China’s economy has finally reached a turnaround after a prolonged rough patch. Exports and domestic demand are both showing signs of recovery, and the country is buzzing as a result.
This weekend, data including figures for industrial production, fixed-asset investment, retail sales and overall economic output will be released, revealing the expansion of what is already the second-largest economy in the world.
Retail sales have also increased significantly. Liu Licai, a merchant in southern China, explained that her shelves have been emptying so quickly that she is forced to place additional orders with suppliers.
“Business has gone up by more than 10 percent in the last several month,” she said.
Situations like that of Ms. Liu have been keeping factories busy. As a result, employment rates are increasing, while construction sites show new signs of life and markets grow across the country.
Brown Advisory’s head of investments Paul Chew recently rocked the financial boat by saying that the EU crisis will have a very minor impact on American businesses this year. He explained that the rising market demand for United States exports will balance any small decrease in European demand.
“A European recession would clearly hurt U.S. exports to Europe, but the U.S. economy us not overly exposed as the EU only represents approximately 20% of the total U.S. export market,” Chew said.
He went on to explain that S&P 500 gains are currently increasing beyond historical averages, in comparison to the more sluggish GDP. The earnings are also reducing new hires and preserving tight cost restraints. GDP has jumped a mere 1.4%, while S&P 500 earnings have reached 15%.
Last year’s trends, namely volatility and thematic investing, do not interest Chew as much for the upcoming year, as he sees equity valuations as “relatively compelling.”
This weekend, President Barack Obama spoke at the Asia-Pacific Economic Cooperation summit in Honolulu, stating that China is now a “grown up” economy, and must learn to act more responsibly on its currency.
“We welcome China’s peaceful rise,” he said, but Beijing should cease “gaming” the international economic system and help level the field for foreign businesses from the U.S. and around the world. He added that China is deliberately keeping its national currency at a low point in order to support Chinese exporters.
“Most economists estimate that the renminbi (yuan0 is devalued by 20 to 25 percent,” he said. “That means our exports to China are that much more expensive and their imports into the United States are that much cheaper.”