China and the World Economy
The 18th Communist Party of China (CPC) national congress promised to build China into a moderately prosperous society by 2020.
The ambitious goal, put in place, would create a Golden opportunity for entrepreneurs and investors worldwide.
For 30 yrs, China has been steadfast in turning itself from an economically isolated country into a market-oriented and open economy, and has made commendable achievements.
China has become the world’s 2nd largest economy, the largest manufacturer and exporter, and the owner of the world’s largest foreign exchange reserves.
As the world’s major economies struggle to find a way out in their debts and fiscal puzzles, China managed to keep its place as an important engine to boost regional and world economic growth.
Once China completes its task of further expanding its economy, the consuming power of its 1.3-B+ population will be substantially raised.
In a Keynote speech at the 18th CPC National Congress, Hu Jintao said by 2020, China will double its Y 2010 GDP and per capita income for both of the country’s urban and rural residents.
It is the first time that China has specially detailed its objective on per capita income in the country’s blueprint for future development.
And the emphasis on raising the income of average Chinese people in China’s roadmap to prosperity is in line with the country’s commitment to shifting its growth module to a more consumption-driven pattern.
As a result, some 600-M Chinese will join the rank of the middle-class by Y 2020, as predicted in November by China Institute for Reform and Development, a government think tank.
With rising discretionary income, this expanded army of middle-class Chinese will carry out more aspiration-driven spending, including the buying of globally branded luxury goods.
According to the World Luxury Association, by the end of Y 2011, Chinese consumers’ total spending on luxury market, excluding the buying of private planes, yachts and limousines has reached US$12.6-B, making China the world’s largest luxury-goods consumer.
The Hong Kong-based investment bank CLSA Asia-Pacific Markets predicted earlier this year that Chinese consumers will buy 44% of luxury goods sold in the world by Y 2020, up from 15% in Y 2010.
The CPC also promised to improve its social security system as it leads China forward. An better social safety net also helps to reduce the worries among ordinary Chinese for flaring costs on medicine and education, thus prompting them to spend more.
The growing purchasing power of the Chinese people means growing profits for retailers and manufacturers in and beyond China, which in turn will work to revive the slack global economic growth.
A moderately prosperous China also means a fairer and well-regulated market, and an improved financial system for foreign companies seeking business opportunities in the country.
As China works to accelerate its urbanization process, its growing demand for energy and raw materials will also be a timely benefit to the world’s sluggish commodity market.
According to a Y 2012 International Monetary Fund white paper, entitled China’s Impact on World Commodity Markets, China’s consumption in Y 2010 accounted for about 20% of non-renewable resources, such as metal ores, 23% of major agricultural crops, and 40% of base metals.
The white paper concluded that the global commodity market developments will increasingly be determined by China.
The crisis-stricken world economy desperately needs growth engine, and fortunately, a moderately prosperous China can provide that economic force.
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Paul A. Ebeling, Jnr.
Paul A. Ebeling, Jnr. writes and publishes The Red Roadmaster’s Technical Report on the US Major Market Indices, a weekly, highly-regarded financial market letter, read by opinion makers, business leaders and organizations around the world.
Paul A. Ebeling, Jnr has studied the global financial and stock markets since 1984, following a successful business career that included investment banking, and market and business analysis. He is a specialist in equities/commodities, and an accomplished chart reader who advises technicians with regard to Major Indices Resistance/Support Levels.
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