You may have heard some of the talking heads wondering about a China slowdown. But, ask yourself, how bad would it be if China’s GDP growth slowed a bit from its current scorching 11.1% to just 9%? Compare that to the probable 2-3% we’re likely (lucky?) to rack up in the U.S. this year and then ask yourself where’s the better place to put your money.
China’s economy is being intentionally cooled a bit, as the government trims credit growth from last year’s record $1.4 trillion and discourages multiple-home purchases to cool surging property prices. July industrial output rose the least in 11 months, retail sales growth eased and new loans climbed less than estimated. China Petroleum & Chemical Corp. said recently that its crude-oil processing increased at a slower pace in the second quarter as fuel demand slowed.
So, sure, China’s economy and China stock market are bound to have their ups and downs. But long term, their curve is upward and steeper than any other in the world. Remember:
• China led the world out of last year’s global recession with an economy that’s more than 90-times bigger than when leader Deng Xiaoping ditched hard-line Communist policies in favor of free-market reforms in 1978.
• According to Eswar Prasad, a senior fellow at the Brookings Institution and former head of the China division at the International Monetary Fund, China’s surpassing of Japan “is a marker of its increasingly dominant role in the global economy. The resilience of China’s growth during the crisis enabled a number of other countries, particularly commodity-exporting economies, to ride on its coattails.”
• China overtook the U.S. last year as the biggest automobile market and Germany as the largest exporter.
• China is still the world’s No. 1 buyer of iron ore and copper and the second- biggest importer of crude oil, and has underpinned demand for exports by its Asian neighbors.
• Four of the world’s top 10 companies, by market capitalization, are from China, including PetroChina Co., Industrial & Commercial Bank of China Ltd., China Mobile Ltd. and China Construction Bank Corp.
• Agricultural Bank of China Ltd. boosted the size of its initial public offering to $22.1 billion this summer after selling more stock in Shanghai, making it the world’s largest first-time share sale.
• China may be the biggest IPO market in 2010 as companies are likely to raise 500 billion yuan ($74 billion) in Shanghai and Shenzhen, PricewaterhouseCoopers forecast recently.
• The country’s “double-digit” expansion will contribute a third of global growth this year, the Organization for Economic Cooperation and Development said in March.
• China’s phenomenal growth will continue to have a huge impact on the global commodities market and foreign direct investment flows just as Japan did in the 1980s. But, China’s population is 10-times bigger than Japan’s, its economy is still growing at above 9 percent per year, and China new consumer class is just beginning to invest.
While China may have been the junior partner in its relations with the U.S. not so long ago, that day has most certainly passed. Not only does China now hold the upper hand, it also has many other trading partners which it can rely upon (not to mention a thriving domestic market that promises to soon be the most lucrative in the world).
Big-cap American stocks like Alcoa, DuPont, and Wal-Mart are counting on Chinese demand to fuel their growth strategies in the years ahead。
（From Dr. Stephen Leeb‘s E-mail）