At the Highest Level
Underscoring China’s commitment to sustained economic reform, Chinese Premier Li Keqiang mentioned the word “reform” a remarkable 77 times in his opening speech at the National People’s Congress, China’s annual rubber stamp legislative assembly held this past March in Beijing.
|The China Analyst - April 2014|
The delegates of the National People’s Congress revealed a GDP growth target of “around” 7.5% for 2014 while prioritising other key socioeconomic issues. Over the past year, Beijing has repeatedly pledged to tackle corruption, reduce production from key polluting industries – aluminium, cement, glass and steel – and increase consumer spending levels.
The Chinese government also hopes to continue implementing reforms by opening state-dominated industries up to private, and even foreign investment, coerce banks into becoming more market-sensitive and further ease exchange rate controls. Beijing hopes these structural and financial reforms will unlock additional sources of economic growth and improve the efficiency and market-sensitivity of the Chinese economy. In line with China’s increase in consumption,
China’s agricultural sector will undergo structural changes starting in 2014. China’s State Council recently announced plans to abandon the country’s 95% grain self-sufficiency policy, which has been in place since the days of Maoism. This is expected to result in rapid growth in the amount of imported foods consumed locally. Moreover, the population’s continued shift toward a more protein-rich diet will further strain global food supply chains. Genetically modified foods, greater mechanisation and market-oriented central policies can lead to greater efficiency in China’s agricultural sector.
Increasing consumption at all levels in China will also lead to growth in demand for oil and minerals. Though China has recently become the world’s largest importer of oil, China’s per capita oil consumption lags well behind the levels of the developed world, which demonstrates room for further growth. As China’s consumption of oil has ballooned, China’s state-owned oil and gas enterprises have developed into global players representing key collaboration opportunities for international firms, especially in areas such as tapping unconventional resources. China has also hinted at opening up the Chinese market to more foreign participation.
China’s interest in advancing its climb up the global value chain will assure steadily rising demand for mineral products and advanced mining technologies. As the mining industry cools from its 2012 boom, resource nationalism, an increase in price volatility, higher operating costs and declining mineral grades will increase risk and complexity in the global mining sector. As resource constraints continue to arise, Chinese mining firms will continue their trek into deeper mineral deposits domestically and abroad.
Trends in China’s finance and banking sectors will be instrumental in demonstrating the direction the Chinese economy will take. The rapid growth of shadow banking, along with its inherent risk, demonstrates the Chinese economy’s need for a more transparent and accountable financial system.
It is against this backdrop that China’s policymakers will continue to dictate the pace of change through their policy of coordinated reform, which will continue to initiate remarkable opportunities both in the Chinese market and abroad.
In the April 2014 edition of The China Analyst, we outline the implications of China’s continued quest for natural resources as the country redefines itself once more through the implementation of key economic reforms.
I trust that our readers will enjoy this edition of The China Analyst and, as always, I welcome your feedback.
Kobus van der Wath
Founder & Group Managing Director
The Beijing Axis