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With the China market on an incline over the past few years, investors around the world are speculating about what is next. In 2007, China posted double digit growth numbers and during the first quarter of 2008, the country has again posted double digit growth numbers. With the Summer Olympic Games being held in Beijing in August, additional economic growth is expected to occur for this emerging market.
What is the current economic forecast for the China market moving forward?
The Development Research Center of China’s State Council has recently released a report suggesting a greater than 10% growth for the next several years. While some economists believe that the growth may not reach double digits in 2009 and moving forward, it is hard to argue with the forecast based on recent, consistent double digit years for the China market. And, by 2010, it is estimated that the China market will reach $2.3 trillion, a staggering number to consider.
Even if the China market slows to 7-9% per year, these numbers still present substantial capital growth numbers for investors globally and domestically in the home country of China. While the actual economic growth numbers will not exactly correlate to the Chinese stock market growth, it is a strong indication of a health economy and for growth opportunities.
Much of the wealth generated by the China market is derived from manufacturing, with China being a leader in global manufacturing exporting. Also, capital formation within the nation is also on the rise, with some estimates pointing to this factor for driving over 60% of nation’s economic growth.
Even though China is posting large economic growth numbers, it is still considered to be a developing or emerging market with improvement and reform occurring in a variety of areas. Technological innovation, economic system reform and urbanization are also contributing to the nation’s growth..
So, as the nation continued to develop, reform and grow both in terms of number of people and in exportation, their overall economy will continue to grow each year. The debate is not surrounding whether or not the China market will grow, but at what pace. Economists are targeting growth numbers between 6-11% and gross domestic products between $2 trillion and $5 trillion over the next 10 years.
The China market presents opportunities for domestic exportation to the country of raw goods required for manufacturing, importing less expensive manufactured products, investment in real estate and real estate development, human capital to provide training and support for the nation as it develops, investment in the Chinese stock market directly and investment through China stocks listed domestically or though other investment vehicles. As with any investment, it is important to review both the risks and rewards in comparison with your personal risk tolerance before making any final investment decisions.
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