China to Top Global GDP League in 2009

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Jan. 23 – Our sister website, 2point6billion, has just run a piece on how Asian economies are likely to perform against those of the developed world this year.

The recent news of the decline of China’s GDP to 9 percent for 2008, draws up interesting conclusions about the country.

China needs to maintain a GDP growth rate of 8 percent to keep social stability issues at bay. This has been a primary driver for the Chinese government because a figure lower than 8 percent will cause strain on the limited welfare the state can provide.

The burden of millions of students graduating each year and rising unemployment can easily be used against the government. It will be a challenge for the ruling party to manage this issue and may in fact be of a higher priority than economic growth.

Nonetheless, when compared with GDP elsewhere, China’s scheduled performance – even it is the lowest in two decades – still places it at the top of the global league table in terms of GDP growth for 2009.

Chris Devonshire-Ellis, Partner of Dezan Shira & Associates, agrees: “Although the recent downturn has created some casualties among certain China based businesses, our pipeline of international businesses looking to invest in China has actually shown a recent improvement.”

Forecasts done by the World Bank expects China to post a 7.5 percent GDP growth for 2009. Next comes India at 5.8 percent, and Vietnam at 5 percent. While the figures are lower than what analysts and economists are used to seeing, they still represent a huge difference over the anticipated performance by Japan at -0.1 percent, the United States at -0.5 percent, and the E.U. at -0.6 percent.

The implications for businesses in the latter three countries are profound. If they are looking at showing a return better than that provided by their respective domestic markets, they must invest in places that are still performing as the highest ranking GDP growth and also have expanding domestic consumer markets. These include China and India, in addition to Russia and Brazil.

He adds, “Most of these are looking at servicing the China domestic market, with restaurant chains, and other foreign retailers looking at the domestic consumer growth in China and India.”

“We are anticipating a rise in FDI figures for the second quarter based upon what we are seeing. It is certainly not all bad news and we are looking forward to renewed interest in emerging Asia as markets in the developed world remain stagnant for the year.”

The 2point6billion article can be read here.