Archive for the ‘chinese economy’ Category
Just last Thursday, Apple Inc. (NASDAQ/AAPL) revealed its long-awaited and worst-kept secret when the maker of the “iPhone” and “iPad” reported it would align with China Mobile Limited (NYSE/CHL) to push its products into China, a very lucrative market for the smartphone giant.
The deal, while somewhat newsworthy, was not a bug surprise to the markets, as evidenced by the stock slightly edging upward by a little more than three percent on the news.
Now, you may be wondering why the stock market simply shrugged at the news, given that China Mobile is the biggest mobile deliverer in the world, with about 730 million subscribers.
Obviously, that’s a huge number of potential buyers and added revenue channels for Apple. But the deal really doesn’t mean Apple will be going back to its previous high above $700.00, reached in September 2012. The reality is that Apple needs to be able to find Chinese buyers for its somewhat expensive (or overpriced) smartphones and tablets.
The target market is there, and it’s probably closer to about 300 million people or so, based on the number of middle-class consumers in China. The reason I see its potential market base being much smaller than China Mobile’s subscriber base is simply due to the company’s product pricing. I really don’t think some shopkeeper or farmer in rural China is going to dole out a major portion of their annual wages to snap up a snazzy “iPhone 5C” or “5S.” This will be the main dilemma Apple will face in this market.
The problem at the very root of this dilemma is that Apple will need to … Read More
The modification to the current one-child policy, which I recently discussed in these pages, will help create an even bigger middle class in the country that will drive up the demand for goods and services. (Read “China’s Expected Baby Boom a Boon for U.S. Business.”)
The Organization for Economic Cooperation and Development (OECD) has become more bullish on China, and predicts Chinese gross domestic product (GDP) growth will rise to 8.2% in 2014, driven by a rise in domestic consumer spending. (Source: “OECD sees China growth accelerating in 2014,” China Daily, November 20, 2013.) The OECD even goes as far as to say the Chinese economy could surpass the U.S. economy to become the world’s biggest economy by 2016. While this is faster than I expect, it’s clearly not impossible, given the rise in income levels and spending.
The middle class in China will drive the economic engine of the country, unlike what we are seeing in America with the declining spending prowess of the middle class. In fact, what we are seeing in China is similar to the power of the U.S. middle class that drove the Industrial Revolution in the late 1800s and early 1900s.
If China can emulate what happened in the U.S. then, there could be some golden years ahead for the Chinese economy.
To play the expected rise in consumer spending in China, which is increasing at double-digit rates and is likely to … Read More
There you have it; the latest great news out of China, I think, will help drive sales of some U.S. companies going forward.
The news? There are going to be more babies born in China over the foreseeable future. In a surprise and strategic move, the Communist Party of China decided it was time to increase its baby population and look towards the future of the country.
Under the country’s new plan, the one child policy will be modified to allow two children per family in cases where one of the parents came from a one-child family.
As I said, this is huge; it could be a critical turning point in the direction and growth of the Chinese economy. (Read “Time to Look at Chinese Stocks Again?”) While the change in population control may seem archaic to us here in America, in China, this is a major change that could impact the country for decades going forward.
Make no mistake about it, China is ambitious and wants to expand its economy more and become the biggest economy in the world. This will inevitably happen; it could even take less than the previously estimated 20 years, given the new baby policy along with the opening of some state-operated industries to private investment and foreign companies.
And while the Chinese government wants to make sure there are sufficient babies born to replace the aging population, a key objective of the change is to inevitably drive up domestic consumption in the Chinese economy in the decades ahead.
The Chinese economy will see rising demand for food, homes, apparel, household … Read More
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