The below story is an edited version of a presentation given by Yeung as part of ANZ’s Economic Outlook Series 2019. Click HERE for more information.
The impact of the ongoing trade dispute between the United States and China highlights the importance, for the latter, of hastening its structural reforms.
Currently enduring an economic slowdown which is structural, not cyclical, China aims to transform itself into a high-value added and technological driven economy, decamping from property driven growth cycle.
A country endowed with valuable assets (be they natural resources or corporate headquarters) supports its currency outlook. The yuan will appreciate only if China can move up to the value added chain.
The reality is the Chinese economy is increasingly constrained by its factor of inputs. Its growth potential is shrinking unless we see a substantial improvement in productivity per unit of input.
Productivity improvement is the key to sustainable growth in China. A shrinking labour supply encourages investment in human capital.