China’s growth rate is slowing but it is still a good investment for a long-term play. Jim McCaughan, CEO of Principal Global Investors, tells Deborah Kan investors should look to the U.S. for the near term.
After keeping its currency tightly linked to the US dollar for years, China in July 2005 revalued its currency by 2 % against the US dollar and moved to an exchange rate system that references a basket of currencies.
In 2006, China announced that by 2010 it would decrease energy intensity 20% from 2005 levels.
China is the world’s fastest-growing major economy, with an average growth rate of 10% for the past 30 years.
Nevertheless, key bottlenecks continue to constrain growth.
The disparities between the two sectors have combined to form an economic-cultural-social gap between the rural and urban areas, which is a major division in Chinese society.
China has acquired some highly sophisticated production facilities through trade and also has built a number of advanced engineering plants capable of manufacturing an increasing range of sophisticated equipment, including nuclear weapons and satellites, but most of its industrial output still comes from relatively ill-equipped factories.
The market-oriented reforms China has implemented over the past two decades have unleashed individual initiative and entrepreneurship, whilst retaining state domination of the economy.
The ministry made the announcements during a press conference held in Xiamen on the upcoming United Nations Conference on Trade and Development (UNCTAD) World Investment Forum and the 14th China International Fair for Investment and Trade.
In this period the average annual growth rate stood at more than 50 percent.
It also aims to sell more than 15 million of the most fuel-efficient vehicles in the world each year by then.
China’s challenge in the early 21st century will be to balance its highly centralized political system with an increasingly decentralized economic system.
Despite initial gains in farmers’ incomes in the early 1980s, taxes and fees have increasingly made farming an unprofitable occupation, and because the state owns all land farmers have at times been easily evicted when croplands are sought by developers.
Except for the oasis farming in Xinjiang and Qinghai, some irrigated areas in Inner Mongolia and Gansu, and sheltered valleys in Tibet, agricultural production is restricted to the east.
Horses, donkeys, and mules are work animals in the north, while oxen and water buffalo are used for plowing chiefly in the south.
There are also extensive iron-ore deposits; the largest mines are at Anshan and Benxi, in Liaoning province.
There are also deposits of vanadium, magnetite, copper, fluorite, nickel, asbestos, phosphate rock, pyrite, and sulfur.
China’s exploitation of its high-sulfur coal resources has resulted in massive pollution.
Other leading ports are rail termini, such as Lüshun (formerly Port Arthur, the port of Dalian), on the South Manchuria RR; and Qingdao, on the line from Jinan.
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Investor: Take U.S. for Near Term, China for Long Term
