Tuesday, May 12, 2015

WHERE IS THE SLOWDOWN OF CHINA..THEY ARE PREPARING

According to the latest report across the globe and even within china its being found that Chinese economic consumption has dropped significantly. This have been seen through the economic numbers which are coming following with the GDP growth rate which has being reduced over the last 6 months. But In my research I find that China is just focusing for long term asset creation and getting prepared for long term financial crisis burden which might come in a decade. Its demographic culture is changing and hence growth will be slowed but will be stable or sustainable which is the key demand of the global investors at this point of time.

China’s population is more focused towards retirement planning, health care cost planning, planning for higher education of their children’s and more planning for uncertain economic times. They don’t rely much on the government support for social cost segment. There is a prominent change in pattern. They are creating long term assets which should be the ideal strategy for an economy –planning for another financial crisis. The consumption driven economy should not be the ideal policy of any country. US is one of the biggest example of crisis where consumption driven economic policy was so strong that they developed a theory where ‘Borrow and Spend’ was adopted. Well I am jealous about the wealth managers and financial advisor of China about this type of supportive sense of investing mentality. The world might be busy in criticizing the Chinese about the slowdown of their economy but in practical terms when wealthy nation is created over the long term no other economic is taken into consideration for growth comparison. China is focusing towards rural India and they are focusing aggressively on the same as previously in 2013 I indicated that they are focusing towards bridging the gap of income inequality. The drop of urbanization of China has treated by few analysts as sign of slow down; well that’s just a part of the half story. China is focusing on bridging the income inequality gap and extending the urbanization facilities to the rural parts of china which leads to growth of rural getting converted into urbanized places.

Some couple of rationales will make the depth of focus:
·         Rural online transactions reached over 100 billion yuan (US$16 billion) in 2014 and they are expected to hit 460 billion yuan by 2016
·         E-commerce giant Alibaba Group signed an "Internet plus rural area" agreement with the Commerce Department of the central province of Henan to implement a plan to develop rural e-commerce.
·         China is promoting large-scale farming via transfer of management rights of rural land and development of new agricultural businesses. The reform has made the agricultural sector more attractive to industrial and commercial capital.
·         E-commerce platform, www.chinagaili.com, signed cooperation contracts with more than 500 farmers and sold agricultural produce worth 20 million yuan (3.2 million U.S. dollars) 
·         Jingdong, another leading online retailer, said it has set up more than 100 county-level service centers covering more than 10,000 villages.
 Ecommerce is going to change the landscape of rural consumption and agricultural output capacities. Further e-commerce and government focus is going to modernize the agri-market of chain which will reduce the gap of income inequality.
China’s sovereign reserves of which are estimated to be $4 trillion (£2.7tn) of foreign reserves stashed away in various sovereign wealth funds are focusing towards agri-sector. China Investment Corp (CIC)  will pay particular attention to agricultural sectors that have been neglected by large institutional investors in the past, such as irrigation, land transformation and animal feed production. They building roads, buildings, bridges, transport infrastructure, national rail route which will connect the mainland china with rural china. China is focusing to increase water and waste treatment ratios of rural china and expanding the broadband network coverage, cleaner burning gas which replaces the dirty coal burning. They are just focusing on developing the quality of life style of urban china. If we look at the current scenario and its expected plans for growth for building rural into urban facilities we find:


Further there are sectors which are going to find stupendous growth in the coming years from China which includes e-commerce, internet and telecom followed with healthcare facilities. The most astonishing part is that when the world think china is slowing down and there is some trouble in the economy the US business of healthcare industry says that they are bullish on the inter-state development of the economy.

Entrepreneurship is taking radical change in China where commercial registration system reform, reform of the administrative approval system, replacing business tax with value-added tax and reducing the burden ratio of companies and individuals for their social security contribution and IPO registration system reform. These measures make it easier for entrepreneur registration, government permission, support of Venture Capital (VC) and Private Equity (PE) and reduction of the tax burden which will promote entrepreneurship. Entrepreneurship is thus the trend for 2015. The reshaping of traditional industry by the Internet will also provide another broad stage of growth opportunity for the economy.

The conclusion which can be drawn from the above developments is that China and its people are focused towards realistic measures and process which will bring stable growth for the people in the long term. The world might be treating china as a slowdown and devastated economy but just think that US economy simply devasted by running the consumption driven economy based on Borrow and Spend. If they have chosen the path of internal focused based economy and not riding on consumption driven then the recession of 2008 should not have happened and trillions of tax payer’s funds should not have been spent.  China is following the path of Better safe than sorry. Their citizens understand and focusing on long term planning of wealth preservation and development of the next generation life styles. Entrepreneurship and corporate governance levels are being improvised and hence better business opportunities would be growing. They have not restricted themselves from mere bookish knowledge of corporate transparency they are applying the same.

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