Have you wondered lately why China is in the news practically everyday, on a par with Europe? If you have, you are not part of the growing group of Americans who, over the past two years, believe that it is China, not the U.S., that is the leading economic power in the world.
A Gallup poll coming out of Princeton, New Jersey, in February 2012, indicated that Americans view China as having overtaken the U.S. in terms of economic power by a wide margin, possibly due to the current U.S. economic contraction and the 10% growth rate that China has enjoyed over the last 30 years.
Robert Mittelstaedt, Dean of the W.P. Carey School of Business at Arizona State University, calls China a country in transition. Now the world’s second largest economy, right behind the U.S., China still has a per capita of only $7.600 per person, lagging far behind the per capita of the U.S., which stands at $47,400.
While China still shipped 18% of its exports to the U.S. in 2011, amounting to $1.58 Trillion and producing a $272 Billion trade deficit, it is believed that China’s economy going forward will be more reliant on domestic consumption, driven by its fast growing middle class, a complex trend that will deeply impact American companies having significant presence in China.
China’s influence over the U.S. will become more pronounced as U.S. companies agile enough to take advantage of this development will flourish, whereas those that stick to the status quo will most likely shrink or even disappear, with deep implications for the U.S. labor force.
Forward looking companies such as McDonald’s, Starbucks, or Ford, have set their footprints on the Chinese landscape for a number of years, and expansion is still contemplated. As a matter of fact, if you were to invest in the S&P 500, you will already be heavily exposed to the Chinese economy.
Technology is further fueling the transition, as even mom and pop U.S. operations can penetrate the Chinese marketplace via the Internet.
Keith Fitzgerald, chief investment strategist for investment newsletter Money Morning, takes an even more radical approach, as he states: “Either we’re at the table, or we’re on the menu”. China’s influence over U.S. is certain to stay in the news for some time.