CONTENTS

Introduction..........................................................................................................................7

Three Keys to China's Economic Rebalancing.................................................................................................7

Economic Reform..............................................................................................................12

SOE Reform: Half Measures Insufficient ForThe Long Haul ...........................................................................12

Foreign Policy Analysis.....................................................................................................16

One Belt One Road: China's Outward ExpansionFaces Major Challenges .........................................................16

China's Expanding Military Reach'Inevitable', But Gradual............................................................................ 26

Table: POSSIBLE FUTURE CHINESE BASES . . . .. . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . 30

Consumer Outlook............................................................................................................32

Bright Consumer Outlook Amid StructuralEconomic Slowdown....................................................................... 32

Table: China's Largest & MostConcentrated Domestic Consumer Markets . . . .. . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . 33

Table: Provinces That Could Play Catch Up .. . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. .. . . . . . . . . . . . . . . . . . . . . 34

Table: China's Top Twenty Provinces (By GDP,2013) . . . . . . . . .. . . . . . . . . . . . . .. .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41

Table: Key Sector Forecasts . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . .  . . . . . . . . . . . .  . . .  . . . . . . . . . . . . . . . . . . . . . . . . . . . 42