Post by jeffolie on Oct 28, 2007 13:25:12 GMT -6
China, Emerging Markets Can't Fill U.S. Shoes
By Michael R. Sesit
Oct. 26 (Bloomberg) -- China is among the world's fastest- growing economies. Shanghai and Shenzhen are home to its hottest stock market. Now many investors regard the evolving Asian behemoth as the antidote to a slowing U.S. economy, picking up the slack in global growth as the American consumer retreats.
They probably shouldn't. China's growth has been fueled by exports and investment, not consumers, whose share of the country's gross domestic product is declining. From almost 80 percent in the first half of the 1980s, Chinese household consumption fell to 46 percent of GDP by 2000 and shrank further to 36 percent in 2006.
``The average consumer in China isn't a credit-card-toting shopper roaming malls in search of fashionable jeans or a large- screen television,'' says Joseph Quinlan, New York-based chief market strategist at Bank of America Capital Management.
Instead, the Chinese are savers. The average household banks a quarter of its after-tax income. That's to compensate for reduced government outlays for health care, unemployment benefits and pensions; more costly housing; the loss of guaranteed lifetime employment; and rising school-related expenses in a country obsessed with education.
Bottom line: ``The old saying, `If the U.S. sneezes, the rest of the world catches a cold,' remains relevant,'' said the International Monetary Fund in its April 2007 edition of the World Economic Outlook.
How much of a cold depends on how big the sneeze.
www.bloomberg.com/apps/news?pid=20601039&sid=auhSx4a0tgkY&refer=home
By Michael R. Sesit
Oct. 26 (Bloomberg) -- China is among the world's fastest- growing economies. Shanghai and Shenzhen are home to its hottest stock market. Now many investors regard the evolving Asian behemoth as the antidote to a slowing U.S. economy, picking up the slack in global growth as the American consumer retreats.
They probably shouldn't. China's growth has been fueled by exports and investment, not consumers, whose share of the country's gross domestic product is declining. From almost 80 percent in the first half of the 1980s, Chinese household consumption fell to 46 percent of GDP by 2000 and shrank further to 36 percent in 2006.
``The average consumer in China isn't a credit-card-toting shopper roaming malls in search of fashionable jeans or a large- screen television,'' says Joseph Quinlan, New York-based chief market strategist at Bank of America Capital Management.
Instead, the Chinese are savers. The average household banks a quarter of its after-tax income. That's to compensate for reduced government outlays for health care, unemployment benefits and pensions; more costly housing; the loss of guaranteed lifetime employment; and rising school-related expenses in a country obsessed with education.
Bottom line: ``The old saying, `If the U.S. sneezes, the rest of the world catches a cold,' remains relevant,'' said the International Monetary Fund in its April 2007 edition of the World Economic Outlook.
How much of a cold depends on how big the sneeze.
www.bloomberg.com/apps/news?pid=20601039&sid=auhSx4a0tgkY&refer=home