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China Brain Predicts, Part One.


Trying to predict anything in life is often a futile exercise. Trying to predict anything related to China even more so, especially in light of the events that the first part of 2012 has already witnessed. Disregarding all of this, and some common sense besides, China Brain has put down some predictions for what the remainder of 2012 may hold. Some of these are serious, some of them less so, but all are intended to create some lively debate and discussion. Please do let us know what you think. More to come as and when we feel inspired.


  1. China's GDP growth for the whole of 2012 will come in at a healthy 8.0%. Many doom-laden pieces have been written on the negative impact of Europe's continuing woes on China. Although we are concerned that the Continent is being rocked to the core by a combination of economic stagnation and political upheaval (most recently in France and Greece), we would point out that only 20% of China`s exports head to Europe, that signs of recovery in the US are particularly encouraging, and that many if not most emerging markets are powering ahead. Any renewed moves towards breaking up the Eurozone which have been hinted at by the new French President, could impact our prediction, but we are quietly confident that Angela Merkel will hold fast, as will the Chinese consumer, who is starting to demonstrate an important willingness to spend more at home and abroad. Knowing how much the government likes both round numbers and the number 8, we're quietly confident that there will be no major surprises on this one.



  1. The handover of power will be peaceful in Beijing but bloody elsewhere. With the transition fast approaching and the Party apparently locked in battles of an ideological nature, we remain optimistic that President Hu and Prime Minister Wen will make their exits in relative and appropriate harmony. We are not going to predict, however, how their legacy will be viewed in years to come. At such a critical juncture in China`s history, when Party eyes are focused on machinations in the capital we are likely to see a re-flaring of trouble in the country`s restive regions and a potentially very severe crackdown by the country`s new leaders who will want to be seen as no pushovers.


  1. The number of Chinese dissidents who gain entry into the US Embassy in Beijing: 0. The number who will try: more than 10. Since the Bo Xilai / Wang Lijun ‘incident’ and the remarkable escape of the former prisoner known as CGC, we expect the US embassy to come under increasing pressure to take in more dissidents. We find it highly unlikely that any of them will actually be let in. Two reasons: the US won`t want to risk jeopardizing its relationship with China any further than it already has done by continually providing safe harbor for opponents of the Chinese government. Perhaps more importantly, we can expect a rather large local security presence keeping a close eye on the gate 24/7 from now on.


  1. Chinese outbound investment will surpass last year`s figure of US$60 billion. We're still waiting for the mega deals to start rolling in – well the bankers are – but we expect to see a continuation of Chinese investments characterized by mid-sized acquisitions and large greenfield investments. As mentioned previously, the world is increasingly welcoming Chinese capital, except when it gets close to sectors related to national security. But, from a pragmatic perspective, beggars can no longer afford to be choosers. We boldly predict at least one major (US$10 billion or more) deal in the remainder of the year, which will no doubt get held up in red tape for at least another 12 months after being announced.


  1. Talking of deals…China will approve the Google / Motorola deal. We`re sticking our necks out on this one but if rumours are right that Google has offered the Motorola handset business to Huawei as something of a sweetener, we see little reason for the government to hold up the deal. The impact of a negative decision on China`s ability to pull off deals around the world could also be somewhat cataclysmic.


  1. China will fail to beat its 2008 gold medal haul at the London Olympics. Four years ago, China's rise to the international stage was completed by its talented and young (in some cases, a little too young) athletes, who whipped local crowds into a nationalistic fervor via their haul of 51 gold medals. China Brain expects things to be a lot closer at the top of the medal table this time around. We would be surprised if China took more than 45 golds.


  1. Chinese people will make over a 100 million overseas trips for the first time. As incomes rise and government policies enable more foreign travel, more and more of the population will step outside of the nation's borders for the first time. The impact on popular destinations will be at once exciting and terrifying. Profits will be up, but the thought of another 1 billion Chinese visiting the same places in years to come may push tourists from other nations to visit these sites sooner rather than later. Queuing at Disneyland might never be the same again; new queues will form outside luxury goods stores in Paris, New York, Milan and other cities famous for fashion.


That's it for now. We'll check in at the end of the year on how we did. Let us know if you think we're right, wrong, or wildly off the mark. Feel free to suggest other predictions too.



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