Later this year China is expected to have a change in leadership (see article). This event has been under-reported in the US as the difficulties with the Euro currency and the Greek contagion have taken center stage. Unlike the US, politics in China usually takes place behind closed doors so there are few inklings as to what the outcome is likely to be in the fall and into 2013. There are rumors about the expected appointees but, these are not likely to be confirmed until the "proper time". The removal of Mr Bo Xilai from his position is an indication that activity beyond the "normal" will be quickly reined in and kept in check during this year of "shifting powers".
As with all countries, there are usually many normal on-going issues that are dealt with on a day-to-day basis but, in China's case unless these are pressing (like dealing with the dissident Chen Guangcheng - see article) many of these issues might start to be postponed for the new regime to deal with. Exceptions to this would be any perceived threats to the "stability of the leadership". This could come in the form of internet discussions/blogs or civilian protests. In a country with a populace as large as China, there is always a fine line between individual freedoms and the mandate of the government.
The China Core/Transient 2012 graph shows the slowdown from an economic perspective in the April time frame by the Core momentum (black line) moving into "Risk" and the subsequent movement towards an equilibrium in June. For much of the summer, the Core trend is slightly below equilibrium and will likely result in many conflicting signals coming from China on the economic condition but, predominantly could be expected to be negative. There is a "transient" dip (green line) into "risk" in July and news coming out at that time might not be received well. Some of the news and/or delays in communications could be related to the "changing of powers" but, this is likely to make the rest of the world on edge. The China Risk/Yield 2012 graph follows with what has already been said.
It's worthwhile to note that the end of May 2012 might bring about unexpected conflicts/demonstrations in the country and later in July 2012 there may be more "removals" of politicians or dealing with clean-up from previous incidents.
During the August/September 2012 time frame, both the Core and Transient shift into "yield" and at this time it is expected that signs of stabilization become evident in both the economy and the political process. We'll check back on China's progress over the next few months and provide updates.
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