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.
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.”
Getting trade agreements in place is one of the ways China tries to get deals done. But who is doing it better? The China Weekly Hangout discussed in June the way the EU and the US are dealing (of fail to deal) with China, with negotiation expert Andrew Hupert from New York, Swiss lawyer Nathan Kaiser from Taipei and political analyst Steve Barru from Denver, Colorado. Moderated by Fons Tuinstra of the China Speakers Bureau.
The +China Weekly Hangout will hold on Thursday 18 July an open office where you can drop in to discuss upcoming subjects, panelists and current affairs in China. Here is our announcement, or you can register for participation right away on our event page.