There is a tendency when it comes to analyzing China to separate the economic situation from the political situation. A day after China’s stock markets spasmed, jargon-filled reports abounded of the varied monetary tools Beijing is using to try and restore confidence in its economy. Certainly understanding these tools is important, but without understanding the political developments that are happening parallel to reports about these economic figures, one is left with an incomplete picture.
Our model says that China is entering a period of slow or no growth. The country is in an economic imbalance as it attempts to move from an export-driven economy to one based on domestic consumption. In our 2016 forecast, we laid out why China’s precise actions are unpredictable. What is certain is that crises will emerge and that they will in part be a result of internal political struggles and in part due to the attempts of China to manage the effects of a weakening economy.