Our Asia-Pacific analyst Neil Thompson recently wrote a piece titled “China’s Economy Limps On” offering valuable insight into the Chinese economy and what’s next for businesses impacted. Here’s an excerpt of his views:
At ERI we take a balanced view to the economic risks coming out of China right now. Despite slowing growth, Beijing will not remove non-tariff barriers to foreign firms or make other policy changes that could spur a stronger economic recovery. President Xi Jinping remains focused on national security risks and regime survival at the expense of loosening political controls to support faster growth. Chinese policymakers are also prioritizing “high-quality” growth in areas they have identified as important to China’s scientific and technological development over improved external trade relations or re-building investor confidence. This represents a key shift in Beijing’s outlook away from the high growth model it pursued in previous years.
However, we also believe that due to China’s slowing economy Beijing’s willingness to retaliate against companies from countries that impose trade or technology restrictions on China will be temporarily reduced over the next 12 months. Beijing will probably only risk symbolic or limited economic countermeasures to response further to US-led economic restrictions against Chinese firms. On the other hand, businesses or individuals who collect or report data on China’s economic situation will face elevated legal or regulatory risks as China tries to limit foreign access to the true state of its economic outlook.
Unfortunately, China’s economy will remain sluggish over at least the next 12 months and Beijing’s policymaking will do little to address the root causes, weakening business confidence. Due to concerns over debt, Chinese government economic policy remains focused on spending on infrastructure projects of declining utility to China’s increasingly developed economy rather than more direct stimulatory methods. Absent stimulus, consumer spending will remain weak as concerns over employment security and the need to save in the absence of a strong welfare system weigh on households.