ZHONGWO Chai – yo!… resounds across all the Olympic arenas. It means "Go China." At the time of writing, China is leading in the gold medal stakes and has just overtaken the US's predictable dominance at the top of the medals table.
On the economic front, China has experienced staggering growth and advancement in recent years, emerging as a global economic powerhouse.
Only this week the FT reported that China is forecast to overtake the US as the world's largest producer
of manufactured goods, ending 100 years of US dominance.
Overall, though, in the corporate world, there has been significant productivity growth, a contributing factor to China's competitiveness and corporate profitability.
To grow as fast as it has, China has been absorbing huge amounts of raw materials, driving up commodity prices such as iron ore and coal. For example, China alone is estimated to account for 39% of total global demand for cement, 31% of steel and 39% of coal, China's main fuel input for electricity generation. Urbanisation, rising incomes and a growing middle class of around 300 million people are all having an impact on consumer trends and expenditure patterns.
The data suggests that, unsurprisingly, China's middle-income classes are geographically concentrated and will be in Beijing, Shanghai, Tianjin and provinces such as Hebei, Shandong and Guangdong among others.
For companies aiming to target the Chinese consumer, this means that as much as 60% of the country can be ignored. The country is seeing increasing levels of telecom spending and increased penetration of mobile phone usage, higher speed broadband, cheaper handsets, and so on.
China Mobile, one of the leading telecom companies, has 430 million subscribers, and is estimated to be adding seven million users on a monthly basis – and even with those numbers, overall penetration is low (but growing fast) at 43%.
Visible consumption is everywhere to see, from designer handbags and shoes to luxury cars. The passenger car market is growing at an estimated 17% year on year, with three luxury vehicle brands announcing record sales – Mercedes Benz reported growth of 52% year on year.
Along with many other emerging-market governments, China has more plans to invest in infrastructure over the next decade, and the amounts talked about are significant. Globally, emerging markets are forecast to spend an estimated $22 trillion over the next decade.
China alone is estimated to pour $9bn into its infrastructure plans; upgrading roads, rail links, power generation plants, ports, telecommunication services, water services and airports, as well as social infrastructure areas such as schools and hospitals. All of this eases bottlenecks and alleviates the inflationary pressures.
The questions now are around the global backdrop and the extent to which the world economy slows. What happens to commodity prices? Has inflation peaked in China? Where do interest rates go from here? What will happen to the China growth story? Whatever the outcome, China is firmly on the world stage as a global player.
Kim Catechis is head of emerging markets at SWIPThe full article contains 510 words and appears in Scotland On Sunday newspaper.
