Product Type: Market Research Report
Published by: Business Monitor International
Published: March 2008
Product Code: R302-2295Description Olympic Year, Olympic Challenges
While we expect GDP expansion to continue to slow in 2008, we nonetheless feel that spill over
effects from 2007 and continuing loose monetary conditions will prevent the authorities from successfully
cooling the economy substantially and are thus forecasting economic growth of 10.7% in
2008. This would represent a continued moderation from Q 07, when annual GDP growth slowed
to 11.2% y-o-y, from 11. % in Q 07 and 11.9% in the March-June period. However, full-year growth
in 2007 nonetheless reached a 1 -year high of 11. %, meaning that the Chinese authorities will
maintain their tightening bias in 2008.
The 2008 Olympic Games to be held in Beijing in August will be China’s highest-profile public event
to date, and will - at least symbolically - mark its emergence on the world stage. Thus China’s
top priority in the run up to the Games is to ensure that they pass smoothly and that they cast
the country in the best possible light. However, Beijing’s heavy-handed approach in doing so is
attracting increasing criticism and threatens to undermine the government’s efforts. Meanwhile,
attentions will be focused in the short term on China’s five-yearly reshuffle of the National People’s
Congress (NPC, parliament) in March.
China will continue to struggle in its fight against runaway inflation, which hit an 11-year high of
6.9% in December 2007. The People’s Bank of China (PBoC) elected to raise the one-year
lending rate by 18bps to 7. 7% and the one-year deposit rate by 27bps to .1 % on December
20 2007, but we retain our view that the bank’s ability to implement further rate hikes will remain
limited. With options running out, the Chinese authorities appear to have relaxed their crawling
peg currency regime to allow faster currency appreciation. Having gained 6.86% in 2007 to close
the year at CNY7. 0 1/US$, we are forecasting the yuan to rise to CNY6.7000/US$ by the end of
2008, implying gains of approximately 9.0%. We also expect this pace to be matched in 2009 as
the unit moves towards CNY6.1 00/US$ by year end.
With its vast supply of cheap labour and rapid economic growth China remains the top destination
for foreign direct investment (FDI) in the developing world. Positively, the Chinese government is
increasingly giving more protection and encouragement to the burgeoning private sector, which is
now the most dynamic in the economy and accounts for most of the country’s job growth. However,
the command nature of its economy means that bureaucracy remains a key obstacle to doing
business within the country and the legal framework is still weak despite two decades of reform.
Table of Contents - Executive Summary
- Pressures Continue To Mount
- Chapter 1: Political Outlook
- SWOT analysis
- BMi Political Risk Ratings
- Domestic Politics
- Olympics Thrusts human Rights into The Spotlight
- The 2008 Olympic Games to be held in Beijing in August will be China’s highest-profile public event to date,
- and will - at least symbolically - mark its emergence on the world stage
- Table: The State Council and Other Key Posts
- Chapter 2: Economic Outlook
- SWOT analysis
- BMi Economic Risk Ratings
- Economic Outlook
- GDP Data highlights External/Domestic Trade Off
- We expect that economic growth will continue to moderate in 2008, while spill over effects from 2007 and continuing
- loose monetary conditions will prevent the authorities from successfully cooling the economy substantially
- Table: Economic activity
- Monetary Policy
- ‘Prudent Policy’ no Longer Enough
- China has announced its intentions to bring down runaway inflation to within ‘normal’ limits after introducing a
- number of inflation-fighting measures in December 2007 and January 2008
- Table: Monetary Policy
- Trade Outlook
- What Does Slower Global Growth Mean For Exports?
- With economic growth slowing across China’s main export markets, concerns that the country is heading for a
- potentially ruinous ‘hard landing’ are once again surfacing
- Table: Balance Of Payments
- Demographics
- Demographics Point To Mounting Woes
- China’s demographic profile points to mounting long-term woes Chief among them, China’s population is ageing
- rapidly, a process whose symptoms have been exacerbated by the government’s ‘one-child’ policy
- China’s Population Options
- Whither The One-Child Policy?
- Regional Policy
- Chongqing: Gateway To The West
- The municipality of Chongqing, the largest and most populous of China’s four provincial-level municipalities,
- has been dubbed ‘China’s Chicago’ as the government primes it to become a key strategic link between the
- east and west of the country
- Chapter 3: Special Report
- Looking Beyond 2008
- The Future Of The World, in Three acts
- US: The Rebalancing act
- Unwinding The imbalances
- We believe that a substantial, multi-year shift in the US external accounts is under way A weak US dollar and
- subdued domestic consumption should lead to a narrowing in the US’s structural current account deficit
- China: What if We’re all Wrong?
- Our Core Scenario For China
- We are retaining our positive headline growth projections for China across the forecast period to 2012, with our
- expectations of the continued success of the urbanisation process and export-driven growth model underpinning
- our assumptions
- Japan: immigration Key To Long-Term Growth
- Demographic Woes Portend Long-Term Decline
- Immigration remains the only realistic way that Japan can overcome its long-term economic challenges
- Chapter 4: Business Environment
- SWOT analysis
- BMi Business Environment Risk Ratings
- Business Environment Outlook41
- Table: BMi Business and Operational Risk Ratings
- institutions
- Table: BMi Legal Framework Ratings
- infrastructure
- Market Orientation
- Table: Asia, FDI Inflows
- Table: Top Export Destinations
- Table: BMi Trade Ratings
- Operational Risk
- Chapter 5: Key Sectors
- Tourism Forecast
- Executive Summary
- We anticipate Olympic-related arrivals to boost 2008 tourist arrivals as a whole by 10% year-on-year, after growth
- of 4-6% year-on-year for much of the previous decade
- Table: China’s Tourism industry - investment and Employment
- For the 2007-2012 forecast period we expect the transport and communications sector to continue outpacing
- the economy as a whole It will achieve average annual growth of 107%, versus 96% for overall GDP
- Freight Transport Forecast
- Executive Summary
- Table: China Freight Transport industry Forecast
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