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What Should We Expect from China?

What Should We Expect from China?
January, 2017

What Should We Expect from China?
– is the country heading for an economic crisis?
– and is the new leadership reformist? Or Maoist?

The answer to these questions is particularly critical in this new era of unpredictability in the West, not only to envisage the future of the most populous nation on earth, but also to predict the economic well-being of the rest of the world.

Paradoxically, even though risks and uncertainty are building up, China’s best time is probably yet to come, only if China succeeds in its turnaround.

This time, however, the challenges keep accumulating and the stakes are higher than usual!

Despite its much publicized slow down, China accounts for an estimated 50% of world growth.

When one takes note of the economic uncertainty for Europe, compounded by Brexit, the general weakening of the European Union, the instability created by the conflicts in the Middle East, and the unheard-of unpredictability of the new US administration, an economic crash in China could be the start of a new global crisis. As a result, understanding what to expect from China becomes a crucial part of evaluating how well our economies and businesses will be able to progress.

China’s new leaders have announced far reaching reforms to put the country in a position to develop further as a society and as a nation. McKinsey identified China’s economic slowdown as the top risk to global growth: most of us are not aware how very different tomorrow’s world could be if China’s reforms succeed or fail.

Until recently, China’s mid-term evolution has been quite predictable

Since the Deng Xiaoping era, the Communist Party’s primary objective has been to develop China economically, both for the well-being of its people and for the country to be strong enough to be an independent world power.

In Chinese eyes, this is only natural: throughout its 2’000 years of history as a united country, China was both independent and a key, if not dominant, player within the world it knew. Predictably so, in the last 30 years, China’s position among nations has again become a preeminent one, at least in economic terms.

And while a few years ago China’s fast growth was perceived to be dangerous competition to developing and developed economies alike, today we fear that if China sneezes the rest of the world will catch a cold. The fact is that whichever way we look at it, China’s development has become an inescapable factor of our economic lives and well-being.

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