China – Market Overview
In 2016, China experienced its lowest economic growth rate
in more than a quarter century with real GDP growth decelerating to 6.7%.
Although economic indicators in late 2016 [and the first half of 2017] suggest
a short-term cyclical upturn may be underway, many economists remain concerned
about China’s medium-term prospects for economic growth due to the slow pace of
economic reforms and a failure to bring corporate debt levels under
control. China’s 13th Five-Year Plan (2016-2020) calls for ambitious policy
reforms in order to “comprehensively build a moderately prosperous society” by
doubling 2010 GDP and per capita incomes by 2020. This will require China to
maintain an average of 6.5% annual GDP growth over the plan’s five-year period
(2016-2020). Achieving this growth without further exacerbating the
build-up in debt will be a major challenge for the Chinese leadership,
requiring significant policy adjustments that could impede short-term
growth and be opposed by powerful vested interests.
While China’s leadership has, in response to increasing global concerns about
Chinese economic policy, repeated long-standing commitments to gradually
opening China’s market to foreign participants, little tangible progress has
been made in recent years. Indeed, foreign companies report growing
concerns about the business climate in China. China continues to rely
upon industrial policy tools – including subsidies, market access restrictions,
pressures to transfer technology, and other support for domestic competitors –
to drive the economy, calling into question the ability of foreign firms to
operate on a level playing field in the market. Furthermore, Communist
Party control over SOEs, non-government organizations, and think tanks has
increased over the last year. The United States continues to vigorously
engage Chinese counterparts to push for a more balanced and fair bilateral
economic relationship. Nevertheless, significant market
potential exists for foreign companies, particularly those operating in
industries such as energy efficiency, clean
technology, and healthcare, where critical Chinese needs provide an
opportunity for mutual benefit.