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construction China can build a city the size of Rome in only two
weeks. This means China is underpinning demand in global markets
for many key commodities. It also means that any downturn will
quickly register on Chinese GDP and global commodity markets.
Since the mid-1990s the central government has taken over several
important tax bases and substantially increased its tax revenue at the
inapplicable to China.
The Chinese government has continually reformed its government
structure and policy making process to spur sustainable development
and enhance its legitimacy. The reform of government and policy
making in China follows two intertwining trajectories: the first is to
refine the technical arrangements of various stages of policy process:
But now, the Wall Street bank projects that the Chinese economy will
overtake that of the US by as early as 2027. The Economist
Intelligence Unit (EIU) forecasts that on a purchasing power parity
(PPP) basis it will do so by 2017.
This dramatic reversal of fortunes between the West and the rest has
transformed the way many MNCs look at China (as well as other large
emerging markets, such as India and Brazil). Simply put, it is no
longer seen as a major market for the future but a place to make big
money now. While it may not be crucial to all companies, China
certainly ranks highly on the global agenda.
On a macro level, China faces some serious risks too. An inflation rate
that has been pushed to a three-year high by multiple factors (ample
liquidity, booming demand, high commodity prices and upward wage
pressures) has become the biggest headache for Chinese
policymakers. Rising prices disproportionately affect Chinas stillrelatively-poor masses, and in the past have triggered social unrest.
There is also the growing possibility that Chinas huge investment
driveespecially at the local government leveland its own exuberant
housing market could end in a bust, triggering a sharp economic
slowdown in the next few years. A timely policy response cannot be
taken for granted, since the government is increasingly preoccupied
with political manoeuvring ahead of the next leadership transition,
expected at the 18th Chinese Communist Party congress in late
2012.
MNC executives are not overtly concerned about a major crisis in the
Chinese economy, but they are not ruling it out. Just under 40% said
they were concerned (18% very concerned) about a crisis. More44%
were concerned about major social unrest. But many do expect a
slowdown in growth40% expect Chinas growth rate to slow to more
developed country levels, which was expected to be around 3-5%,
within the next five years.
Some believe that foreign investment into China is set to slow over
the coming years. EIU special report argues that, in fact, the rapid
expansion of Chinese consumer demand will mean that the country
continues to attract FDI inflows, in particular into the services sector.
It explains that this investment will continue to move towards