(This is the third post in a three-part series highlighting what I think could happen in the Chinese economy in 2016. Read the first post here, and the second post here. To listen to a podcast conversation on this topic, check out the latest episode of McKinsey on China here.)

Moving people at scale – middle class, not peasants

Despite prodigious investment, many Chinese cities cannot build sufficient quality infrastructure to avoid massive congestion as part of day-to-day life, and even though the new 5-year plan will commit to building more, it will not solve these problems. Growth has simply outstripped potential solutions. For example, Beijing’s population officially grew 50% to 21 million over only the last 15 years and unofficially by significantly more.

Wealthier cities will seek to follow Beijing’s lead in doing something different about this – specifically moving large numbers of jobs and people out of the city center. In Beijing’s case this is not about moving migrant workers, but rather moving between 400,000 and 2 million middle class residents (depending on which version of the plan you look at) by shifting many government offices out of the city center.

The planned hub in Tongzhou on the outskirts of Beijing aims to draw in 1 million by 2020, according to Caixin, not just with jobs but also higher quality schools and hospitals. Moving jobs is essential. Attempts to create satellite cities have generally failed to date, as while people have moved, jobs have not and the satellites have become dormitories for commuters who add to the daily traffic congestion.

While Beijing is privileged in having money, land and millions of government workers it can direct to move, other cities will study Beijing and, if they can find the land, seek to emulate it.

Movies in China: $$$

2016 will see a Chinese movie gross $500 million domestically. As a benchmark, the highest grossing movie of all time on US domestic screens is Avatar at US$770 million. This year’s leading domestic productions in China were Monster Hunt (grossed $380 million to date) and Lost in Hong Kong (over US$250 million). The leading international movie, Furious 7, grossed almost US$400 million in China.

The China box office is set to grow around 40% in 2015, and with the pace of new screen additions alone, should deliver 20% plus growth in 2016. More than half the top 10 grossing movies for 2015 (as of late November) are domestic productions and 60% of the box office is from Chinese movies. Chinese producers and directors have clearly tapped into what excites Chinese moviegoers (and also what is permitted by the censors).

Box office take has been boosted by the large number of IMAX screens in China, for which ticket prices are typically 40-50% higher. IMAX recently opened its 1,000th screen worldwide in Taiyuan, China, bringing its total screens in China to 260, with another 210 on backlog. In parallel, IMAX has launched a fund to invest in Chinese movies that can leverage the IMAX brand and infrastructure.

A risk to this rosy scenario for movies comes from the internet, where there is even faster growth. For example, the recent simultaneous launch of Legend of Miyue, an 81 episode historic drama, on broadcast and online channels (through Tencent Video and LeTV) attracted 700 million online hits in just two days. Alibaba invested over US$3.5 billion in a leading video platform. Currently consumers seem to want both the cinema experience and the mobile device experience. I believe this will continue and we will see new milestones for the big screen in 2016.

China continues going global, with the UK a new focal point

China outbound investment will accelerate in 2016. Much will be driven by “One Belt, One Road” (“OBOR”) related initiatives. A second potential theme will be distressed asset acquisitions in basic materials and related sectors. Chinese acquirers may not plan to extract the assets in the near term but simply stockpile them as a long term “insurance” play. Finally, a growing share will be private sector companies with aspirations to become global leaders. These companies are increasingly sophisticated buyers, conducting quality due diligence, working with traditional advisors, and focusing on countries where they perceive it to be easier to get deals done as a result of warm political relations.

As one example, 2015 saw the UK-China political relationship reach new highs, capped by President Xi’s extended visit to the UK in October. Chinese investment in the UK is spreading well beyond flagship property investments with Chinese companies acquiring companies in UK sectors ranging from pizza to oil exploration, and from luxury yachts to automotive and retail, acquiring technology, brands, talent and market access. This will build off established investments in the UK’s manufacturing heartland, for example by Yongtai in UYT (car parts), Chongqing Machinery of Holroyd (machinery) and China Rail of SMD (hazardous environment vehicles) – all long established UK industrial companies with their base far away from London.

The perception that in the UK almost no deal will be blocked for political reasons really solidified in China after the UK nuclear power deal was confirmed. On almost every trip to the UK I can now guarantee to meet multiple Chinese private entrepreneurs looking for investments and partnerships. 2016 will also see large financial sector investments as London moves to become a leading RMB offshore market and possibly also Chinese acquisitions of UK asset managers. There is also growing investment in UK research: expect announcements of research partnerships between Chinese private sector companies and leading UK universities, especially in medical, biotech and advanced materials.

Other countries will seek to emulate this path to attracting Chinese investment at scale.

And finally…soccer

My enduring predictions that big business would embrace soccer in China have finally been realized, even if less quickly than I expected. After Sergio Aguerro took what became one of the world’s most shared selfies with President Xi and David Cameron, it was inevitable that Chinese capital (specifically China Media Capital and CITIC Capital) would invest in Manchester City FC and in the global network of teams that Manchester City is part of under its Qatari ownership.

Other leading teams are exploring how to participate in China. Arsenal has a multi-year grassroots program in place, as does Real Madrid. And there is growing outbound investment in soccer, highlighted by Wanda buying into Athletico Madrid in Spain in 2015.

But most importantly, TV rights to Chinese soccer sold for US$1.3 billion, up 20-fold over the previous contract. There is now real money flowing into the domestic game and finally I believe we will see quality teams emerging to compete with China’s only quality team today, Guangzhou Evergrande, and that problems with match fixing and gambling driven corruption will end.

I won’t predict when China will win the World Cup. Realistically, the only way they will qualify for the next couple World Cups is if FIFA goes ahead with its thought to increase the number of participating teams to 40. But as England proves, not winning international tournaments is no barrier to having a highly successful, incredibly valuable, domestic soccer league.

In 2016, China can really start to move in that direction.

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As always, don’t over focus on the short term noise about a point of GDP growth up or down. Try to identify the medium term trajectory in the parts of the economy relevant to your business.

Enjoy China in 2016!

(This is the third post in a three-part series highlighting what I think could happen in the Chinese economy in 2016. Read the first post here, and the second post here. To listen to a podcast conversation on this topic, check out the latest episode of McKinsey on China here.)