Current question in the Economics Forum:
"China is aiming to change its economic growth structure from an export driven model towards a strongly domestically oriented and consumer-based approach. How realistic are these ambitions and which concrete targets could be reached within what time span? Which industry sectors will be able to benefit from China’s modified economic strategy and how should investors assess these developments from a risk perspective."
"The important Third Party Plenum back in November suggested Chinese authorities are getting serious about rebalancing the economy and restraining credit growth. The result of the recent Party Plenum is a blueprint and Chinese leaders still have everything to prove. But the fact that the document convincingly maps out the way in the right direction is new and a cause for optimism. If executed successfully, it will help rebalance China’s economy away from investment towards consumption and reduce the probability of a hard landing further down the road. Chinese authorities are likely to take more measures to tackle the debt explosion seen over the last five years. The implication of this is that economic growth will slow down further from current levels. China currently still sticks to its official growth target of 7.5% but it seems highly unlikely that this number can be sustained for much longer. The reason is that it is not consistent with the goal of rebalancing the economy. Financial market consensus is that Chinese growth will be as high as 7.5% in 2014 and 7.2% in 2015. We estimate that these numbers are too optimistic and that growth could easily fall back to 6.5% as of next year and gradually lower in the years thereafter. Paradoxically, this evolution should be welcomed as it significantly reduces the chances of a hard landing further down the road. For now, however, financial markets are still reasoning the other way around."
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