China still a strong bet but danger lurks

Financial Times ^ | March 6 2006 | Phil Davis

[indcons]

It is almost axiomatic that China will, in the coming decades, overtake the US as the world's biggest economy. Goldman Sachs predicts 2050 as C-day, while other forecasters believe Chinese pre-eminence could come within 30 years.

Investors are not waiting to find out. Large and small, across the world, they are scrambling to place their bets.

The trouble is, just as many investors used a scattergun approach to get a slice of the Silicon Valley in 1999, so they would seem to be firing shots in the dark at China.

The obvious way to take a punt, on Chinese quoted stocks, is fraught with dangers. The local stock market is small - the Chinese economy is the fourth largest but the stock market ranks just 19 - and highly volatile. It has been unsettled at times by reports of impropriety and is an uncomfortable buy-and-hold strategy.

In addition, many of the biggest and best Chinese companies are listed abroad, in Hong Kong, New York and elsewhere.

Fanglu Wang, managing director of the asset management arm of Hong Kong-based Citic Capital, says: "There is little doubt how fast GDP will grow in the next 10 years. But there is a doubt over the capital markets. The development of a domestic institutional investor base is very important. If you always depend on Silicon Valley and Frankfurt, the capital markets won't work."

[headstamp]

Fanglu Wang... and the horse he rode in on.

LOL

[Dr. Marten]

Sleep well in your complacency.

[spikeytx86]

On Per Capita GDP:

Doing a little figuring on my calculator and the data from the world fact book, I don't see how china overtakes us by 2050.

I took china's current per capita GDP and compounded growth to 2050 at 9.2% growth (in which aint gonna happen) and the 2050 Per Capita GDP grows to $73,643.00

I used the same data for the US per capita GDP and figured 2.5% annual compounding GDP growth (rather conservative figure) and got $124,858.00 by 2050 a full $51,215 higher per capita GDP.

At best they will overtake us in actual GDP in which is quite misleading. They have 3 1/2 times the population of our country so that means they can be much poorer then us and still "overtake us". But in actual wealth they will never be able to touch us even if they maintain there "phenomenal growth". China will always be a pheasants super power compared to us.

[Sandreckoner]

That's very true. But in the eyes of most of the world, in the eyes of business, in the realm of soft power and the impression of "superpower," it's the largest economy that matters. (It also matters in very real ways, but ...)

It is still far from a certainty that China will become the largest GDP, but it's a very real possibility - provided we let the dollar slide versus the yuan for decades to come, as we seem to want to do.

[proxy_user]

What about demographic profile?

In 20 years, half their population will be over 60. We will have some problems, but it won't be that bad here.

[Kuehn12]

No one knows the shape of the world then, the government from time to time puts out budget projections that go out 10 maybe 20 years no one puts any stock in it.

I think it is probable that a large conflict will be fought sometime before 2050 in the Pacific Rim. I don't know for sure that we will be involved, but I am reasonably sure the Chinese will along with the Japanese will be involved. Such hatred between nations can't lead to any where good, and besides Japan will be fighting for its survival. By 2050, they will be in the midst of a full fledge demographic crisis, a pop to old and big to support, a growth rate that is negative. This will be the main reason for a war because China will take advantage of it, that is assuming the Communist are still in power. There is no guarantee of that. So, with that being said there is no real way to know the shape of our economy let alone the Chinese Economy.

Here is a what if, what if the Chinese Communist lost in say 2030 because of new generation of leadership that didn't believe in communist ideology, so by 2050 China is full fledge democracy of just over 2 billion. WHY NOT BE OPTIMISTIC.

[gogoman]

In 20 years, half their population will be over 60. We will have some problems, but it won't be that bad here.

China is a society that relies on the offspring to take care of their elders. So there is little reliance on the government for the caring of the old; it's mainly an internal family affair. Issues of social security will not be as important in China as it is in the United States. As long as they can provide jobs for the young, the old in a sense is automatically taken care of.

[gogoman]

so by 2050 China is full fledge democracy of just over 2 billion.

Chinese population will peak at 1450 million before declining rapidly around the year 2030. It will never reach 2 billion. It's not just only-child, people in the cities overwhelmingly prefer just one child.

[Kuehn12]

That was only a guess, but thank you for the accurate numbers.