A Red Dragon Rises
Dear Wealth Watch Reader,
China’s amazing GDP growth is on track to overtake the whole of Europe in 2018.
Today I’ll break down how it happened and why it means big gain chances for you.
Read on below…
Once the World’s Largest Economy, China Soon Will Be Again
In the 19th century, China was the world’s largest and most vibrant economy.
But after more than a century of colonial meddling, internal strife, civil war and revolution, China fell from grace by the mid-20th century.
But if you have any doubt that this, the 21st century, is the “Asian century,” then a recent Bloomberg story should put those doubts to rest once and for all.
The headline says it all:
“China’s Economy to Overtake Euro Zone This Year”
In fact, China’s economy has been expanding at an even faster rate than economists expected a few years ago.
Gross domestic product (GDP) for China is now expected to top $13.2 trillion by the end of this year.
That puts China comfortably ahead of the entire eurozone economy — all 19 euro nations combined — with 2018 GDP expected to be $12.8 trillion, as you can clearly see in the graph below.
Note: Charts nominal GDP levels; 2018 Bloomberg survey medians where official data unavailable as of Feb. 26, 2018. IMF GDP deflators used to convert from real levels.
But what’s most striking to me in the graph above is the way China is quickly overtaking Europe: steady, fast-paced growth for China, compared with stumbling, slowing growth in the “Old World.”
As recently as 2008, the eurozone had GDP of $14 trillion, while China’s was just $4.6 trillion. An enormous advantage.
But then came the global financial crisis that devastated U.S and European economies more so than those in Asia.
Over the past decade since the crisis, Europe’s economy has steadily shrunk, hitting a low of $11.7 trillion in 2015.
Meanwhile, China has steadily expanded, growing its economy by nearly $8 trillion over the last decade. This puts China on track to overtake Europe in 2018, much earlier than previously forecast.
But it’s no surprise to me.
I’ve commented often about the rise of Asia and the great “wealth transfer from West to East” that accompanies it.
In fact, it was back in 2016 when emerging and developed Asian economies as a group grew larger than the combined economies of North and South America.
Perhaps ironically, China today is in the midst of a transition. Its economy is pivoting away from the export-led model that served it well for the past several decades.
In its place, the leadership in Beijing is embracing a domestic consumption-driven economic model.
China faces its fair share of challenges in pulling off this epic economic transition. Not the least of which is its rapidly expanding debt burden.
China’s debt as a percentage of its economy (debt-to-GDP) grew to a whopping 260% at the end of last year. That compares with 152% debt-to-GDP in the U.S. and about 90% for the 19 eurozone nations.
But the smart money is betting on China today because it has a tremendous growth advantage. Its economy is expected to grow 6% per year on average for the next decade, and perhaps beyond.
The U.S. and Europe, meanwhile, will be lucky to manage even 3% yearly economic growth at best.
That’s why some of the very best investment opportunities in the 21st century will be found in Asia.
In my next article, I’ll give you two timely ideas about where to place your bets on China.
Here’s to growing your wealth,
Chief Income Expert, Mike Burnick’s Wealth Watch