China and Global Economic Recovery

By: Ian Campbell | Wed, Oct 3, 2012
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Why read: To test the contemporaneous views I expressed four years ago, to observe similarities and differences then and now, and to determine if you agree with my current views.

Commentary then: On July 31, 2009 I commented as follows:

An article today titled 'Is China Leading a Global Recovery says:

"increasingly, many companies see China as their ticket to surviving--and even thriving--in a post-recession world because of its insatiable appetite for goods as it moves toward a consumer-driven economy"; and,

"a lot of people are starting to believe America and China are in two very different boats" and includes interview comments with executives of major companies - at least one of which is quoted as saying: "Is China going to lead the global economy out of this slump? I wouldn't think so".

For the following 20,000 foot reasons that is the camp I am in:

leads me to the conclusion that continued growth in China does not necessarily mean recovery in the U.S. Perhaps near-term growth in China will bear on U.S. economic recovery in a more significant way than it will in the longer-term, but at the end of the day I simply don't see how the U.S. is going to enjoy meaningful economic recovery and ultimately:

without creating jobs big-time resulting in its consumers spending big-time.

As much as I would like to conclude those things are a possibility for the U.S. going forward, I am not optimistic about such an end-game.

The referenced article concludes with this statement: "Are the Chinese amazed that we're still stuck in recession? That's right. They're holding all the cards and will continue to do so. There is a feeling here that China is still stuck in some kind of Third World mentality. It's not. It's a superpower". I would qualify that statement somewhat. I would say a 'budding superpower' with a probability of the word 'budding' disappearing in the next 5 - 15 years.

Commentary now: Today's China's GDP growth has abated somewhat from levels that country was experiencing three years ago (down from about 10% compound per annum to about 7.5%), with some attendant concerns that China is beginning to have its own internal economic issues. That said, if China's statistics are to be believed, it is still growing at a rate that is multiples of the current GDP growth rates being experienced in the developed countries.

In essence, where China is viewed in the context of America and other developed economies I see no reason to change my view of China today from what it was three years ago.

 


 

Ian Campbell

Author: Ian Campbell

Ian R. Campbell, FCA, FCBV
Economic Straight Talk

Through the Economic Straight Talk Newsletter Ian R. Campbell shares his perspective on the world economy, the financial markets, and natural resources. A recognized business valuation authority, he founded Toronto based Campbell Valuation Partners (1976), Stock Research Portal (2007) a source of resource companies market data and analytic tools, and Economic Straight Talk (2012). The CICBV* annually funds business valuation research in his name**. Contact him at icampbell@srddi.com.
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** through The Ian R. Campbell Research Initiative

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