A landing point for China's volatile economy is still not in sight, leading to a protracted period of declining growth, a new report by the Demand Institute finds. "China's productivity crisis—the result of both institutional deficiencies and a maturing economy—remains unaddressed," the report says.
The news has got Wall Street buzzing. A period of Chinese market turmoil—including a devastating stock crash—led to a series of big movements in the market. A devaluation of the yuan was followed by a record-setting sale of US bonds, triggering industry-wide concerns.
As a result, many wealthy Chinese have turned to US real estate assets as a safe haven for their money, finding creative ways to circumvent regulations limiting how much Chinese nationals can spend abroad.
On a local level, analysts in the report believe the government will "pull enough policy levers to prevent full-blown economic crisis." They expect a 4.5% GDP growth on average between 2015 and 2020, or 3.6% if the government interferes.
The most challenging task for the Chinese Communist Party will be to go against its own ideology to reform and restructure debt-ridden and unproductive state-owned enterprises. [BI]
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