China will begin its 13th five-year economic plan next year in an environment where it is expected the economy could growth around 6.5 percent a year, encountering several challenges that the authorities need to confront.

1. Challenges and opportunities China
faces in 2016
By Carlos Aquino (chinadaily.com.cn) Updated: 2015-12-28 13:40
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A woman inspects a robot designed by General Electric during a recent industrial fair in Shanghai. Despite the
slowdown in China's economic growth, the US company is confident that the Chinese market will continue to
expand. [Photo provided to China Daily]
China will begin its 13th five-year economic plan next year in an environment where it
is expected the economy could growth around 6.5 percent a year, encountering several
challenges that the authorities need to confront.
First, the "new normal" stage of economic growth, where the economy would grow
around 6 percent instead of the 10 percent growth rate it used to, would mean that the
service sector would have to take the slack of the industrial sector, and internal demand
(internal consumption mainly) should do the same for external demand.
Second, the aim of having a less resource-consuming and environment-friendly
economy would mean tackling factory overcapacity in several industries such as steel,
cement, automobiles, and this would require finding new sources of growth in energy-
clean industries and technologically advanced industries.
Third, the easy and cheap money available due to the several monetary stimulus
implemented by the Chinese government would came to an end and instead of this some

2. fiscal support such as infrastructure investment and corporate tax breaks for specific
industries in the so-called supply-side reforms would be needed.
Fourth, in the external environment the end of cheap and abundant dollar finished when
the Federal Reserve in US began increasing its interest rate and this is having effects
like the cooling of growth of many emerging economies that were buyers of Chinese
goods. The deceleration of Chinese economy itself has also mean that many emerging
economies that were dependent on demand of China for their primary goods, now with
less foreign exchange, would buy less Chinese goods.
While facing those challenges, China has its own edges to overcome them. First, China
could keep steady development despite of some negative factors mentioned above for
example by also making a reality the "One Belt one Road initiative" and putting fully
operational the Asian Infrastructure Investment Bank. These measures could spur an
infrastructure boom abroad and benefit Chinese companies and demand for Chinese
goods.
In the internal side, the growing urbanization of the country can began having greater
favorable effects in the economy with the limited relaxation of the "hukou" system by
giving some migrants workers official residence status to settle in the cities and began
enjoying the advantages of being urban residents. This together with the relaxation of
the one-child policy, could increment internal consumption, occupancy of some unused
property and increase labor supply.
Second, China could continue opening its economy reducing more its tariffs and non-
tariff barriers and in this way introduce more foreign competition for its companies.
Especially some State-owned companies that are not profitable should streamline its
operations so in this way could represent less a burden for the fiscal position of the
country.
Cheaper and better foreign goods will also improve living standards as demand for them
is high as shown by the shopping spree when Chinese go abroad.
http://www.chinadaily.com.cn/opinion/2015-12/28/content_22840536.htm