12 Things You Should Know About China
China is booming. Despite what you may hear from the financial news, the numbers simply speak for themselves. China’s unprecedented economic growth and the projections for future growth are simply astounding. It is estimated that by the year 2030 China’s urban population, (not counting those living in rural areas) will reach the one billion mark. And based upon current projections, by 2025, China will have over 215 cities with more than one million inhabitants each – compared to 35 in Europe today.
Below is a brief list of twelve things that I think investors, and non-investors alike, should know about China. So the next time you hear a news report about how China is on the brink of disaster, refer to this list and think again. 1. TOP GDP GROWTH - China has the world's highest GDP growth. According to the IMF, China’s GDP has been forecast to grow at 10.5% in 2010, and by 9.6% in 2011. Compare that to the United States’ 2.7% growth estimate for 2010 and 2.4% forecast for 2011. And based upon current projections, China will surpass the United States as the top global economy around 2025.
2. LOW DEBT TO GDP RATIO – China’s official public debt to GDP ratio is one of the lowest in the world at just over 20%. Compare this to America’s 60% ratio, Greece’s 124% ratio, or even worse, Japan’s 202% ratio. Additionally, China’s massive foreign reserves of various currencies provide a nice emergency financial cushion.
3. A NEW GENERATION OF CONSUMERS – Since 1980, the Western consumer mindset has been influencing China’s consumption habits. For decades, China has been flooding the world economy with its exports. Today, China is just beginning to realize its own domestic consumer demand. There are over a billion cell phone users in China and around 400 million internet users. And the consumption is just getting started.
4. SAVINGS – While Chinese citizens are catching on to Western-style consumption patterns, they are also disciplined in saving money. The Chinese saving rate is around 40%. Compare that to the meager 5% in the United States. China’s savings is, and will remain, a major driver of private economic growth.
5. STRATEGIC ACCESS TO NATURAL RESOURCES: All great empires require unconstrained access to natural resources in order to grow. China understands this and has literally gone on a global buying spree to secure access to natural resources all around the world. In 2005, China surpassed the United States as the world’s number one consumer of meat, grain, wheat, rice, coal, and steel. And in a few short years, China is expected to surpass the U.S. in total oil consumption.
6. HEALTHY BANKING SYSTEM – The booming Chinese economy has been accompanied by a fast-growing banking sector. Because China’s banking sector is still in the early stages of development, they lacked access to many of the complex structured financial products that destroyed many Western banks. Add to this, the Chinese government’s commitment to a healthy banking system and it is no wonder that Chinese banks have much healthier balance sheets than Western banks. In fact, three out of the top five global banks - based upon market capitalization - are Chinese banks.
8. INTERNET DOMINATION – China is now the world’s largest internet market with nearly 400 million web users across the country. That number is greater than the entire population of the United States! And with over 80 million new citizens gaining internet access every year, the impact on the world wide web will be immense.
9. LARGEST AUTOMOBILE MARKET – In 2009, China surpassed the United States as the world’s largest auto market after the country’s vehicle sales jumped an astounding 46% in that year alone. While the United States dominated the auto industry since the earliest days of the 20th century, China is now emerging as the center stage for development in the 21st century. The amazing growth in Chinese auto sales is largely attributed to their rapidly growing economy and the birth of a new middle class. And as the middle class demand for autos continues to rise, China’s burgeoning auto industry will benefit greatly.
10. EDUCATION A TOP PRIORITY – The Chinese government has a bold vision for investing in education and has made large strides in reforming its educational system over the last several decades. Over the last twenty years, China has practically eliminated illiteracy and now boasts a 91% literacy rate. And among Chinese youth age 15-24, the literacy rate is 99%, higher than the U.S. Today, Chinese high schools have world class standards in math and science giving them an edge in today’s technological revolution.
11. MANDARIN EXPLOSION – The Chinese language is used by over 900 million people, making it the most widely spoken language in the world. Today, countries and businesses alike are investing in learning the language in order to gain a competitive advantage within China. This proliferation of the Chinese language will further aid China’s meteoric rise.
12. CHINESE SELF-CONFIDENCE. With so much in its favor, the Chinese are rightfully feeling confident about their collective future. Each month, new entrepreneurs are popping up all over the country with new inventions, products, and services. The capitalist spirit is alive and well in China.
Jerry Robinson is an economist, published author, columnist, and international conference speaker. In addition, Robinson hosts a weekly radio program entitled Follow the Money Weekly, an hour long radio show dedicated to deciphering the week's economic and geopolitical news.
Robinson has appeared on numerous TV and radio programs, including FoxNews, to discuss global economic topics. Robinson is also the best-selling author of the book, "Bankruptcy Of Our Nation: 12 Key Strategies For Protecting Your Finances In These Uncertain Times." (New Leaf Press, 2009)
His writings and radio show can be found online at http://www.ftmdaily.com
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