Here at Clariti Research we can't miss a day that a bullish or bearish argument for the Chinese economy doesn't come up in the media. Some say it's the "bubble of all bubble's" while others argue it's the next "super power" and both have their own merits. Still, it's as if everyone is wearing blinders and can only focus on Chinese GDP or export numbers. This leaves both the media and masses blind to one huge factor for the Chinese economy and that is increasing domestic consumption levels!
What China lacks in buying power per citizen it makes up with overwhelming population numbers. According to the UN Department of Economic and Social Affairs China currently holds 19.64% of the world population, or 1,335,460,000. The US on the other hand holds 4.54% of the world population, or 308,549,000. There is no question that on average a Chinese citizen has far less buying power than that of a US citizen but with numbers like this China is playing a game of quantity over quality.
Today China's real estate market has become hot and debatable. Everyone seems to be pointing the finger at loose Chinese monetary policy and we won't argue that this isn't a factor. Still, we think there is a far greater factor, and that is internal population migrations. Currently, the majority of Chinese people still live in the countryside but today there is a substantial population movement from the Chinese countryside to the growing metropolitan cities. For the first time ever in the history of the People's Republic of China relative personal earnings are growing fast enough to allow it s citizen the opportunity to move to a different part of the country and or move into cities for greater economic opportunities. We see this as the greatest driver of property prices in China.
2010 forecasts for Chinese GDP growth are currently at 9.5%, according to a Reuters survey. Combine this GDP number with a domestic population size of over 1.3 billion people it's not hard to understand why internal consumption are increasing and will likely make up for any decrease in foreign demand. As well, China today is the largest car market in the world. The quality of the car may be lower but that doesn't change the fact that this is point which supports growing domestic demand.
Further, if part of America's long-term economic success has been attributed to strong levels of internal consumption then why should China be any different in the future based off the same reasoning?
Popular names such as Aluminum Corp of China, CNOOC, Petro China, and China Mobile may be wild rides but with exposure to the Chinese economy there are bound to go somewhere over the long term...the likely direction being up.
We can't miss a day that a bullish or bearish argument for the Chinese economy doesn't come up in the media. Some say it's the "bubble of all bubble's" while others argue it's the next "super power" and both have their own merits. Still, it's as if everyone is wearing blinders and can only focus on Chinese GDP or export numbers. This leaves both the media and masses blind to one huge factor for the Chinese economy and that is increasing domestic consumption levels!
What China lacks in buying power per citizen it makes up with overwhelming population numbers. According to the UN Department of Economic and Social Affairs China currently holds 19.64% of the world population, or 1,335,460,000. The US on the other hand holds 4.54% of the world population, or 308,549,000. There is no question that on average a Chinese citizen has far less buying power than that of a US citizen but with numbers like this China is playing a game of quantity over quality.
Today China's real estate market has become hot and debatable. Everyone seems to be pointing the finger at loose Chinese monetary policy and we won't argue that this isn't a factor. Still, we think there is a far greater factor, and that is internal population migrations. Currently, the majority of Chinese people still live in the countryside but today there is a substantial population movement from the Chinese countryside to the growing metropolitan cities. For the first time ever in the history of the People's Republic of China relative personal earnings are growing fast enough to allow it s citizen the opportunity to move to a different part of the country and or move into cities for greater economic opportunities. We see this as the greatest driver of property prices in China.
2010 forecasts for Chinese GDP growth are currently at 9.5%, according to a Reuters survey. Combine this GDP number with a domestic population size of over 1.3 billion people it's not hard to understand why internal consumption are increasing and will likely make up for any decrease in foreign demand. As well, China today is the largest car market in the world. The quality of the car may be lower but that doesn't change the fact that this is point which supports growing domestic demand
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