China's growth is Western world's great export opportunity
So Friday's snapshot of the Chinese economy from the Organisation for Economic Co-operation and Development was hardly likely to slip beneath the radar.
The OECD expects the Chinese economy - at least by some measures - to rob the US of its crown as the world's biggest by 2016. After slowing to 7.8 per cent last year, the OECD expects the Chinese economy to expand 8.5 per cent this year and reach 8.9 per cent next.
Despite the challenge from India and Brazil, China remains the world's fastest-growing economy.
And there is plenty in the OECD's 161-page report to encourage the West.
China's reliance on exports to fuel its growth is declining, albeit slowly. Exports as a share of the economy fell between 2006 and last year, the OECD notes. That is partly because demand from cash-strapped Western shoppers for everything from trainers to flat-screen televisions has fallen due to their own feeble economic growth.
But the OECD also points out that spending by Chinese consumers is now playing a larger role in the economy.
Given the need for Europe and the US to reduce their reliance on a mix of consumer spending and asset bubbles for growth, the emergence of new consumers who may want Western products should be embraced.
The report also notes the steps that Beijing is taking to open up the country's financial sector as well as ensuring that bond and equity markets, rather than the government, provide a growing share of financing to the broader economy.
There is much in the report to cause concern. Protection of intellectual property rights, for example, remains uncertain, something that causes much more anxiety among US corporations than the simple fact of where each economy stands in the world pecking order.
No one cheers more loudly for the US than billionaire investor Warren Buffett. Yet, when asked about the threat from China, he simply tells US companies to regard it as an opportunity. That's a far more constructive approach than a baleful "we're all doomed".
Frequently Asked Questions about this Article…
The OECD's snapshot says China remains the world's fastest‑growing economy and, by some measures, could overtake the US as the biggest economy by about 2016. The report highlights strong growth compared with peers like India and Brazil.
The OECD noted China slowed to 7.8% last year but expected growth of about 8.5% this year and roughly 8.9% next year, underscoring a robust growth outlook for investors to watch.
The report shows exports as a share of China’s economy have fallen since 2006. That shift, coupled with weaker Western demand, means Chinese domestic demand and consumers are becoming more important — a potential export opportunity for Western companies targeting Chinese buyers.
Chinese consumer spending is playing a larger role in the economy, which creates growing demand for goods and services. Everyday investors can view this as an opportunity to gain exposure to sectors that benefit from rising household spending and Western brands selling into China.
The OECD notes Beijing is taking steps to open up China’s financial sector and shift more financing to bond and equity markets rather than the government. These changes could broaden market access and create new investment channels over time.
A key concern in the report is the uncertainty around protection of intellectual property rights in China, a worry that causes particular anxiety for US and other Western corporations considering investment or technology transfer.
Billionaire investor Warren Buffett, cited in the report, advises US companies to regard China’s growth as an opportunity rather than a threat — a constructive stance that many investors and businesses can take when evaluating exposure to China.
Given China’s rapid growth, expanding consumer base, and gradual financial opening, investors might consider exposure to companies and sectors that benefit from Chinese domestic demand and improved market access — while also weighing risks like intellectual property uncertainty and global economic headwinds.
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