Rising importance of China
The biggest advances in developing nations are yet to come. From 2007 through 2014, an estimated 1 billion people throughout Asia will enter the middle class for the first time, and middle class income levels will rise significantly.
The massive industrialization of China and their subsequent entering of the global economic scene has had major impacts on markets around the globe. The Chinese ascent into the WTO and the move for china to essentially become a manufacturing shop for the world has had impact on many industries. On the supply side, Chinese products have kept inflation down in the developed world as consumers in the US and Europe have been able to see falling prices for most of their imported manufactured goods. By keeping prices down, and inflation under check, this has allowed central bankers around the globe to have freedom to set interest rates relatively low, which has spurred growth without the corresponding inflation. One of the side effects of this mix has been a boom in asset prices as money has flown into stock markets (internet bubble) and into real estate (subprime lending). Internally, China has also been booming. They say that 2 or 3 new cities the size of Manhattan are built in China every 5 years. This massive construction and economic boom has led the Chinese to search the globe for raw materials (oil, gas, minerals, commodities, etc). As the Chinese demand for commodities has surged, the commodity producers around the world have enjoyed massive price increases. Also, as the Chinese consumers become more affluent, there has been a corresponding boom in Luxury goods industry and status products being sold in China, as well as a booming Automobile Industry. Overall, the rise of China is changing the nature of global business in unexpected ways.
On the other hand, the world bank recently released new numbers which revised downward the wealth GDP of China (on PPP basis) downward by 40%. This means that China is 40% poorer than was estimated only a few months ago. This doesn't seem to change the trend of the rising importance of China, but it does put the growth into perspective. See our discussion on GDP based on PPP (purchasing power parity).
Concepts to consider (external links)
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