Page 16 - 2017 White Paper
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7 White Paper on the Business Environment in China
specifically, its top leadership, time and time again, The New Normal
frequently brings up the need and urgency for its
particular brand of structural supply-side reforms. The Last year, when referring to the Chinese economy,
Chinese media and the foreign business community the catch phrase among China’s government officials—
have, for the most part this year, been reporting from and the global media—has undoubtedly been “the new
opposing camps; the Chinese media faithfully reporting normal”. Let’s take a look at what exactly does this mean
that reforms have seen progress this year and the and what are the implications for doing business in
foreign business community adhering to the opposite China going forward.
view that reforms have stalled. In order to fully and
comprehensively understand, therefore, the present It is clear by now that China’s economy, in the midst
context of the progress (or lack thereof ) of reforms, this of transitioning from its breakneck manufacturing and
White Paper incorporates relevant sections of the 2016 production-fueled growth model to a more services-
and 2015 White Papers. oriented and knowledge-based model is slowing
down in the years to come, although economists may
It is noteworthy to mention – and we have disagree about how much and for how long. In 2014,
documented this instance in this current White Paper the country’s GDP growth rate fell to 7.4 percent, the
as well - that China’s central leadership has, themselves, lowest in almost a quarter century, and many expected
on at least one occasion this year, also expressed that figure to drop further in 2015. According to China’s
dissatisfaction at the country’s slow pace of reforms. National Bureau of Statistics, the country’s GDP growth
rate was at 6.9% as of the third quarter of 2015, with the
We believe that the urgent, timely and full growth in the services sector offsetting the stagnation
implementation of an ambitious and comprehensive in manufacturing, keeping Premier Li Keqiang’s growth
program of reforms, coupled with the achievement of target within reach and exceeding economists’ lower
the 13th Five-Year Plan’s objectives, has the potential to expectations of 6.8% (Bloomberg 2015).
usher in a golden age of economic opportunity for China
and, correspondingly, the country’s foreign investors. Both President Xi Jinping and Premier Li Keqiang
have been quoted as calling this new, early stage of
In our opinion, supply-side structural reform, a key China’s development as “the new normal” in describing
focus of the 13th Five-Year Plan, has three major goals: the economy’s crucial rebalancing, one in which China
enhancing and upgrading industrial structures; pursuing is undergoing the process of diversifying its economy,
and strengthening market-oriented reforms in key pursuing a sustainable level of growth and striving to
sectors of the economy; and achieving the five targets of distribute economic benefits more evenly (Hu 2015).
reducing industrial capacity, inventory, financial leverage
and costs, and adjusting structural shortcomings. So, what is “the new normal” in China? The first is a
All of these reform focus areas, if properly pursued, lower rate of economic growth—this is plainly obvious.
addressed and implemented, provide significant upside The second is a focus on a new model of growth that
opportunities for foreign investors in which to make a places less emphasis on investment and more on
play. consumption, especially domestic consumption.
China is now in a relatively advanced stage in its Transition to this new model requires commitment to
transition towards transforming into a high-income the current administration’s ongoing structural reforms
economy. Increasing signs of liberalization and and long-term policies. The Chinese government has
innovation are starting to appear in several sectors done a tremendous job, in only 30 years, in crafting an
across its economy and we believe that current institutional environment that is generally conducive
adjustments are slowly moving China’s industries from to business, including foreign business. But in order
its present middle positioning towards the more high- for China to narrow the gap with more mature global
end positioning of the economic value chain. This is economies and in order to better serve as a sustainable
where partnerships between foreign investors and engine of future, long-term economic growth, further
China’s domestic enterprises can assist in and benefit in improvement of that environment is not only necessary
the country’s progress towards a ‘new normal’ of future but vital.
economic development.
16
specifically, its top leadership, time and time again, The New Normal
frequently brings up the need and urgency for its
particular brand of structural supply-side reforms. The Last year, when referring to the Chinese economy,
Chinese media and the foreign business community the catch phrase among China’s government officials—
have, for the most part this year, been reporting from and the global media—has undoubtedly been “the new
opposing camps; the Chinese media faithfully reporting normal”. Let’s take a look at what exactly does this mean
that reforms have seen progress this year and the and what are the implications for doing business in
foreign business community adhering to the opposite China going forward.
view that reforms have stalled. In order to fully and
comprehensively understand, therefore, the present It is clear by now that China’s economy, in the midst
context of the progress (or lack thereof ) of reforms, this of transitioning from its breakneck manufacturing and
White Paper incorporates relevant sections of the 2016 production-fueled growth model to a more services-
and 2015 White Papers. oriented and knowledge-based model is slowing
down in the years to come, although economists may
It is noteworthy to mention – and we have disagree about how much and for how long. In 2014,
documented this instance in this current White Paper the country’s GDP growth rate fell to 7.4 percent, the
as well - that China’s central leadership has, themselves, lowest in almost a quarter century, and many expected
on at least one occasion this year, also expressed that figure to drop further in 2015. According to China’s
dissatisfaction at the country’s slow pace of reforms. National Bureau of Statistics, the country’s GDP growth
rate was at 6.9% as of the third quarter of 2015, with the
We believe that the urgent, timely and full growth in the services sector offsetting the stagnation
implementation of an ambitious and comprehensive in manufacturing, keeping Premier Li Keqiang’s growth
program of reforms, coupled with the achievement of target within reach and exceeding economists’ lower
the 13th Five-Year Plan’s objectives, has the potential to expectations of 6.8% (Bloomberg 2015).
usher in a golden age of economic opportunity for China
and, correspondingly, the country’s foreign investors. Both President Xi Jinping and Premier Li Keqiang
have been quoted as calling this new, early stage of
In our opinion, supply-side structural reform, a key China’s development as “the new normal” in describing
focus of the 13th Five-Year Plan, has three major goals: the economy’s crucial rebalancing, one in which China
enhancing and upgrading industrial structures; pursuing is undergoing the process of diversifying its economy,
and strengthening market-oriented reforms in key pursuing a sustainable level of growth and striving to
sectors of the economy; and achieving the five targets of distribute economic benefits more evenly (Hu 2015).
reducing industrial capacity, inventory, financial leverage
and costs, and adjusting structural shortcomings. So, what is “the new normal” in China? The first is a
All of these reform focus areas, if properly pursued, lower rate of economic growth—this is plainly obvious.
addressed and implemented, provide significant upside The second is a focus on a new model of growth that
opportunities for foreign investors in which to make a places less emphasis on investment and more on
play. consumption, especially domestic consumption.
China is now in a relatively advanced stage in its Transition to this new model requires commitment to
transition towards transforming into a high-income the current administration’s ongoing structural reforms
economy. Increasing signs of liberalization and and long-term policies. The Chinese government has
innovation are starting to appear in several sectors done a tremendous job, in only 30 years, in crafting an
across its economy and we believe that current institutional environment that is generally conducive
adjustments are slowly moving China’s industries from to business, including foreign business. But in order
its present middle positioning towards the more high- for China to narrow the gap with more mature global
end positioning of the economic value chain. This is economies and in order to better serve as a sustainable
where partnerships between foreign investors and engine of future, long-term economic growth, further
China’s domestic enterprises can assist in and benefit in improvement of that environment is not only necessary
the country’s progress towards a ‘new normal’ of future but vital.
economic development.
16
