10 Apr The Asian Tiger Still Roars !!!!

Posted at 06:03h in Richie's Posts by

Chinese Premier Wen Jiabao delivered a 2 hour address to the China National People’s Congress on 5/3/2012. The newsgrab that the media and numerous economic commentators took out of this was that the Chinese government’s GDP (economic growth) target was to “only” be 7.5% in 2012. What the newshounds didn’t promote was what China had achieved economically over the past 12 months as follows: –

  •  Had built 4.3 million homes for low income earners in cities & started building a further 10.4 million
  • Had created 12.2 million new jobs in urban areas
  • Provided access to clean water supplies to 63 million rural residents & power to 600,000 people in areas that previously had none
  • Disposable income for rural residents (on a per capita basis) increased > 11% in real terms

Each of these in their own right are fantastic achievements & collectively illustrate the ongoing strength of China. For some Doomsday proponents the 7.5% GDP target confirmed that China was about to experience a ‘hard landing’. On face value & considered examination this is a ridiculous assumption to make. Based on stats alone, it is not realistic for the China to sustain economic growth rates of 10%+ year after year. China over the next 5 – 7 years will likely pass the USA as the biggest economy in the world. Imagine if the USA (or any developed Westernised nation for that matter) was to declare GDP rates of 7%+ – the headlines would scream “Economy Over Heating – Danger, Danger, warning, warning”. Already we have seen that in the 1st quarter of 2012 that China’s GDP was > 8%, so it is possible that 7.5% for this year may be at the lower end of expectations.

China in the future will look to re-balance their economy, to one that is driven by more domestic consumption & away from relying only on export driven markets & investment in capital intensive fixed assets. Over the past 10 years China has invested billions of dollars into high speed railways & road expressways, with particular investments being made into the centre of the country, away from only the larger coastal zones. On top of this China is looking to make investments that are sustainable and promote clean energy sources. More emphasis is being made on the quality of the economic growth being achieved, rather than merely focusing on growth for growth’s sake.

China is also strategically buying up arable land worldwide to ensure that they can get access to reliable food supplies. Don’t be surprised over the next 12 – 18 months if you see China use it’s vast foreign reserves (> $1 Trillion US) to purchase further strategic assets in Western Europe (looking at bargain basement prices) & diversify away from only holding US denominated assets (some more gold perhaps …????)

Whilst there will always be speed bumps & hiccups along the way, the Chinese miracle is a long way from ending yet.