Grow China’s GDP Through Investment, Not Consumption

Many on the planet are enthusiastic about predicting China’s GDP. There isn’t any doubt that China is not going to grow at double digits in the future, or, perhaps, ever again. Everyone, or at best those that have a public opinion, generally seems to believe the key to China’s GDP growth: invest less and consume more.

Neglect the fixation on increasing consumption; this is happening and will naturally continue an evergrowing middle class. In fact, despite its growth, for your future consumption will not replace investment because the key driver of China’s GDP. Most Chinese feel they experience a sword of Damocles hanging over their heads, i.e., a fast-growing and rapidly aging population, soaring inflation plus a growing deficit ( RMB18.3 trillion or US $2.95 trillion) from the government provided “social security” program.

Our bet is on investment, not just in infrastructure projects for example highways, bridges or residential high rise buildings which China has in relative abundance, but on some industries that will not only significantly boost GDP growth, and also will have a big impact on people’s quality of life.

It is easy to distinguish some industries that meet these criteria. Environmental improvement and protection, first of all is definitely an obvious candidate. China’s air and water quality is deteriorating due to twenty years of destructive manufacturing activities. According to Elizabeth Economy in the Council on Foreign Relations, China is now spending 1.3% of the GDP on environmental protection initiatives, half which goes to infrastructure development along with other projects in a roundabout way related to the safety. In accordance with the European Commission, this season environmentally friendly protection expenditure of the EU-27 was 1.2% of total GDP. Due to the severe environmental challenges facing China, far more investment must be channeled into this industry. It may help create more occupations, facilitate R&D and encourage more international companies to participate in in China’s market and definately will cause not only economic gain.

Another sector in the Chinese economy that presents tremendous opportunities for growth will be the medical device industry. China’s per capita consumption next year of medical devices was $14 vs. $370 from the U.S. In the greater than 16,000 Chinese manufacturers, the most important 200 comprised lower than 20% of total production this year and quite a few ones manufacture low-end items that incorporate limited technology. Over 67% of medical devices consumed in China are imported.

Before several years, some city governments, e.g., Suzhou, Jiangsu Province, set up successful industry parks to incubate biotech companies. There is however much more that will and should be done. For example, both the central and provincial governments may help Chinese companies from the aspects of technology licensing and commercialization by facilitating financing through establishment of seed funds. Additionally, the us government could encourage local companies to spotlight innovation through tax incentives and much better IP protection.

In spite of heavy investment in Chinese public infrastructure in the last two decades, you can still find a number of ways to improve such a investment in the near future. As an example, China’s bullet trains make traveling easier and faster. However, many newly constructed bullet train stations don’t have elevators or escalators. Passengers must carry or shoulder their heavy luggage down and up stairs, which can be seemingly endless, especially to prospects shouldering heavy loads. Once train travelers exit the station they often times battle to find public transportation. Few stations directly interact with a bus or subway terminal and getting a taxi can often be literally an actual physical battle.

Of course, China retains tremendous growth potential. Using a more thoughtful and prudent private and public investment approach, the united states will continue to achieve sustainable high growth whilst enhancing and improving the lives, health insurance overall well being of the people.

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