Unless you have been in a
cocoon, you most likely are aware that China will in all probability become the
next economic superpower in the world. The country’s economy is on steroids,
growing at close to double digits over the past few years and this is not
expected to change.
And if you understand the vast
size of the country’s economic engine, you would also understand that China is
a place where you need to have some capital invested. Of course, at the same
time, you also need to fully understand the risk factors associated in investing
in a country where the economy and corporate structure is strictly under the
control of the communist-led government.
The concept of an open economy
in China is debatable as there is the constant threat of government intervention
at any time to suit the political agenda. Yet the risk is probably warranted
given the vast growth opportunities that lie in the country for both
multi-national companies and investors looking for some diversification outside
of their borders. This region of the world will become the next big boom in
economic growth as long as the Chinese government is willing.
A report just published by the
Development Research Center of China's State Council estimates that the country
will report GDP growth of about 8% annually from 2006 to 2010. Based on the
numbers we have been seeing, this estimate seems to be reasonable.
The report estimates that
China’s GDP based on 2000 prices will hit USD$2.3 trillion by the end of the
current five-year period in 2010.
In the subsequent 10-year
period from 2010 to 2020, the report calculates a decline in the annual GDP
growth rate to around 7%, which is still quite respectable.
For investors, the estimated
numbers are staggering but then China must be able to manage any inflationary
and growth-related issues going forward as the country becomes richer.
The country’s middle class of
several hundred million strong is booming as citizens’ move from the
countryside to the cities in search of opportunities to increase their wealth.
As Chinese citizens make more
money, they become more consumption driven. This in turn pumps up the demand
for both domestic and foreign good and services. That’s why we are seeing such
a mass flow of companies into China searching for growth opportunities.
The bottomline is you need to
be in China at some point. In future
commentaries, I will examine some of the key Chinese stocks
trading as American Depository Receipts (ADRs) in the U.S.
Hi. I’m Designer of Blog Magic. I’m CEO/Founder of ThemeXpose. I’m Creative Art Director, Web Designer, UI/UX Designer, Interaction Designer, Industrial Designer, Web Developer, Business Enthusiast, StartUp Enthusiast, Speaker, Writer and Photographer. Inspired to make things looks better.
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