3. The China variable
The International Monetary Fund’s prediction of a respectable 4.5% gain in GDP for emerging markets in 2016—an increase of half a percentage point on 2015 estimates—suggests positive signals for an industry that has been working hard to tap into such countries, particularly those in Asia.
But, as is becoming a common feature, uncertainty in China casts a shadow over the year, as do widespread political unrest and six-year low oil prices.
China’s “new normal” of a weaker economy is likely to affect domestic consumption, and this might well knock on to southeast Asia, Japan and Korea at the very least, while a hit to the rest of the world is also likely.
Still, China is continuing to see an expansion of GDP at over 6%. Given the size of its economy today compared to that of a decade ago, USDEC economists expect overall gains of double-digit growth.
Chinese consumer spending remains bullish, despite danger signs in banking, manufacturing and other sectors. This is a positive sign for the administration’s efforts to convert from an export-based economy to one based on private consumption, the council says.
Other moves to support consumption growth, such as removing its one-child policy and lobbying successfully for the IMF to grant the yuan reserve currency status, will also have a substantial impact. The latter move will help drive further reforms to facilitate a consumption economy, according to USDEC.