After decades of high growth, it seems the unwritten laws of economic gravity are finally catching up with Asia’s “Red Dragon.” Chinese leaders are balancing a complex set of political, economic and social factors to maintain stability in the face of a slowing economy. Indeed, they may be managing one of the most complex economic maneuvers in modern history.
The global economy has a huge stake in China’s successful adjustment, and the slowing economy and growing social tension are worrisome for investors inside and outside China.
This report maps the challenges facing China’s economy as well as the policy options available to its leaders, based on an online, crowdsourced analysis Wikistrat conducted in collaboration with Exan Advisory.
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- China will continue its march toward fundamental economic reform, managing the complex transition from export-led growth towards domestic consumption. Its economy will decelerate, but radical or catastrophic change is unlikely.
- Expect volatility and softening prices in key commodities that China imports, particularly those that support manufacturing, including iron ore, coal, copper and other base metals. This will have ripple effects on major exporters of these commodities, including Australia, Brazil, Chile, Nigeria, Peru, South Africa, Sudan and Zambia, although some price softening will be offset by efforts to decrease supply.
- A slowing import-export trade will, over time, hit related service industries such as shipping, but this will be gradual and some of the impact will be offset by China’s massive international construction initiatives.
- Decreasing demand in construction and construction-related industries will impact exporters of heavy machinery, concrete and similar products.
- China will remain a robust end market for technology, entertainment and services to feed healthy domestic demand, with the notable exception of luxury goods which are likely to stay depressed.
Wikistrat Senior Analyst
Former U.S. Deputy Assistant Secretary of Commerce for Agreements Compliance