Beijing set a growth target of 6.5-7% to build a moderately prosperous society over the next five years. In order to accomplish this goal, China has been working hard to create a favorable environment for businesses to prosper. On February 16th, the People’s Bank of China, the National Development and Reform Commission, and the Ministry of Finance shared their plans for boosting business growth in 2016. Here are the main strategies in their plan:
Strengthen Monetary and Credit Policy
Policymakers in China have announced plans to strengthen monetary and credit policy with the goal of creating a favorable financial environment. The central bank of China vowed to use liquidity management tools, improve macro-prudential management, and stabilize money-market operations.
Help Companies Raise Funds
China also plans to help industries raise funds. In order to accomplish this, China will increase capital and insurance markets. They are encouraging corporations to issue bonds and shares to assist with raising funds. Another way the government is helping businesses with financial issues is promoting M&A activities (merger and acquisition). In particular, China recommends that zombie companies opt for M&A to pull themselves out of the rut.
Improve Risk Mitigation Practices
Another way that China plans to nurture the expansion of China business is improving risk mitigation tools and techniques. The country is currently transitioning into a consumer economy, making risk mitigation more important for a smoother transition. When people worry about the state of the economy, they tend to hold onto more of their paychecks. But spending is also a necessary aspect of a healthy economy.
China Notes They Have Many Opportunities to Boost the Economy
In regards to the changes taking place to encourage China business growth, Hong Lei, the spokesman for the Chinese Foreign Ministry, said “I’d like to stress that China will stick to its policies of using foreign investment, creating a favorable environment for foreign companies, and protecting the legal rights of foreign investors. China still has significant room to maneuver its policy and boost the economy.”
Conclusion
China has great plans this year to create a supportive environment where businesses can prosper. Not only do they have an optimistic outlook but have plans to continue growing and mitigate risk along the way. However, it’s still up to the business itself to put in the necessary work to do well in China, whether as a foreigner or local.
Risk mitigation is a subject we’re very familiar with and if you are interested in knowing more about China, download the first free chapters of my book, Red Flag – Your Guide to Risk Management when Buying in China here.
