Chinese policymakers released its fourteenth Five-Year Plan, focusing on quality of growth, setting the foundation for a more balanced economic recovery. A push for more vaccinations will also help lift consumer sentiment and aid consumption recovery. However, shifts in government priorities will discourage investment growth. Firms should prepare for a broad-based domestic demand recovery but remain vigilant, as geopolitical tensions between China and the West will continue to create uncertainties in 2021.
Our latest China Market Review dives into the following trends in China’s economic recovery and how your business can navigate through them.
- Lingering consumer caution will likely extend China’s service sector recovery: China’s domestic catering, tourism, and hospitality sector will continue to recover, albeit at a protracted pace. Firms should plan for gradual domestic demand improvement in offline outlets while expecting online channels to remain resilient.
- Total local government revenue will improve substantially in 2021: An expected upside for tax revenue in 2021 will lead to improvement in local government debt-service capacity, allowing local authorities to increase purchases. B2G companies should expect higher volumes and lower pricing pressure from clients.
- China will tighten shadow-bank lending to slow debt buildup: A further crackdown on China’s shadow-bank lending suggests financing challenges for business’ small, private distributors, many of whom rely on private lenders to finance their payments or business operations.
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