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Trade War; China; Chinese Economy; Alibaba, and etc.

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We're approaching the end of week 1, June 2019. The G20 is in about 3 weeks, and there seems to be no deescalation of the ongoing trade dispute between USA and China; in fact, it's further escalating e.g.: Mexico.

Having said this, I think it's important that we take a step back and really view what this all means to China in the greater scheme of things:


  • China is poised to double their consumption (at least) by 2030;
  • GDP will still grow at ~6% for another 3 years, slowing to 4 - 5% for the next 5 - 10;
  • The number of online shoppers in China will almost triple the entire population of the USA
  • China has created over 70 million service jobs in the last 5 years, but only lost 14 manufacturing jobs
  • The Chinese middle, upper-middle, and upper class will triple in size in 10 years - totaling ~600 million
  • Chinese disposable income will more than triple
  • China will become a net importer like the USA, and will consume at an exponential rate - in 2018, net imports increased to >$2.1T - a 15.8% increase YoY
  • The lower tier cities in China will grow faster than the upper tiers; their spending/consumption and net population already exceed the T1/T2 cities, and the income gap between upper tier vs. lower tier is narrowing

In light of this, we really have to ask ourselves whether the most recent market selloff is overdone. I think it is, and have been doing a deep dive into Alibaba; based on my research, I believe Alibaba will benefit more from China's impending tailwinds more than any other company in China - the ecosystem they're creating is scary, and I believe the market has got it wrong by taking such a reactive/short-term view.
 
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Having said this, I think it's important that we take a step back and really view what this all means to China in the greater scheme of things:
What you're describing looks like a case of China not so much competing against the USA but of essentially becoming the USA at least in economic terms.

Fast forward 20 years and Chinese people will be lamenting that not much is made in China anymore, whatever foreign country took all their factories and the government ought to do something to stop this.

That seems the logical conclusion if they're going down the service and consumption rather than production track and begs the question of to where is manufacturing going to shift next?
 
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where is manufacturing going to shift next?
My guess for the immediate term SEA, then onto Africa. There was a SUPER interesting video I saw on African becoming China's China. I would highly encourage you to watch this, as it was fascinating and insightful, but most importantly it was very logical!
 

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