Prepare for Chinese economic change

Unstable, unbalanced, uncoordinated and unsustainable: the words used by China's own premier about the state of his economy. But this is all about to change - so what can investors expect?

Those were not my words at least not when I heard them firsthand in Beijing, last Friday, 15 March. In uncharacteristically blunt language, China's Premier, Wen Jiabao, used the occasion of his annual press conference following the conclusion of the National People's Congress to send a very clear message about the state of the Chinese economy. He explicitly characterized macro conditions as "unstable, unbalanced, uncoordinated, and unsustainable." I have never known a senior policy maker or political leader anywhere to leave it like that without rising to meet his own self-imposed challenge. Premier Wen has put his reputation firmly on the line. China, in my view, now has no choice but to continue tightening as it attempts to bring its rapidly growing and unbalanced economy under control.

China's changing economy: monetary tightening

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