Teneo Insights

Paul Haenle

Senior Advisor, Teneo Holdings

New Reformists Emerging in China

China’s economy is moving in two different directions. The old industrial sector is showing signs of recession, while the new sectors of service providers and high tech manufacturers are thriving despite decelerating GDP growth that is now set at a 6.5 percent target. The old, ailing state-owned enterprises in steel, mining and manufacturing are grappling with massive overcapacity and inefficiencies. Meanwhile, China’s resilient services sector now accounts for the majority of economic output and job creation. To ensure sustainable growth, China’s traditional sectors must also reform, a difficult task given intense pushbacks from vested interests. And further reforms and debt reduction are needed in the new sectors if they are to become the engines of China’s next growth story. In 2017, corporate executives need to focus on Chinese politics. President Xi Jinping continues his anti-corruption campaign and his centralization of political and economic power. This means multinational corporations must align their government relations and communications with Xi’s commitment to supply side structural reform.

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