This has been a turbulent year in China, and a lot of business people have been asking me whether they should be worried. I ask them to take a look at the big picture. The stock market drop and renminbi devaluation created much anxiety in 2015 and caused a lot of over-reaction in the U.S. and the rest of the world. However, if you look at the economic indicators over time, you will see that China is undergoing a market correction, rather than a deep-rooted crisis.
Many people are concerned about the slowdown in China’s economy. In my view there is no cause for alarm: the drop in China’s GDP growth to 6.9 percent is intentional and ultimately a direct result of major reforms put forth by the Chinese leadership. Over the years, China’s double-digit GDP growth was taken for granted, but it was unsustainable. China had to transition the economy away from heavy industrial manufacturing and foreign exports, and shift to a domestic consumer-driven economy with a focus on environmental protection. It is a positive step that is essential for China’s long-term health.
In the past few decades, China has relied on traditional heavy industries such as steel, cement, mining, manufacturing and lower-value exports. The Chinese government has taken initiatives to spur higher-value exports, target emerging markets, open sectors for private investors, and promote consumption growth with increasing middle-class incomes. This strategic plan is working well, with domestic spending accounting for 58 percent of China’s GDP in the first nine months of this year.
At East West Bank, we are focused on industries such as high-tech, clean energy, agriculture, entertainment, digital media, life science and aviation. These are the industries that are growing and have received strong government support in China, and we believe that they have the most potential for growing bilateral trade and investment between the U.S. and China.
Internet companies such as Baidu, Alibaba and Tencent; clean energy companies such as BYD; technology companies such as Huawei and Xiaomi; entertainment studios such as Huayi Brothers and Bona Films – these companies are all enjoying vibrant annual revenue growth in the high double digits.
U.S. companies in similar sectors that have presences in China are also enjoying the same revenue growth in the Chinese domestic consumer markets. For example, Apple, Nike and Disney have all benefited from China’s rising middle class.
Trade and investment activities between the U.S. and China have continued to be robust. China has been the United States’ fastest-growing export market by far. And there is a steady increase in foreign direct investment from China to the U.S. Chinese investors looking for strategic investments in the U.S. are not only in real estate but also are actively engaging in the entertainment, technology, life science and automotive industries. With these companies aiming to play a bigger role in the global market, strategic businesses will continue to come to the U.S.
From East West Bank‘s perspective, we are well positioned for growth compared to our peers. As one of a handful of U.S.-based banks with a full-service banking license in China, our deep industry expertise and cross-border relationships are big advantages as we actively help our clients to manage risk and navigate the changes that are happening in China. We will continue to build our business so that our clients can thrive in any economic or market environment for years to come.
Ultimately, our role goes beyond banking; as the bridge between East and West, we build closer relationships and facilitate strategic partnerships between the U.S. and China, helping to increase trust and understanding between the two biggest nations in the world. That is an important and unique purpose that we at East West Bank work hard to advance every day.
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