There is no doubt the staggering economic growth in China is no fluke. The country continues to report a strong trend of impressive GDP growth in the double digits. According to Michael Tieu, a Brean Murray Carret & Co., LLC analyst, 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 supermarket economy led by hundreds of millions of freshly minted consumers will be the driver. This isn’t just a prediction — it’s already happening.
According to Mr. Tieu, there are about 500 million subscribers of wired and wireless services in China, which is quite impressive in itself. Moreover, he 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 an upward trending real estate market where it has not been uncommon to see million-dollar subdivisions sell out in matter of days or weeks. For a country where the GDP per capita was about $2,100.00 in 2006 (according to the International Monetary Fund, April 2007), ranking the country 109th, 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. Chinese President Hu Jintao Hu predicts the per capita GDP to rise to $3,000.00 by 2020.
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 investments in U.S. companies with exposure in China, American Depository Receipts (ADR), mutual funds, or Exchange-Traded Funds (ETFs).
The reality is the country is growing in all facets, whether in technology, industry, or natural resources. The bottom line is the trend is positive, and you need to be there. The recent break of the benchmark Shanghai Composite Index at 4,000 shows the strong growth of Chinese stocks. Just be careful and make sure your portfolio is well diversified.