China’s Economy- What’s Next?
Las Vegas, NV (PRWEB) February 14, 2011
Recently, China has been taking steps to liberalize the yuan exchange rate. Chinese officials state that during the next five years the country will move toward a fully convertible currency.
On December 15, 2010, the MICEX stock exchange in Russia started trading the yuan against the ruble. In January 2011, the Bank of China started selling the yuan in the United States. This is typical of China’s foreign and domestic policies; expanding its international presence through the yuan promotion while redirecting economic growth drivers from exports and infrastructure toward internal consumption.
The first stage of China’s development is over: for three decades its economy has been growing, on average, at an annual rate of 9.5%. The world financial crisis forced the nation to reduce its dependence on the “outer world.” In the absence of technology or resources, cheap labor was always China’s advantage, which allowed increases in exports during globalization. However, to politicians it meant poverty and a third-world nation status. High internal demand and convertible currency will stimulate foreign investments and make the economy less risk-prone.
In 2010, the government virtually stopped resisting strikes by employees for salary increases. Since June 30, 2010, in nine Chinese provinces minimum wages rose, on average, by 33%, to up to 600 Yuan a month – a hint on internal demand support. As Credit Suisse Group AG noted, ”There will be ’strong’ increases in salaries in the five years to 2015 as the nation’s supply of labor dwindles and consumers spend more and save less. Wages may rise by 19 percent a year and private consumption may climb to 41.7 percent of GDP in 2015 from 35.6 percent last year.”
The switch to domestic consumption is likely to be accompanied by break-outs of inflation, and the government will cap the prices for social goods and services. Oxenuk Management, LLC recommends investors who target China move from export industries into domestic consumption, focusing on industries that can pass inflationary expenses on to the ultimate consumer.
Oxenuk Management, LLC, a Registered Investment Advisor, offers asset management services to individual and institutional clients, focusing on investment strategies in industrial and regional markets.
Contact information:
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Oxenuk Management LLC is authorized to offer its investment advisory services only to clients in the states where it is registered (currently Nevada and New York).
By Fedor Sannikov
Oxenuk Management, LLC
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