China's growth moderation is on course. The latest IMF forecast suggests that China's GDP growth will fall to 7.3% in 2014 from an estimated 7.6% in 2013. Reducing inequality and gentrification are on top of the government's agenda. We believe this should be accomplished by implementing broad reforms such as financial market liberalisation, effective land management, free labour mobility, broadening of social security net coverage and establishing a well-defined property rights / compensation system on natural resources. In our view, headline GDP rates only matter when it comes to national power as what counts day to day are living standards, i.e. GDP per capita.
One of the reasons democracies tend to persist is because of the institutions normally associated with this form of government. Among these are individual property rights, minority shareholder protections, an independent judiciary, free press and unambiguous law enforcement. Without aspiring to such a framework it is hard to imagine how democracies could persist beyond the short to medium term.
It is becoming increasingly apparent that China's administration accepts that if universal suffrage is to continue to be resisted then movement on creating the types of institutional frameworks that boost public confidence is necessary. If these types of reforms are delivered, the goal of mobilising China's domestic savings and boosting the consumer economy will be that much closer to being achieved.Back to top