China’s Golden Years Still to Come
Tuesday, November 13th, 2012
By George Leong, B.Comm. for Profit Confidential
These are exciting times for China, with the 18th National Congress of the Communist Party of China currently in motion as the country selects the next leadership group that will dictate the country’s policy and direction over the next 10 years. This could be a special decade for the country. For China, the change at the helm comes at a critical juncture, as the country is currently facing stalling economic growth following years of explosive gross domestic product (GDP) growth that propelled the country to overtake Japan as the world’s second-largest economy.
While many are ditching China, I continue to be a Chinese bull, looking forward. I continue to feel that the golden years for the country are actually still to come. Just consider the 1.3 billion people, the surging middle class, the rising income levels, and a concerted government move to continue to drive the country’s economic turbines to expand the country’s power.
We are beginning to see some signs that the country is on the mend and will surely avoid a hard landing, unless the eurozone and Europe enter a severe recession. What makes the situation in China worrisome is the fragile state of the eurozone and Europe, which continue to fight an uphill battle of high debt and muted growth. (Read “Reminder: Eurozone Has Its Own Fiscal Cliff.”) China will suffer as demand for Chinese goods declines. But there are some encouraging signs.
China’s industrial production surged 9.6% in October, up from 9.2% in September. The key retail sales reading showed sales increasing 14.5% in October versus 14.2% in September. (Source: “Data shows Chinese economy expanded in October,” China Economic Review, November 12, 2012.) And in another positive reading, the country’s trade surplus of $32.0 billion in October represented a four-year high. (Source: “China trade surplus hits four-year high,” China Economic Review, November 12, 2102.)
While it’s premature to say China will not implode, these are good signs, given the government’s desire to power the economy forward and double its GDP by 2020. The transition to the new leadership group should only continue the country’s economic goals established at the 17th National Congress of the Communist Party of China 10 years ago.
China realizes that its political clout in world economic affairs, similar to that of the United States, is related to the strength of its economy; hence, the desire for economic growth. Money buys power and economic and political alliances worldwide. The U.S. has been doing this and China is clearly set on following this business model.
So, while the immediate future continues to be full of uncertainties, I continue to like China longer-term. There is no doubt in my mind that the country is here to stay as a major player and that it will only become more influential and powerful both politically and economically.