Monday, June 4, 2012

China's Economy

China reached an all time GDP high of $5878.63 billion in December 2010 making up about 9.50% of the world economy according to the World Bank.  According to The World Factbook China has become the world's largest exporter making it an important player to keep an eye on.  Some financial experts like Michael Casey author of The Unfair Trade have blamed China for playing a major role in the 2008 financial crisis due to their export oriented economy and a nation full of savers.  Some of its major export partners include the U.S., Honk Kong, Japan, South Korea and Germany.  China exports electrical equipment, apparel, rice, wheat, iron & steel, as well as optical and medical equipment.

The Renminbi exchange rate is currently at 6.37 China has kept their currency tightly pegged to the U.S. dollar for years until 2005 when it revalued its currency and allowed it to be referenced to a basket of currencies.  When the 2008 recession hit the Renminbi remained pegged to the dollar until 2010 when it resumed and gradually appreciated as Beijing gave permission to do so.  In 2010 China became the world's second largest economy after the U.S. surpassing that of Japan.  An important fact to keep in mind is that China's industrial and agricultural output exceeds that of the U.S., the U.S. is number 1 in terms of the value of services it produces.

China's interest rates are at 6.56% and their inflation rate is currently 3.40%.  The European crisis is expected to have an impact on China's GDP which is already slowing down.  China's rapid economic development has caused the country to lose much of their arable land.  The government has emphasized economic reforms and promoted an increase in domestic consumption to reduce China's need for exports in the future.  China's consumer confidence decreased from 105 in February 2012 to 100 in March. The country's 10 year government bond is at 3.38%.  The Shanghai Shenzhen CSI 300 Index China's major stock index has declined in the last month it is currently trading at 2,559.03.  Top performers include Shandong Gold Mining Co and Tasly Pharmaceutical Group Co a company that focuses on brain blood vessel diseases.

Li Ka-shing is Asia's richest man his company employs more than 270,000 people around the world.  He has invested in startup tech companies such as Facebook.  He is also big on philanthropy donating more than $1.5 billion mostly for education and medical research.  In the CNNMoney article "Number of millionaires see a decline in wealth" the Boston Consulting Group sees the new wave of millionaires emerging from Asia.  As double digit growth is expected to continue in the coming years by 2016 it is predicted that Asia's growth will slightly over take that of Western and Eastern Europe's growth combined.

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