China’s “wow” statistics
Some “wow” statistics to consider:
• China has an official 1.3 billion people—that’s 1/5th of all people
on the planet. Unofficially, it has 1.5 billion people—the 200 million
that aren’t counted is larger than the United Kingdom, France, and
Germany combined!
• China has 100 cities with 1 million or more people—and to put this in
perspective, the United States has nine. Shanghai, the financial hub
that buzzes with the optimism of Silicon Valley, has 17 million people.
Beijing has 14 million.
• China is the #1 market for mobile phones (350 million users), #1
steel maker, #1 coal producer, #1 in foreign direct investment ($500
billion), #1 auto market by 2010, and #2 market for PCs.
• There are expected to be 10,000 IPOs of Chinese companies in the next 20 years.
• There is $1 trillion in money market funds or twice the value of the
entire Chinese market. The Chinese save 42% of their income.
• 350,000 engineers will graduate from Chinese universities this year, far more than in the United States.
• 300+ biotech companies exist unencumbered by much of the regulation and bureaucracy that U.S. biotech companies face.
• 320 million people under the age of 14—more than the entire United
States population. There are 300 million Chinese moving from rural
communities to cities.
• The Chinese government and the World Bank project that for China to
meet its education goal of increasing the percentage of 18 to 22 year
olds with a college education from 4% to 20% in the next 20 years, it
would have to build 10,000 universities the size of Indiana University.
Very bullish for online education companies!
Key trends that will impact China are the growing middle class, urbanization, and growth in inter-Asia trade.
As we look at China today, it reminds us of the two largest waves of opportunity we have seen in the past 50 years.
• Post World War II Japan
• 1990s U.S. technology
China offers three upside scenarios:
1) Rapid earnings growth propelled by economic Megatrends
2) Price-to-earnings multiple expansion
3) Likely currency revaluation (the Yuan traded freely for 20 minutes on Friday!)
All that said, to portray China as a “bed of roses” would be misleading
as numerous thorns abound. It’s truly a “buyer beware” market where the
attitude of the Chinese entrepreneur seems to be that it’s up to the
investor to figure it out what truth is. Financial transparency is a
murky concept.
Capitalism is only 27 years old and accordingly, the talent needed to
accompany world-class businesses is lean. China has massive bad bank
loans it needs to account for. Moreover, issues like brutal traffic and
horrific pollution do not have simple fixes and will only get worse
with the urbanization and growth of the economy.
The bottom line, China presents both danger and opportunity, but looking ahead, it’s clearly the Pacific Century.
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