This morning's edition of China Daily (the English version) featured an editorial highlighting the fact that while China's economic growth had slowed considerably because of the global financial meltdown, it was still doing fairly well. That's a pretty big understatement. China's GDP growth, helped in part by the government's economic stimulus package of 4 trillion Yuan (about $586 billion US), has already accelerated from 6.1 percent in the first quarter to 8 percent in the second quarter, putting China on track to meet or even exceed its 8 percent growth target for the year. In the first five months of this year, the country has enjoyed 15 percent growth in retail sales and sales of automobiles in May were up an astonishing 55 percent over last May. And on Thursday, The Banker magazine and Reuters reported that China had three of the five most profitable banks in 2008.
The resilience of China's economy shouldn't be too surprising. For the past several years, the Chinese government has been aggressively pursuing foreign investments, encouraging the growth of private business and industry, supporting economic development and implementing rural financial packages designed to narrow the economic gaps between urban and rural areas as well as boost rural consumption.
So while China is still considered a developing country by most global standards, this nation of 1.3 billion people – that's roughly four times the population of the United States – is ripe for becoming an economic giant (or maybe dragon is a better analogy) in the next few years.
This means companies like Coca-Cola see lots of green in this red country. Doug Jackson, president of Coca-Cola China, was quoted in the paper earlier this week saying China has the potential to become the company's largest market. With a new three-year, $2 billion manufacturing and marketing investment plan, Coke is hoping to boost its average per capita consumption for Chinese from 25 bottles a year to something closer to the American consumption of 500. So far so good, China sales in the first quarter of this year grew by 10 percent.
And, to the extent marketing and advertising is another good indicator of economic expansion, China is not holding back. The majority of the products we've seen advertised on television, billboards and in magazines and newspapers would be very familiar to American consumers: health and beauty products, cell phones, clothing brands, toys, food products, cars and real estate. Banks are also particularly aggressive with their advertising and bank sponsorships and promotional messages can be found everywhere, from shopping districts to historical attractions.
But while we have seen many recognizable American brands (Starbucks, McDonalds, Wal-Mart, Coca-Cola, P&G, Ford, GM), it's also somewhat surprising how few U.S. brands we encounter. Part of this is probably due to the fact that China has traditionally been a closed country, making it tougher for international companies to break into. In addition (or maybe as a result of the restrictions) it's obvious that China is anxious to build it's own national brands. One women's line of clothing advertises that it aims to be a global brand and among the finest in the world. Perhaps the Chinese people are also realizing that they already manufacturing many of the world's leading brands, so it's not a big leap to build and market their own competitive brands of similar or even better quality.
Whatever the economic, political and social dynamics occurring on this side of the globe, one things is very clear: we will all be seeing and hearing more about China and its people in the future. So if you're retirement account is still looking a little lackluster these days, maybe you should consider some shares of Coke, China Telecom and Bank of China.
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