China China China

All I hear about is that China will lead the world into recovery. I just don’t get it. GDP-wise it is large but not large enough to have the impact everyone is talking about. EU GDP = 18 trn US GDP = 14 trn Japan GDP 4 trn China GDP 4 trn How does China make up for the rest? It is 1/8 of the GDP of US & EU alone. It’s growth rate of 7.9% is strong, but nothing like the double digit rates of previous years. It’s just not enough IMO.

Basic fallacy…you are converting their GDP in yuan into dollars. The pruchasing power of yuan locally is a lot more than the dollar in US or Euro in EU.

I think it has something to do with the 1.5 billion people that live there and that they will eventually need to buy all that cool crap Billy Mays used to sell.

  1. All in dollars, IMF or World Bank, take your pick. Not sure what you are trying to say 2) 7.5% on 4 trillion is 7.5%. It doesnt matter if 1 person or 1.5 billion produced that number. It does not make up for 30 trillion times whatever the growth rate is (anyone know - is it still negative or flat?). And China was growing at +10% from 05-08, so still unconvinced.

They also got 2 trillion dollar in foreign exchange reserves. Imagine the compound rate of return on a 2T portfolio…

What I am trying to say is that the cost of living in countries like China and India is so cheap that nominal GDP in US dollars is not a good comparison, anf does not reflect the low cost of living in those countries. Can you get a full meal for 50 cents in USA?

Still missing the point. Here is what I am saying. 7.5% growth on a small part of the world GDP in no way, shape or form compensates for negative growth on the majority of the rest of the world. 9 out of the 10 largest economies are shrinking. That is something in the region of US 40 trillion. The China rate has slowed in the context of the last 5 years. Why the excitement? And sorry, I haven’t got it yet. What is the point about meals? What is the point about forex reserves? Forex isnt GDP growth is it? That reflects external investment. An inflow. It will be used to buy UST and other assets. Can you lay out your thesis on the effect of this already invested cash being useful for world growth - im not familiar with the logic of reserves. In fact, can anyone have a go at making a joined up, coherent argument rather than a one sentence throw away comment.

I am with Muddahudda on this. Also,I don’t trust their statistics. But even a 10% deviation from what is supposedly around $ 4000 bln GDP wouldn’t make a difference: China simply isn’t large enough to lead the rest of the world out of recession. Also, where would that growth have been without their humungous stimulus package, which surpasses almost any other one in size (as % of GDP).

marcus phoenix is trying to say that in PPP terms, China is much more wealthier than what the GPD stat shows. Also, let’s be clear, “leading” the recovery means having the better growth rate, (8% on 4trl vs. -5% on 18 trl), simple as that. Who says its growth has to make up for the ill economies elsewhere?

Simply put, who has money has power. It is not who is bigger. Just like a locomotive, although a small part of the train, play a key role. Previously western people led as they purchased product made in china. Now chinese have accumulated enough to buy stuffs made in western, for their infrastructures. So it prevents western people from losing jobs. Western people will continue their lifestyle i.e. keep buying from China. Therefore, China lead in this special period of time.

If you have really been hearing that China will lead the world to recovery, then that is a big exaggeration and you have a right to be skeptical. But the point that Chinese growth is a big deal does make sense. I don’t know off the top of my head what percentage of world GDP China represents, but let’s say crudely that it’s 10% (assuming that your statistics summarize the entire world, which obviously they don’t). Then China is contributing nearly one point to global GDP growth. Ok, if world GDP is going to sink by ca. 3% (IMF) this year, it does not save the world, you are right. But especially in its region, for countries like Japan, that growth has a much bigger effect. There are a lot of people in Japan that will have jobs this year thanks to that Chinese growth. Some more in the EU and US also fall into that category. It’s a knock-on growth effect that Japan, the EU and the US don’t have to pay for. The other thing that is worth mentioning in China’s favor is that it is one of the only countries that can fund stimulus programs from savings rather than debt. That is a very positive contribution to world GDP because it doesn’t have to worry about how it is going to pay for that present growth in the future. I think the mangled point about PPP is that China’s GDP is higher if you look at PPP rather than using official exchange rates. Therefore, its economy is bigger than it looks on paper and the growth effect on world GDP is larger. The fact that fast food is cheaper there is really beside the point.

Australia has been saved from recession by China, so this thing about China is real. I also think through the multiplier effect the contribution of China to World GDP is huge than the OP is appreciating. If you have a chinese friend try taking them out and get them a gift “not made in China”. Or may be the OP is wearing a suit, shirt, tie, shoes, boxers and socks with a European Cut and Label, but made in China.

Mudda…you Indian? (dots not feathers)

Picco Wrote: ------------------------------------------------------- > (dots not feathers) Harsh…

China’s share of global GDP is about 6.5%, give or take a few bp. So if it grows by 10% in a year, it would contribute some 0.65% to world GDP. Fine. I also agree that its surrounding economies like Australia and Japan will benefit more strongly from Chinese activity than others. What I am saying is that the big hubba jabba that is being made about China’s grwoth is totally blown out of proportion. Perhaps you havn’t noticed, but every little news about some stimulus program in China is having an immediate impact on equity markets (intraday). Latest trade stats say imports from China have fallen 13% yoy. Doesn’t sound like it is a big help to other nations.

^^^ Does it matter?

Picco Wrote: ------------------------------------------------------- > Mudda…you Indian? (dots not feathers) +1

AlphaSeeker Wrote: ------------------------------------------------------- > Picco Wrote: > -------------------------------------------------- > ----- > > Mudda…you Indian? (dots not feathers) > > +1 Lol. From my experience, alot of Indians in the finance line have a case of “penis-envy” in the sense that they felt left out India is not touted in quite the same breath as “the next one” as China.

You guys who didn’t figure out China was gonna rule the world years ago are way behind. Sh$t, I made so much on Chinese equities in 2007 it would make you cry, and this year my FXI is kicking serious a$$. Get with the program, as analysts you need to be objective and lose the “everyone execpt the USA sucks” false picture of reality. Recognize. I ran the numbers a few months ago on % share of global GDP (PPP basis) using IMF forecasts. In 2008 US held 21% and they are forecast to lose share to 19% by 2012, China on the other hand holds 11% and is forecast to gain share to 14% by 2012. If you make the *big* assumption that the current trend will hold, just by eyeballing my chart, probably they overtake the US 5yrs later in 2018 (of course that is a lot of assuming, ya I know). China is a steam train with a buttload of momentum, the US is flat out of steam. And we aren’t borrowing money to buy the coal to make the steam either, we gave up on that sh$t, too much work, we’re just borrowing money to sit in the back of the train and eat cheeseburgers. The conductor is so fat he couldn’t make it to the front of the train if he wanted to, and even if he did he would find the fuel compartment filled with cheese burgers and Bud Light Lime rather than coal, it is game over dood. Now if you wanna buy equity in the drunk cheese burger eating guy in the back of the train go right ahead, but I’m buying the red steam train [rant concluded]. Thanks.

China has its own problems, politically and economically, just like every other country does. But, boy! China has achieved so much in the past 20 years. Take note of this: in 1988, China and India had roughly the same total GDP level. Now China’s GDP is approximately 3x that of India. If China allows its currency to appreciate freely, as pressured by the US, you will see its GDP jump by another 20% so easily.