As Incomes Rise, So Will Demand

In continuing on my recent discussion on the impressive economic growth in China, a report was just released by Michael Tieu, a Brean Murray Carret & Co. analyst. According to Michael Tieu, the Internet-based services sector in China, which has been on a nice positive trend, is set for additional and sustainable long-term growth. China’s accelerated move towards a super market economy led by hundreds of millions of freshly minted consumers will be the driver.

 According to Michael Tieu, there are about 500 million subscribers of wired and wireless services in China, which is quite impressive in itself. Moreover, Tieu predicts this number will accelerate at a superlative rate of about 50% per annum over the next several years.

 This news should not be a surprise to you. We have all read and heard about the extraordinary economic growth in China. It will not only be limited to technology. As Chinese citizens see their incomes rise, the demand for consumer goods and services will rise along with it.

 The country is also seeing a surging real estate market where it is now common to see million dollar subdivisions sell out in matter of days or weeks. For a country where the average GDP per capita was about $6,200 in 2005 (source: CIA), ranking the country 118th, the growth of millionaires has been impressive.

 I expect the per capita income to continue to rise as the country’s economic engine chugs along. China is still a relatively infant market for many goods. That is why large U.S. and European markets look at China as a major area of growth going forward. Every investor should have some capital allocated to Chinese investments either in U.S. companies with exposure inn China, American Depository Receipt (ADR), mutual fund or Exchange- Traded Funds (ETFs).

 The reality is the country is growing in all facets, whether in technology, industrial or natural resources. The trend is positive and you need to be there.