7 Reasons China Will Lead the Global Economic Recovery.

7 Reasons China Will Lead the Global Economic Recovery...

The recent 21% tumble in the Chinese markets had investors around the world bailing out of China. But, this sell-off actually created one of the biggest buying opportunities of a lifetime. Here’s why China is poised to take off – and how to cash in as China leads the global economic recovery.

1. Incredible GDP growth is driving returns

Recently, HSBC China economist Qu Hongbin forecasted that the Chinese economy will expand to 9.5% in 2010. The impressive GDP growth comes not only from China’s massive $586 billion fiscal stimulus package, but from strong growth in consumer demand.

2. China can stimulate its economy without going into debts

With $2.3 trillion dollars in reserves, China has been able to strategically stimulate their economy – without having to deficit-spend to do it. China hasn’t had to go into debt or print trillions of dollars to attempt to stimulate its economy like the U.S. did. This gives China an incredible opportunity to shore up the economy without damaging its future economic prospects.

3. China is funding global growth

The International Monetary Fund (IMF) announced they were considering issuing $50 billion in bonds to better finance aid to countries struck by the global financial crisis; they turned to China to purchase them.

4. China is moving the world away from US dollar

Not only is China taking advantage of its economic strength to gain leverage in the IMF, it is also pushing for a move away from the U.S. Dollar as the world reserve currency. As the largest holder of U.S. dollar reserves in the world, China has a lot of reasons to be concerned with the value of the U.S. dollar.

5. China is creating a marketplace for its currency

China's central bank has signed bilateral currency swap agreements with six different countries – including Argentina, South Korea and Indonesia – worth $95 billion dollars. The countries that participate in these swap agreements can use Chinese Yuan to buy goods and services in China. With these agreements, China has created a market for its currency without ever having to put it into the open market.

6. China has a room to grow

Annual per-capita income in China is only $6,000 – compared with $47,000 in the U.S. The sheer size of China (1.3 billion people) and its increasing prosperity is an enormous force that can’t be ignored.

7. Global GDP growth is shifting east

As the global markets begin to mend themselves we will see global GDP share move from the west to Asia – led by China. Western economies will decline to just 45% of global economic activity by 2012 – far ahead of the original estimates that predicted the West wouldn’t fall below 50% until 2015. The Shanghai Stock Exchange increased its share of global market cap by 636%. In addition, by 2020 – just 10 years from now – China’s share of global consumption will be equal to that of the United States.