The International Monetary Fund (IMF) recently cut its forecast for China's 2012 economic growth to 8.25% from the 9% projected in September, and it warned that exports would be a significant drag on expansion in the coming two years. That said, the growth is still remarkable and provides excellent opportunities for investors to make money outside of the Eurozone which continues to look as grim as ever.
The BRIC countries (Brazil, Russia, India and China) are a great example of economies that are developing and growing rapidly. Their rate of progression is so fast, in fact, that by 2050 many believe that these economies will be the strongest in the world. British exports to these countries increased by 2.3% in the second and third quarters of last year. A successful investor needs to take this into account and think 'how can I capitalise on this?'
At a time when various sources are speculating that the British economy is again in recession, China recently reported that its economic growth had slowed also but was still at 8.9% in the fourth quarter for 2011. Indeed growth from the year as a whole was down from 10.3% in 2010 but still remains strong at 9.2%. The growth in recent years has been astronomical, to the extent that China is implementing ways to steady the growth to more sustainable levels. Many experts are predicting the Chinese economy to slow in the first part of 2012 but pick up again towards the end of the year. So how can investors capitalise on China's growth?
The data released also showed that real estate investment in China rose to 27.9% in 2011. This sort of development has seen them consume vast amounts of raw materials for construction. Last year was a relatively weak year for the price of steel, however as construction continues to rise in the East, I would expect the price of steel to rise again later in 2012. Like all natural resources steel is finite, meaning the more that gets used, the more valuable it becomes. Steel is a particularly shrewd investment at the moment, given the risks involved in ploughing money into equity.
Alongside the more industrial opportunities, the booming growth in China creates other more subtle avenues for investment. The rapid growth has seen a significant amount of new wealth develop in the country, thus breeding a new affluent class who are unafraid to show it off. In recent years there has been a huge amount of fine wine consumed in China. Fine wine is an attractive option for investors as once it has been bottled it will always retain its value. Equally like steel and raw materials, it is a limited resource so the less there is the more valuable it becomes. In China at the moment, there is a great deal of fine wine being drunk. As this continues, the impact this will have on the price of fine wines will become all the more apparent.