China Herald: A lot of corporate stress for the next 18 months

Arthur Kroeber

A slowing economy and efforts for introduce structural reforms will most probably work out fine in the long run, tells economist Arthur Kroeber in CSMonitor. But for companies, on a micro level, we will see a lot of stress in the coming 18 months, as easy credit is not longer on the agenda.

CSMonitor:

Since the new government took office in March, it has been sending signals that it is no longer ready to follow tradition and combat any fall in economic growth rates with a surge in credit.

“The government now is sitting by and allowing the economy to do a natural deceleration,” says Arthur Kroeber, head of the GaveKal Dragonomics economic consultancy in Beijing. “It is not jumping in to stimulate the economy and keep it artificially high.”

That is in marked contrast to Beijing’s reaction to the 2008 financial crisis, which was to launch a massive stimulus plan that kept the economy humming even as most of the rest of the world went into recession...

The labor market in China is still tight, employers complain, and urban wages have been rising by nearly 20 percent a year since 2010, according to official figures.

The effect of China’s “one child policy,” in place for 30 years, means that workers are likely to be in short supply for the foreseeable future.

“That makes it a good time to carry out structural reforms, because you can do it without too much social tumult,” suggests Mr. Kroeber...

“In the macro sense, everything will probably all work out,” predicts Kroeber. “At the micro level, when it comes to corporate stress, we can expect a lot of bad news over the next 18 months.”

More in CSMinitor.

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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