WEST PALM BEACH, FL (HEDGECO.NET) – The strength and economic growth occurring in China has surprised many market observers. While the Chinese Communist government continues to wield political power,Chinese economy is increasingly integrating with international economies at an astonishing pace. Few years ago, images of students being shot at by the government forces in Tiananmen Square stillremains vivid in many people�s minds. Since China became part of the World Trade Organization [WTO] its government has somewhat softened its communist rhetoric, resulting in healthy economic growthin most parts of country.
The Chinese economy continues to grow faster than the economies of the G7 nations, with an average growth rate of 8% per year. Some analysts and economists are even predicting that in 50 years from now, the Chinese economy would overtake the US economy. Already China has become the fifth-largest exporter in the world, such position was until lately by Great Britain. Today China has the highest trade surplus with the United States, and there is every indication that such disparity may continue to climb.
With large population, and growing technologically based economy, China is also slowly implementing desirable fund investment policies aimed at attracting major asset management firms in the international fund market arena. Mainland Chinese cities such as Shanghai have become a regional financial center, attracting many major and global financial institutions.
The Industrial and Commercial Bank of China, the largest domestic bank in China by assets, is on the verge of plunging into the Mutual fund distribution, custodian and transfer agent business for open-ended funds. Along with the China Construction Bank, and the Bank of Communications, those three financial institutions are well prepared to super head the development and distribution of fund products in Mainland China.
According to Li Chun Xin, who is the head of fund marketing department at the China construction Bank, the three State banks have huge amount of savings, which could easily be converted into mutual funds, an enormous distribution outlets in the country, as well as a huge nation-wide customer base, and have struck an accord with the Chinese public in areas of trust.
Some asset management companies have begun to appear in China, Schroeder International Investment Company has a China fund established in 2002, the Schroder ISF Greater China fund was launched to accommodate the growing investor interests in the Asian region.
The Greater China fund targets emerging markets in China, Hong Kong, and Taiwan, and in 2003, the fund grew by an incredible 42% according to published reports from Standard & Poor�s. The Greater China fund is seeing increasing asset inflows from the investors, assets managed by the fund according to Louisa Lo have risen from $62 million to over $82 million recently. Lo is the manager of the Greater China Fund.
Lo thinks the future is looking bright for China. She said, �Export growth to markets such as the US remains strong, and I don�t expect any sharp slowdown in the immediate term. The middle-class are borrowing and spending more, but the savings rate is 40 per cent, which is very high compared to developed countries.�
On the prospects of the Chinese economy, Lo thinks the current economic growth trends in China would continue, she added, �Multinational companies are relocating factories from the US, Mexico and Europe. China has an almost unlimited supply of cheap labor and its infrastructure has improved, encouraged by local government to attract foreign direct investment.�
While China continues to struggle in areas such as human rights, and other problems such as the recent outbreak of Sars, Chinese leaders continues to slowly implement economic policies conducive to market liberalization. Although much remains to be done, the Chinese premier Wen Jiabao, and President Hu Jintao have so far resisted international pressure to float its currency RMB, which some economists think is pegged to the dollar at an artificial rate. Such situation has enabled China to achieve unfair trade advantage over its trading partners, particularly the United States.
While such issues remain unresolved, suffices to say that China has arrived as an economic power, the nation became the third country to send man to space, with a stable economic growth rate, and growing middle class and consumerism, China would be the next stage of action for international asset management institutions.
Paul Oranika
Editor-in-Chief
HedgeCo.Net
Email: [email protected]
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