for China’s heavy industrial sector.

More in Market Place.

Arthur Kroeber is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch or fill in our speakers´ request form.

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GDP growth in line with our expectations - Ben Cavender

Ben Cavender

China´s GDP growth for the fourth quarter of 2015 has been set at 6.8%, lowest since 2009, but very much in line with the expectations, says business analyst Ben Cavender in Money Control. For 2016 he expects the figure to hoover in the mid-6 percent.

Money Control:

Cavender: Everybody has been a bit conservative this year and they should expect somewhere in mid-6 percent range. Realistically we shouldn't expect that we have seen anything faster than that. The government recognises that there has to be a correction towards slightly slower growth model here and that's really as it should be, so should be expected around 6 percent. 

Ekta: 6 percent? 

Cavender: 6.4-6.5 percent. 

Ekta: 6.4-6.5 percent is your expectation for 2016? 

Cavender: Yes that's correct. 

Nigel: Over the last couple of days we have seen some stability come about in the Chinese currency at around 6.55 odd marks. What is your reading of that? Is that likely to percolate to the market on the whole? 

Cavender: We are going to see currency devaluation going forward and we are probably going to see the government trying to keep a bit more stability going forward. They are going to try and kicks some jitters out of the market here. If the currency is more stable then that should help the market in China. Obviously at the beginning of the year has been extremely rough for a lot of markets but if things stabilise here in China, it should make it easier for other countries in terms of currencies.

More in Money Control.

Ben Cavender is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch or fill in our speakers´request form.

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What will China´s economy do in 2016? - Sara Hsu

Sara Hsu

Financial analyst Sara Hsu looks ahead in the Diplomat at 2016 and what the announced economic shift might mean for the country and the world. An overview of the current state of financial reforms in China.

Sara Hsu:

China is moving away from a manufacturing-based economy to a service-based economy, and has ended a period of intensive fixed asset investment. Overcapacity within the steel industry, for example, has resulted in zero profitability of steel companies and insufficient demand, not to mention supply gluts in the global market. Firms that are inefficient are to enter bankruptcy or be merged with other firms. Excess investment in the real estate sector has also led to an oversupply of houses, which has led to falling home prices, especially outside of the larger cities. Promotion of urbanization policies may help to shore up the demand for real estate. 

Much of the oversupply in manufacturing and real estate occurred as a result of or in tandem with overlending to local governments, which accumulated massive amounts of debt building up infrastructure in recent years. The risks of local government debt default are to be controlled in this coming year in order to maintain financial stability. The issuance of local government bonds has allowed local governments to stay afloat despite holding high levels of debt. Certainly, improving the real estate outlook will help local governments to improve the prospect of further land development and land sales for generating revenue. 

Costs for firms are to be cut by reducing taxes and fees, improving administrative procedures, and reducing social security contributions. These steps will encourage growth of domestic firms. New industries will continue to be promoted; the high-tech industry is growing rapidly, and foreign investment in this industry is expanding along with it. Telecommunications, e-commerce, and new energy sectors are growing as well. 

Goals to maintain macroeconomic stability have been a cornerstone of Chinese economic policy since reform and opening up, in an effort to maintain growth and keep inflation under control. Boosting consumer demand is a somewhat newer task, and with consumer demand rising slowly, it may take some time for demand to make up for other types of spending. However, China’s upper middle class is growing, set to almost double as a percentage of urban households by 2020, which will ensure ongoing expansion of consumer spending. 

China’s leadership has stated that its capital account will be liberalized by 2020, and that its exchange rate will continue to reflect market forces. This process will be aided by the RMB’s recent inclusion into the IMF’s basket of reserve currencies, on the condition that further exchange rate liberalization will take place. The move also increases the attractiveness of holding RMB-denominated assets and will help to push forward opening of the capital account.

More in the Diplomat.

Sara Hsu is a speaker at the China Speakers Bureau. Do you need her at your meeting or conference? Do get in touch or fill in our speakers´request form.

Are you looking for more financial experts at the China Speakers Bureau? Do check out this list.  

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