SHANGHAI — China’s economy is set to become increasingly complex and multifaceted this year, according to a new report from McKinsey & Co.
“An increasingly diverse, volatile, $11 trillion economy whose performance is becoming more and more difficult to describe as one-dimensional,” is how author Gordon Orr, a director emeritus of McKinsey and senior external adviser, described China’s current state.
The report explains that as some aspects of the Chinese economy — such as steel and textiles — are in decline, other parts of the economy are “booming” — including the film and high-tech industries.
In short, Orr predicts China watchers will largely see a continuation of trends from 2015, with increasing urbanization, but fewer jobs and continuing expansion of services. He added that a growing middle class and increasing consumption might not be a savior to the retail and financial services industries, where technology is replacing people.
The environment will also take center stage in 2016, according to Orr, who wrote that he believes progress will be made this year on interest-rate deregulation and the registration process for IPOs.
The GDP growth target of “6 percent-plus” is also set to remain a major focus of the central government, according to Orr.
“Achieving the growth target will remain the core objective of fiscal and monetary policies, so expect lower interest rates and pressure on the exchange rate versus the U.S. dollar in 2016,” Orr wrote. “Financial reforms aimed at moving more of the economy toward a market-based allocation of capital will continue.”