Did you know that in Beijing it is possible to slide down the side of the Great Wall in a toboggan? Yes you can. It’s even scarier than it sounds. To be blunt, I doubt if any risk-averse health and safety officer in Singapore would allow anything as dangerous as that to take place on his or her watch. But we are talking about China, where rules are made up – literally made up – on the hoof. Flick of a switch With the flick of a switch Chinese authorities can clear the skies of pollution. Amazing. With the wave…
Did you know that in Beijing it is possible to slide down the side of the Great Wall in a toboggan? Yes you can. It’s even scarier than it sounds.
To be blunt, I doubt if any risk-averse health and safety officer in Singapore would allow anything as dangerous as that to take place on his or her watch.
But we are talking about China, where rules are made up – literally made up – on the hoof.
Flick of a switch
With the flick of a switch Chinese authorities can clear the skies of pollution. Amazing.
With the wave of a wand, they can choose to either turn off or turn on devices that would allow its residents unrestricted communication with each other. Frightening.
Consider the recent intervention by those in power to calm markets ahead of the 19th congress of the Chinese Communist Party. They reportedly intervened in the stock market after ratings agency, Standard & Poor’s, downgraded the country’s debt.
It would appear that they stepped in to prop up the market on fears that undesired gyrations could spoil the upcoming, carefully stage-managed assembly of important party leaders.
The powers that be in China don’t like to leave anything to chance.
The powers-that-be also stepped in, reportedly, to head off any market exuberance, following the recent relaxation of bank lending.
In order to spur economic growth, the People’s Bank of China cut the amount of cash that commercial banks will be required to hold. By reducing the Reserve Requirement Ratio (RRR), banks could, if they wanted, lend more….
…..And more lending could lead to more net interest income, which could mean higher profits for banks.
It, therefore, stands to reason why investors might be excited at the prospect of greater bank profits. Why wouldn’t they?
But Chinese authorities, again, didn’t want excessive exuberance to be followed by possible dejection, just as the ruling party would be showcasing the virtues of its brand of Chinese socialism.
A good place
It is understandable why a country would want the rest of the world to see it in the best possible light. Consequently, a stock-market crash or a property downturn would not be the best publicity for a twice-a-decade event that the whole world will be watching with interest.
That does not necessarily mean that China is a terrible place to be exposed to. In fact, it could be a good place to look for investing opportunities.
For instance, the amount of income that Chinese consumers have at their disposal has nearly trebled over the last 10 years. It is little wonder that Chinese consumption has been on the rise.
Since 2010, year-on-year retail sales growth in China has averaged around 13%. That is blistering growth, by any stretch of the imagination.
More recently, the growth has moderated. But it is still growing at around 10%, which is streets ahead of other economies. Retail sales growth in the US is around 4%. In the Eurozone it is around 1.2%. In the Japan it is 1.7%, while in Singapore it is about 3.5%.
So, tapping into the spending power of Chinese consumers could be a good way to grow our wealth. But it pays to tread carefully.
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A version of this article first appeared in Take Stock Singapore.
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