Much of this has to do with the conversion of China from an export led economy, to one based on internal consumption and the notion of Xiaokang, which can be translated as a ‘moderately prosperous society’ that the country is hoping to build by 2020.
Other than technology and healthcare, areas of focus are likely to be the reform of state owned enterprises, continued regional development and environmental improvements.
“When, and how many of, these reforms will be implemented remains to be seen, “ Lee says, adding: “The hope is that China’s economy may become more open and transparent, more skewed towards private enterprise and with a greater reliance on private financing.”
Lee is of the view that while investors will take time to adjust and that the road is liable to be bumpy, they would do well to remember that “sacrifices being made now should result in long-term rewards”.
Another way to look at it is: what does a moderately prosperous China mean for the rest of the world and what happens if growth in China is slower than what the world has come to expect?
The answer to the first part of the question is very much dependent on the answer to the second part and while much of it will, indeed, be dependent on the policies put in place by the Chinese government, there are those of the view that a far more important determinant is the country’s level of debt.
The chaos wreaked in August by concerns over Chinese growth are a clear indication the global economy is vary wary of any signs of illness within the Chinese economy.
But, despite this, markets generally seem to lean toward the view that no matter what happens, China will somehow carry on.
