Monday, November 24th, 2014

Chinese Economic Growth Confirmed by Global Insights

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Can You Hear Me Now? China’s Story Loud and Clear

Can You Hear Me Now? China’s Story Loud and Clear

It seems that many financial writers, bloggers and internet denizens are having trouble accepting the remarkable China growth story. When China announced that the nation’s first quarter growth had hit a blazing 11.9 percent annualized, many scoffed. How could it be, they wondered, that the American colossus would still be suffering and European flailing while China prospered? Beijing must be fudging the numbers, many concluded.

About: China growth story, China’s economic growth, Taiwan economy, China’s massive stimulus program, Taiwan Semiconductor (TSM), Chinese tourism, Taiwan tourism, Chinese stocks, China Stock Digest
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Now we have strong, reliable data from outside sources that bolster the ongoing China growth story. Taiwan has just announced stunning first quarter economic expansion numbers. They are the best in three decades. The island’s government says gross domestic product rose 13.27 percent in the three months of this year, the greatest expansion since 1978.

Who gets the credit? China, of course.

The research firm Global Insight says unequivocally that mainland China’s economic growth was the major force behind Taiwan’s surge. Taiwan’s exports grew 44 percent in the first quarter, with mainland China and Hong Kong accounting for over 40 percent of the island’s booming exports.

Global Insight also believes that China’s massive stimulus program boosted high-tech and other sales in the second half of last year. Taiwanese electronics and computer firms export their parts and components to China for assembly before they are re-exported around the world. One of the giants of the industry, Taiwan Semiconductor (TSM) the island’s biggest company, has forecast that revenues will rise this quarter to a record $3 billion, and permit the company to expand its workforce and production.

Global Insight also believes that China’s massive stimulus program boosted high-tech and other sales in the second half of last year. Taiwanese electronics and computer firms export their parts and components to China for assembly before they are re-exported around the world. One of the giants of the industry, Taiwan Semiconductor (TSM) the island’s biggest company, has forecast that revenues will rise this quarter to a record $3 billion, and permit the company to expand its workforce and production.

With more than a thousand Chinese missiles aimed at Taiwan’s shores, the Taiwanese have little reason to polish China’s growth statistics, although China’s new president has been trying to cool previous warlike rhetoric between the island and the mainland. Taiwan is also heavily invested in manufacturing facilities on the mainland of China.

Chinese tourism to Taiwan is also generating major revenues as relations between the two sides thaw out. Bloomberg News reports: “Chinese visitors
to Taiwan in the first quarter outnumbered Japanese for the first time…The statistics bureau said that Chinese visitors tripled in the first quarter from a year earlier.”

Chinese tourism has helped expand the service economy dramatically. The service sector surged
a very noteworthy 42 percent during the first quarter.

China’s wealth effect has also influenced other regional economies. Singapore’s GDP grew an annualized 38.6 percent from the previous three months in the first quarter. Japan’s economy expanded at the fastest pace in three quarters on stronger exports, although its domestic economy is still mired in stagnation.

Despite the long term trend of Chinese expansion, short term volatility caused by European and U.S. instability continues to roil the stock markets. That’s why I’ve recently recommended that subscribers to the
China Stock Digest purchase some hedging instruments to balance out current risk and volatility.

China’s world-beating growth story has once again proven to be real, although Chinese stocks are not immune to extreme global volatility.

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