04/24/2015
China / Economics
China’s push for growth-at-any-cost is being replaced with the "New Normal". It will fundamentally change how business and investing are done.
Setting ambitious targets and reaching them fast has been an essential part of China’s dizzying economic success story for more than three decades. But now that push for growth-at-any-cost is being replaced with what China’s leaders call the “New Normal”.
Officially, it is being billed as a balanced and holistic development approach that strives for “quality” – even if that means “lower” – growth while placing overriding importance on ethics, equality, justice, and social harmony. This sweeping sea-change is powering a comprehensive overhaul of the policies of, and the mentality behind, the system that manages the giant economy of the world’s most populous nation.
Investors and businesses, both outside and inside China, must understand that many old ways are gone or are going.
The transformation has already begun with major reforms chalked up since President Xi Jinping came to power a little over two years ago. They include deregulating key utility prices, experimenting with free trade zones, amending budget laws to allow local governments to issue debt conditionally, reforming the hukou (or household registration) system, trying out mixed-ownership for some state-owned enterprises, strengthening the foundation of law, and even relaxing the one-child policy.
Such change, so far at least, seems to be cautious in action and measured in magnitude, which makes sense at a time of transition for China’s development. Moreover it has been enacted apparently without systematic risk, despite a highly volatile external environment and a decelerating domestic economy. That bodes well for China’s macroeconomic management structure, which appears to be maturing in a positive way. And, much more is to come.
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