Outlook for 2011-15

• There is little likelihood of significant political reforms in the forecast period (2011-15), as China's leaders will concentrate on maintaining stability during the transition to a younger generation of political leaders in 2012-13.
• Strained relations between China's majority Han ethnic group and Tibetan and Uighur minorities are unlikely to improve. The government will maintain a hard line against separatism, stoking wider ethnic grievances.
• The economy performed unexpectedly strongly in 2010, and the Economist Intelligence Unit now estimates real GDP growth in the year as a whole at 10.2%. Growth will slow to an average of 8.4% a year in 2011-15.
• Wage inflation will remain rapid in the forecast period, helping to support private consumption. But investment, notably in the property sector, will decelerate from the high growth rates that were recorded in 2009.
• China will continue to come under strong pressure to allow a rapid and more meaningful increase in the value of the renminbi. However, the currency is likely to appreciate only slowly against the US dollar in 2011-15.
• Consumer price inflation is expected to remain a major policy issue in 2011, as the government struggles to contain a strong increase in food prices. Inflation is expected to average a manageable 4% in 2011­15.
• Although export growth has rebounded strongly in 2010, the outlook for exports is clouded by the uncertain global economic environment.

Monthly review

• China is coming under pressure to do more to bring North Korea to heel. This follows the North's artillery attack on the South Korean island of Yeonpyeong in November.
• In the past month the Chinese government has launched a high-profile campaign criticising the decision to award the Nobel Peace Prize to a Chinese dissident, Liu Xiaobo.
• Fears are mounting that China's economy could be overheating, amid rising inflationary pressures in the economy. This follows the announcement that inflation reached a 28-month high of 5.1% year on year in November.
• Rising inflationary pressures have prompted the government to shift its monetary policy stance from "appropriately loose" to "prudent".
• Total vehicle sales in the first 11 months of 2010 were up by an impressive 34% year on year, at 16.4m. This puts China on course to be the biggest automotive market in the world for the second successive year.