Rebalancing act: Uncertainty rules as China attempts to shift from investment-led to consumption-led growth
China watchers, much like the US Congress, have not found much common ground of late, but recently, pundits have come together around a cautious optimism for China’s economic outlook. This is primarily the result of two factors. First, China’s economy gathered steam in the late half of 2012, which has carried over to the beginning of this year, causing many to conclude a “hard landing” is out of the question. Second, China’s leadership seemingly has embraced the widely-acknowledged need to rebalance the economy away from investment and toward consumption-led growth.
Pundits and investors are right to be heartened by these developments. But they should not lose sight of the very real challenges that China must contend with to transition its economy while maintaining politically palatable levels of economic growth. Its ability to do so is by no means certain, and a “hard landing” is not off the table.