What might happen in China in 2016?

Millions of people being relocated from cities, fewer jobs, greater centralization, and more movie blockbusters are just some predictions for the year.

(Cited from McKinsey & Co. Article published by Gordon Orr, Jan. 2016.)

In debates about whether growth is a percentage point up or down, we too often lose sight of the absolute scale of China’s economy. No matter what rate the country grows at in 2016, its share of the global economy, and of many specific sectors, will be larger than ever. My snapshot of China in 2016? An increasingly diverse, volatile, $11 trillion economy whose performance is becoming more and more difficult to describe as one dimensional.

The reality is that China’s economy is today made up of multiple subeconomies, each more than a trillion dollars in size. Some are booming, some declining. Some are globally competitive, others fit for the scrap heap. How you feel about China depends more than ever on the parts of the economy where you compete. In 2015, selling kit to movie theaters has been great business, selling kit to steel mills less so. In your China, are you dealing with a tiger or a tortoise? Your performance in 2016 will depend on knowing the answer to this question and shaping your plans accordingly.

Many well-established secular trends in China will continue in 2016. The service economy’s expansion is perhaps most prominent among them. In this piece, as usual, I won’t spend much time on the most familiar things. Instead, I will highlight what I believe will become the more important and more visible trends in 2016, either because they are now accelerating to scale or a discontinuity may become a tipping point. (For a quick summary, see sidebar, “The China Orr-acle: Gordon’s predictions for 2016.”) I hope you find my ideas valuable.

  • The 13th five-year plan—few surprises
  • Fewer jobs, flatter incomes—and, potentially, less confidence
  • The maturing of investing: More options for Chinese investors and foreign investment managers
  • Manufacturing in China is changing, not disappearing
  • Agricultural imports are rising and rising
  • More centralization
  • Moving people at scale—the middle class, not peasants
  • Movies in China: $$$
  • China continues to go global, with the United Kingdom as a new focal point
  • Big business would embrace soccer in China

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