Slow growth and an uncertain outlook: a new corporate calculus on China?

David Skilling, Senior Adviser, Thomas Gratowski, Senior Practice Director, and Jens Presthus, Associate Director, gave their latest take on China’s economic outlook – looking at both the short and long-term as well as what Beijing’s policy priorities mean for the global economy, geopolitics and China’s relations with the rest of the world.

Key insights from the event:

• Structurally lower growth, but no economic collapse. China’s economy appears to have found a cyclical bottom, fending off concerns about a meltdown. Still, a strong rebound is unlikely, and growth will be structurally lower in the years ahead.
• Private investment is falling fast. This is mainly because growth in domestic demand has failed to strengthen over the last 10-15 years, and not because of tighter regulation imposed over the last 2-3 years. Although this has not helped.
• Property downturn unlikely to trigger financial crisis. Widespread financial contagion is unlikely given state control of the financial system. At the same time, a property revival is not on the cards – Beijing has made this clear.
• De-risking of supply chains is happening, but slowly and imperfectly. Foreign and Chinese firms are moving production out of China, even if it makes little financial sense. But this does not mean that China is being rooted out of supply chains.
• There is enormous variation in terms of sectoral performance. Industries linked to the property sector are ailing while policy tailwinds are boosting parts of the manufacturing sector. Certain consumer goods segments are also benefiting from demographic dynamics and even a pessimistic outlook on the economy.
• There is still space for foreign firms to fill gaps in the Chinese economy. Many foreign firms are being squeezed by tougher competition and generous subsidies favouring domestic rivals. Still, at least for the time being, foreign firms retain an edge in certain industries – making expansion in China a lucrative proposition.