Revised Capitalist Model:China Style & China's Global Role in the 21st Century

Happy New Year to all!

I have been an ardent supporter and a firm believer that China will continue to rise and seek to strengthen its ties with the rest of the world in the coming decades.

In fact, this has already been happening over the last 10 years and now due to the worldwide economic recession and various countries suffering the imbalances and pressures due to US economic policies and USD interest rates, this trend has gathered more steam in the last 2 years.

This article from FT succinctly summarises all the great leaps that China has made using its extraordinary reserves, strong banks, relaxing currency system, Govt focus and therefore, has been acquiring strategic interests in various countries around the world.

Recently, China has started supporting Indian businesses by not only importing from India but providing USD bank loans at international market rates including loans in Chinese Yuan, which the Indian banks are unwilling to provide at international rates or on a longer tenure basis. China went as far as providing power equipment at competitive international prices to Indian company, more specifically to Reliance Power.

China is also focusing to help countries around the world to conduct trade in currencies suitable to each country including conducting trade in Chinese Yuan or Renmibi. Last one year, China has relaxed norms and allowed foreigners to use HK to invest in local currency. Additionally, they have also allowed foreign companies to issue fixed income bonds denominated in Yuan, and many companies are falling over each other to do the same since this provides not only liquidity at extremely competitive prices for international players but uses the excess liquidity in the banking sector plus creating a robust bond trading market and a Yuan benchmark.

This week's trip to the United States by a Chinese President was granted state honors in the USA for the first time.

China also announced its GDP growth just today morning at 9.8% while the rest of the world continues to be in a midst of a recession and banking collapse. In all, China grew at a pace of 10.3% in 2010. This is influencing dramatically the rise of the middle class within China and spearheading the real growth with the Chinese Govt ensuring that no bubble persists in the real estate or other sectors by making rapid and pertinent changes in their policies.

Meanwhile, China has added France and UK's combined GDP over the last 10 years.

China's economy is approx. USD 6.1 trillion today in GDP size when compared to USD 14.6 trillion for USA. However, China is adding USD 600bn each year at a pace of approx. 10% while US is adding less than 2% at USD 3oobn p.a.. This clearly indicates that in USD terms China is growing at double the speed of America in USD volume. While the US economy shrank in 2008 and 2009, however, China continued to roar ahead at 9.1% in 2008 and 8.4% in 2009 annualized growth.

You must take out time to read this article for a few minutes which should give you a perspective.

Whether one likes it or not, China is going to provide an alternate to the global US hegemony that we have witnessed over the past century.

It can be beneficial to profit from the new trend over the coming years and get invested now when the Chinese stock market is still at lower levels due to overheating economy and inflation problems inside China and the global imbalances of artificially low USD interest rates created to help America come out of a depression, in the international markets.

A strategy to straddle the planet

By Geoff Dyer, David Pilling and Henny Sender

Published: January 17 2011 21:01 | Last updated: January 17 2011 21:01