The Chinese economy in 2014 Expect new policies aimed at encouraging sustainable development
It is a sign of the challenges facing the Chinese economy right now that the closeddoor annual Central Economic Work Conference lasted four days, rather than two, this year.
The culmination of this year’s conference as well as the time of year, has also led to increased attention to the Chinese economy’s performance in 2014.
Much of this attention has centered on the central government’s macroeconomic policy and key economic targets.
But is macro policy the real issue and should we expect much change in 2014? Inflation targets are likely to remain at similar levels, somewhere between 3 and 4 percent. Since the Consumer Price Index peak of 6.5 percent in July 2012, inflationary pressures have eased amid a tightening of government monetary policy.
Little change is also to be expected in gross domestic product targets for 2014. Any reduction far below 8 percent will undoubtedly lead to a serious increase in unemployment levels with a consequent, deleterious effect on social stability. A figure around 7.5 percent will, therefore, again dominate government GDP forecasts for 2014.
However, just a cursory glance back in economic history tells us that macro policy is important but also that significant, sustainable economic development is driven by activity in the micro environment. Chinese companies and their brand-building and market-expansion plans are the key to overcoming China’s major economic and social challenges.
It is, therefore, the Chinese government’s policies and actions at the micro level where change is to be expected in 2014.
Policies aimed at supporting smaller Chinese companies are also to be expected, particularly those based in China’s less-developed regions, such as supportive finance initiatives to help with education and training in all aspects of business development and management.
Government policies aimed at the formation of industry clusters, vital in the emergence of global Japanese and South Korean firms, are also predicted.
Government rhetoric will continue to highlight the importance of domestic consumption during 2014, but in order for this to increase and a more vibrant, lasting consumer culture to emerge it is actually international expansion by Chinese firms and their brands that matters most.
Increased international expansion of China’s larger companies, such as Huawei Technologies Co Ltd, ZTE Corp, Lenovo Group Ltd, Haier Group and Hangzhou Wahaha Group Co Ltd, will not only contribute considerably to the Chinese economy in the short term but will also attract and retain far greater purchases by the Chinese public.
As a result, do not be at all surprised to witness an even greater number of takeovers by Chinese firms of famous foreign companies and their brands — and even more audacious acquisitions. The Bright Food Group Co Ltd’s takeover of Weetabix Ltd and Zhejiang Geely Holding Group Co Ltd’s purchase of London taxi company Manganese Bronze Holdings Plc respectively represent a very thin end of a very thick wedge.
Expect the Chinese government to play a pivotal, although indirect, behindthe-scenes, part in facilitating further forays by Chinese companies into overseas markets via aggressive acquisition strategies.
Macro policy and the stability and expansion of the macroeconomy will be no less important in 2014 but even more important and vital to fueling continued economic growth in 2014 and beyond will be the arrival of Chinese firms on the international stage.
Expectations are high but not as high as the takeover bids that will lead to further international market penetration by Chinese businesses throughout 2014. The author is a visiting professor at the University of International Business and Economics in Beijing and a senior lecturer on marketing at Southampton Solent University’s School of Business. The views do not necessarily reflect those of China Daily.
Increased international expansion of China’s larger companies, such as Huawei Technologies Co Ltd, is expected to contribute significantly to the Chinese economy next year.