IF the world economy is recovering, as both International Monetary Fund (IMF) and World Bank figures indicate, how does this affect China?

THEN this is to China’s benefit. RCM expects growth for China to be around 9% for 2010. Exports are a recovering part of this, but we see single-digit rather than the spectacular growth of the past. If the world economy recovers faster than expected, then there will be a greater upside for China in terms of exports.

IF the Chinese government is serious about stimulating internal consumption, what steps have to be made?

THEN they need to improve social security, as coverage is limited. This affects behavior and the desire to save or consume. The pension, medical and residency permit systems must be changed to encourage urbanization and consumption, but it is a multi-year structural change, not a quick fix. 

IF trade becomes an issue between the US and China, particularly ahead of the mid-term US elections, what happens next?

THEN a full-blown trade war is unlikely as it would hurt both countries. Though some sectors may be used as political bargaining chips, I don’t see protectionism as a major risk. 

IF the Chinese property bubble bursts …

THEN it would be unlike Japan, where prices languished for two decades. In China there is always a risk of a bubble due to high savings rates and limited investment options, but there is no threat to the overall economy yet.  

IF, or rather when, China becomes the world’s second-largest economy, what will the effects be?

THEN that will be THE question for investors in the next decade. If China transitions from the world’s factory to the world’s consumer, then this will have weighty positive implications for the global economy.