China's rapid emergence into a world economic superpower is well
documented. No country in the history of mankind has witnessed both the speed and
magnitude of growth (as measured in GDP) that China has experienced over the past
three decades. As the second largest economy behind only the U.S., the root causes
of its success are many. From its initial reform in 1978 through today, China’s
economy was largely driven by investment growth. And more recently, over the last
decade, exports became the primary growth driver. Yet the Global Financial Crisis
(“GFC”) of 2008-2009 proved a formidable test of the sustainability of China’s recent
economic model. The collapse in external demand weighed heavily on its export
growth, forcing a massive government intervention to buoy its economy.
China's leaders recognize the unsustainability of its growth model and in
March 2011 published its Twelfth Five Year Plan (“Plan”), an ambitious agenda of
initiatives and reforms set to tackle the many growing pains of their country. Central
to this new Plan was the explicit recognition by its leaders that in order to maintain
future and sustainable growth, China needed to pivot away from an economic
structure so reliant on exports and investment to one more reliant on internal private
consumption; namely, to be more of a consumer-led economy.