(August 7, 2012) – China’s economy has doubled since 2004—growing faster than sixteen-year-old swimmer Ye Shiwen finished the 400 IM—and it’s not done yet, according to a new report by Wellington Management.
“The most anticipated economic crisis in history—a collapse of China’s ‘growth model’—will not materialize,” Wellington macroanalyst Santiago Millán asserted. “Instead, the country will continue to power the global economy for years to come.”
China is instead entering a new phase of development, one that will offer plenty of opportunity for institutional investors looking to capitalize on what will be robust growth, according to Millán. “While the growth rate will naturally slow as the base of comparison grows, the economy will have doubled again sometime between 2020 and 2022. Even if China’s economy were to slow to half the growth rate of the past decade, its economy would double in less than a generation, an unprecedented pace in modern economic history,” he wrote. “Moreover, this growth is taking place in the context of an economy that is already the second largest in the world, and not just by virtue of its voracious appetite for commodities.”
Millán argued that China is manufacturing a new product that will be even more valuable to the global economy—and institutional investors—than cut-rate electronics: consumers. “Consumers in China today buy more cars, mobile phones, computers, wine, and luxury goods than consumers in any other country… In a matter of just five years, Chinese retail sales could surge past US retail sales.” Per-capita income will rise as China’s population levels off then declines, Millán forecasted, giving the average Chinese person more spending money. This increased consumption would boost the global economy overall, as well as open opportunities for investment in sectors related to such shopping, including logistics and retail.
Of course, actually investing in China’s growth is the tricky part. But according to a recent report in the China Securities Journal, the country may increase the maximum investment a foreign financial institution can sink into its Qualified Foreign Institutional Investor scheme. The report did not indicate when or by how much the quota may be raised. And 37 qualified foreign investors, including Norges Bank and Abu Dhabi Investment Authority, have already applied to up their quotas by a combined $12.54 billion, according to the newspaper.