Since opening up its economic system to capitalism about a decade ago, China has turned into one of the world’s most dominant and important economic powers. Unlike the United States or Europe, China has a significant competitive advantage — an extremely cheap labor force and a population in the hundreds of millions. China’s 1.3 billion people makes it easy to understand why labor is so accessible and so cheap.
With GDP growth at nearly 10% in 2005, the country’s economic reform has paid massive dividends that I’m sure have caught even the Chinese bureaucrats by surprise. The world is watching closely, feeling the emerging power of China.
China’s GDP is the world’s second largest, behind only that of the United States, at $8.158 trillion and $12.37 trillion, respectively in 2005. Equally impressive is that China has grown in such a short time, compared to the rest of the industrial world. China’s GDP is also now more than twice that of Japan.
Membership on the World Trade Council was a milestone for a country that is striving to join the world economic elite.
Now, make no mistake about it — China is for real. Just the size of the burgeoning middle class in the country alone is almost overwhelming, but very alluring to companies wanting to tap the consumer spending growth in the country.
When you have a real consumer market of several hundred million people, you can’t help but want a piece of the action.
The trend is positive. You should think about some exposure to the country. Personally, I prefer the Hang Seng exchange to the Shanghai stock exchange. To me, the Shanghai exchange’s weak governance is a drawback. An alternative is American Depository Receipts (ADRs) trading in the United States.