The China Economy and Its Affect on the US

by Cåsbr

Article by Jim Trippon Editor of China Stock Digest

The China Economy and Its Affect on the USWith 1.3 billion people, over 3 times the amount of people as in the US, there are bound to be economic impacts on the global and US domestic economies. While many international economies are struggling, and in particular the US, China posted a surprisingly strong growth number of 10.6% for the first quarter of 2008. As the China economy is growing, the US economy has been struggling. Understanding some of the working components of both markets and the potential effects of the China economy growth on the US is important for investors to understand.The goal of China has been clearly stated, to become the most dominant economy in the world. And, they are quickly approaching that goal. Currently, China is on the pace to overtake Germany as the 3rd largest economy. This in of itself is important as the country of China has a much smaller output per person that Germany.Rising quickly as a dominant player in manufacturing, the China economy is looking to expand into other specializations as well. In fact, many Chinese citizens have viewed the opportunity to achieve this goal increasingly possible with the overwhelming success of the 2008 Olympic Games. Not only have the Olympic games significantly boosted the China economy, the games in many ways have re-shaped global opinion of the Chinese nation.While there have been some questions politically raised about the nation, the China economy is booming. In fact, the China economy grew an unprecedented amount in 2007, over 11.9%.As the economy continues to expand, additional foreign investment interest is on the rise.But, how does the growth of the China economy affect investors domestically in North America?One thing that is likely to occur is that the Chinese Yuan will rise in value against the US dollar, creating investment opportunities on both sides of this currency market. On a consumer scale, the rising Yuan will create a rise potentially in the manufactured goods imported from China, on the rise in the US as! many re tailers and organizations are turning to China for the decreased labor and overall decreased prices of goods. In fact, the US is one of the largest importers of Chinese goods, providing consumers in many cases with lower costs of goods. While it is a possibility that these imported goods could rise substantially in price due to the growing China economy, it is likely to have a more long term than short term effect on the North American economy, and in particular on the US economy.As the Chine economy continues to grow, domestic investors are also looking to increase their Chinese holdings. China companies can be purchased on the domestic exchanges, in international mutual funds, on foreign exchanges and in some cases through China directly. Also, many investors will be turning to the forex market, looking to profit in the currency exchange rates over time.There is no doubt that the China economy is growing at an unprecedented pace. What is unclear today, is what kind of a global and domestic impact this growth will have on businesses, investors and individuals.

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Jim Trippon