China after the NPC
Fast forward to the future?
After China’s recent National People’s Congress (NPC), President Xi has a clear slate to implement long-term economic and social reforms.
But which way will he go? Structural bureaucratic reforms suggest a desire to reform within a carefully controlled environment. They also reflect a continuing belief that the Chinese Communist Party is best-placed to lead the Chinese economy through change ahead.
“Recent assessments suggest a pro-reform stance, but under an umbrella of policy continuity”
Bureaucratic changes have been accompanied by a range of appointments key to financial markets and changes to economic targets. But the policy focus remains on deleveraging, with some types of credit growth still a concern. Household borrowing is high.
“The 2018 economic targets emphasized putting the quality of growth first, and the government is willing to tolerate slower growth with year”
We think that the debt problem should remain containable, allowing a slight controlled slowdown over the next two years. Inflation remains a risk, particularly if it forces an aggressive tightening of monetary policy.
“Chinese consumers are changing their consumption patterns, in a way that is irreversible and ongoing”
We identify six key investment themes for 2018: slowing traditional economy sectors, new economy sectors as key growth drivers, further deleveraging, industrial consolidation, changing inflation trends and higher volatility.
“China is embarking on an unprecedented effort to master artificial intelligence”
Asset class views for this year are included, along with an assessment of three key longer-term economic and investment issues and China’s AI push.
Executive summary from CIO Insights Special ‘China after the NPC: Fast forward to the future?’, published March/April 2018.