The Economist Intelligence Unit’s China Strategic Forecast: More Central Control

This morning I went to the Economist Intelligence Unit’s China Strategic Forecast. I had a lot of fun. I got to chat with a lot of interesting people (other consultants and senior decision makers at different companies) and learned a lot of good information. Here are the highlights from the EIU’s forecast:

  •  Expect more control by the central government to help balance the economy and continue harmonizing society. This means the provinces will start to lobby the central government and the National Development and Reform Commission for policies that help maintain their interests. The NDRC however is more likely to approve policies that meet its own interests.
  • The central government is going to push further integration with the global economy through the yet-to-be-named investment fund and allowing funds to go outside the country. This will help get rid of the excess financial liquidity in the market.
  • The current case of inflation is overstated, economic growth will continue next year.
  • Consumer strength will increase not only because middle class salaries are rising, but also because of the harmonious society mentioned earlier, social spending will increase, so low-income families will have more money to spend.
  • There will be greater pluralism allowed in society. This will come from two areas — one the appointment of government ministers who are not Communist Party members and two recognition that even with the Great Firewall, the central government can completely control the flow of information. It will be interesting to see how they manage the freedom of information.
  • There will also be demographic pressures. The first generation of One-child policy kids will be turning 22 next year. They are the jello-generation their political views aren’t yet formed (so the government will try to shape them — J.) The one-child policy is also going to cause shortages in manufacturing in certain sectors and a gender inbalance in some areas because boys are still favoured over girls.

Overall, it’s pretty positive. The EIU’s view on inflation was a new one to me. But once you look at China’s CPI — food is a large part of the index  and China has suffered a shortage of pork and grains due blue-eared pig’s disease and bad flooding this summer that destroyed  many crops == you’ll see that  if you discount food for the reasons I just listed,  the situations not that bad.

I will definitely be attending more of these events and hopefully blogging about them too.




Filed under China Business

3 responses to “The Economist Intelligence Unit’s China Strategic Forecast: More Central Control

  1. yea… economists like jonathan anderson at UBS have been saying core inflation (take out the most volatile components like food and oil) has been stable at 1% for the past few years (can’t remember exactly), so this supply-led inflation we’re seeing now doesn’t really affect the fundamentals. The numbers released each month though, make it seem alarming.

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