China growth set to continue
Shane Oliver
Outstanding investment opportunities will continue to be presented by China through the sustained growth of its developing economy, according to AMP Capital Investors chief economist Dr Shane Oliver.
Addressing China’s current situation in his latest Insights paper, Oliver dismissed the undercurrent of scepticism that China’s boom will end soon, citing several reasons why the country’s rapid economic growth appears to be sustainable.
One characteristic of the Chinese economy he believes bodes well for sustained growth is the fact it has been built upon the rapid privatisation of industry. This has led to an extremely competitive environment, encouraging the adoption of new technology, further leading to a highly productive economy.
Another factor Oliver feels will sustain China’s economic growth is its low labour costs and economies of scale. While some sceptics are concerned that state market competition has worked to effectively push labour costs up, Oliver argued that because China was starting from such a low base, its labour costs will still be considered cheap relative to worldwide markets, even with an increase in wages.
Furthermore, Oliver believes labour costs will be kept relatively low due to the tremendous scope of urbanisation that is still available to China. He said the proportion of people living in urban areas in China is around 40 per cent, which is low by Asian standards and compares favourably to developed countries, where this proportion is around 90 per cent.
The final factors Oliver thinks will help sustain China’s economic growth is the increase in consumerism due to increasing relative wealth and the continued investment in technology to raise the productivity of its industries.
Oliver concluded: “The rapid industrialisation phase in China’s development has years to run and this will create big opportunities for investors with exposure to China, whether it’s indirectly, for example, via commodities, or directly, such as via Chinese shares.”
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