The markets are looking towards the Communist Party meeting in China on November 9 thru the 12 to address the slowdown in the Chinese economy after decades of rapid, double-digit growth expansion. The central planners are in need of both economic and social reform in order to stabilize China’s future.
It is expected that the meeting will address and layout a comprehensive framework of reforms to be implemented over the next several years. According to Tao Wang, economist at UBS, this meeting is a “make or break moment.” She further said “if the new government does not launch sweeping reforms now, many people believe, China’s economy is heading for the ruins.”
The consensus from economists is that China has to remove itself from the unstable growth from easy credit and an economy reliant on exports. Organic growth should be the focus with domestic consumption at the forefront.
Wang believes that whether or not China creates new reforms that their economy will continue to grow over the next couple years. Needless to say, China should not kick the can down the road if anything is to be learned from the political debacle in the United States.
Either way, it is believed that any reforms that the Chinese leaders devise will not be made too public and implemented slowly. It is likely that the brink of a financial crisis will be needed to start pushing through such reforms.
“They don’t have that much time to wait,” said Wei Yao, an economist at Societe Generale. Chinese leaders have much to talk about over the ballooning of credit and local public debt, as well as tax reform and the restructuring of massive state-owned enterprises. Recently, Chinese officials said they aimed to make a high-income economy by doubling their income per capita by 2020. However, to do so, China must take the necessary steps to avoid panic by tackling the country’s economic woes and get on a path to stable growth.