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Will Europe Drag Down China, And Why We Like India

falconfx

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Will Europe Drag Down China, And Why We Like India

Over the past few months, investors have been inundated with analysts posturing about the effects of the European debt crisis. The basic questions that continue to worry investors include: To what extent will the crisis spread? –and– Will it cause a global slowdown? Analysts have voiced their opinions ad nauseam ranging from doom and gloom scenarios to a full global recovery in the short-term. Thus, there doesn’t seem to be consensus on what to expect.

However, since the EU/IMF bailout package makes it highly unlikely that the doomsday theories will unfold; brave investors are once again looking to get their feet wet in global markets. The emerging markets have been a lucrative investment in the past, yet the current European crisis brings some uncertainties that are worth considering before jumping back in. Particularly the question of how the booming Asian economies will be affected and if the emerging markets remain a good play going forward?

While it’s tough to know the answers at this stage of the game, we’ve decided to dig into some economic data from the emerging Asian economies in an effort to make an educated guess as to what may be the most likely outcome.

Our research shows that China, Taiwan, and Singapore have all experienced tremendous GDP growth during their economic recoveries. This growth has been driven by strong exports, which has allowed Asia to assume the role of the global growth leader. For many Asian countries, exports account for over half of their GDP.

However, the worry is that the European debt mess will negatively impact these fast growing economies and send countries such as China into a slowdown. Exhibit A in this scenario is the falling euro. But while a weaker euro means more expensive Asian exports, the data reveals that the eurozone does NOT represent a very large share of total exports from Asian countries.

China is the widely touted as the country most vulnerable to the European turmoil. But our data shows that it only exports 14% of its total share to the euro-one. China’s exports are actually more heavily weighted to other Asian countries (47%) and the US (18%).

Malaysia and Taiwan follow, but only export 7.8% and 7.5%, respectively to the eurozone. The point is that while a falling euro may reduce Asian exports to European countries, the eurozone only accounts for a sliver of Asia’s total exports. Thus, it follows that an economic decline in Europe should not severely impact Asian growth.

Although not at great risk, China is the most vulnerable to fluctuations in the euro from a statistical standpoint. This would suggest that China would be a relatively higher risk play than some of its emerging market counterparts. However, data suggests that emerging Asia export growth has had virtually no relationship with the year to year change in the trade weighted euro. Basically, there is no significant evidence that a fluctuating euro affects Asian exports. According to the latest figures, current export growth in Asian economies remains strong.

Unless the European debt crisis brings about a significant slowdown in the global economy (US in particular), or global trade restrictions increase, Asian economies seem poised to continue exhibiting strong growth via robust exports, at least in the short term.

If investors are looking for a lower risk emerging market play, India may be the answer. Our work suggests that India is unique for a few key reasons.

Domestic Demand: India is not an export-driven country. It is an insulated country that booms on local demand, and is not subject to the fluctuations of international markets or currencies.

Demographic: India’s middle class is larger than the entire population of the US. This allows the country to produce robust amounts of domestic economic activity.

Protection: India has put in place protective business policies that defend domestic companies from direct international competition.


While India and China are two very different countries with very different economies, a case can be made for both when looking at potential emerging market investments. However, from our perspective, we favor India at the present time.
 
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China economic policy are not good for a number of reasons at least in my mind. And they need to face these problems in longer term to comepte to India. India had robus econimic structure. All these points are already in the mind of businessmen seeking to increase the business in Asian countries.

Thanks for the post.

Again above lines are my perssonel views. Trollers plz dont comment unless with good knowledge not the links.:cheers:
 
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I agree that India does have a lot of upside as it is still a very very backward country that is equivalent to an average African nation. There is still potentially a lot of growth in infrastructure, sanitation and education. These would be good investments in India if Indian leaders understand what need to be done for India.
 
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faithfulguy.....I agree that India does have a lot of upside as it is still a very very backward country that is equivalent to an average African nation. There is still potentially a lot of growth in infrastructure, sanitation and education. These would be good investments in India if Indian leaders understand what need to be done for India. dude what is wrong with u...... were u in coma or what...... it is a trillion dollar economy......... is there any country closer to a trillion dollar economy in africa may be south africa comes closer to us first think before u post and donot troll just like always and derail the thread........
 
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faithfulguy is right our country still needs developing and is still very backward.
 
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faithfulguy.....I agree that India does have a lot of upside as it is still a very very backward country that is equivalent to an average African nation. There is still potentially a lot of growth in infrastructure, sanitation and education. These would be good investments in India if Indian leaders understand what need to be done for India. dude what is wrong with u...... were u in coma or what...... it is a trillion dollar economy......... is there any country closer to a trillion dollar economy in africa may be south africa comes closer to us first think before u post and donot troll just like always and derail the thread........

If you take the GDP of the whole Africa, which probably has about as many people as the whole India, the overall GDP would be about the same.

India has over 1.1 billion people. So its economic is trillion dollars. Africa also has a trillion dollar economy as of 2007 as a continent. So its just a per capita comparason.

Economy of Africa - Wikipedia, the free encyclopedia

As for India's economic growth, its commendable. But its not extra ordinary as compare to other economys of Asia as a whole.
 
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The reason why China is doing well is

a) They do not have self imposed sanctions on some countries
that actually want to invest 100 billion dollar in projects

b) They do not have 100,000 men and army and cost expenses
for last 10 years, nor do they have crisis like in Russia in 90's

c) They deal with all countries and the respect the rights of these
countries , they just want to trade that is all - this is why
all countries welcome china

d) China has no mortage scandles as they simply hang anyone
caught in curruption so ppl are normally careful not to scam ppl


China keeps its words , if it says something it will keep its word and honor it ....
 
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If you take the GDP of the whole Africa, which probably has about as many people as the whole India, the overall GDP would be about the same.

India has over 1.1 billion people. So its economic is trillion dollars. Africa also has a trillion dollar economy as of 2007 as a continent. So its just a per capita comparason.

Economy of Africa - Wikipedia, the free encyclopedia

As for India's economic growth, its commendable. But its not extra ordinary as compare to other economys of Asia as a whole.

trolling on the forum. China is among the poorest countries inth world on per capita basic..... and no of poor ppl in China far exceeds that in India....
India has even growth, umlike CHina whre a few thousand have the wealth whereas the vast majority is like living worse then a poor african country....
 
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I agree that India does have a lot of upside as it is still a very very backward country that is equivalent to an average African nation. There is still potentially a lot of growth in infrastructure, sanitation and education. These would be good investments in India if Indian leaders understand what need to be done for India.
u r in the rank of shcninese..... congrats.. :rofl:
 
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I agree that India does have a lot of upside as it is still a very very backward country that is equivalent to an average African nation. There is still potentially a lot of growth in infrastructure, sanitation and education. These would be good investments in India if Indian leaders understand what need to be done for India.

Poor China also needs lot of money....but if the article is any indicator.. China's poor will not be able to come out of poverty...whereas India will continue to grow...

it could be problem for china as the social unrest might spill over....i hope China's leareds take note and prevent the poor chinese from going on revolt....there is still a lot to be done for the upliftment of poor chinese........
 
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I would like to underline what MMS said ..
'Growth with Ethics'

Thats india.
 
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this is a pessimitical analysis from typical indian narrow mindness where the world exisist only between USA, Europe and India. The chinese have already started to negate economic loss from europe by capturing markets in Middle east and Africa which happen to be mineral rich as well therefore they can opt to pay for infrastructure without hardcash. Further the chinese have no problems with couuntries internal politics while India with their "world largest democracy" are rather viewed as a threat.
 
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Ohh and last time i check, a large power plant project in India is under progress by Chinese company. Goes to show "India power"
They can simply bug this system and root it out at times of conflict.

The indians are scared of buying mobile communication gear from China for its fear of "bugged up". China retaliates by offering to build facilities in Banglore.
 
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I would like to underline what MMS said ..
'Growth with Ethics'

Thats india.

And the GCC is bogged down with ethicless and opputunist indian who will decieve, manipulate, lie, cheat and steal their way into their goals. Seriously expecting ethics from Indian is like expect religion from athiest. While there is a lot of Indian talent to be tapped, sadly the ones offering them feeding spoon end up having their hand bitten with data thefts, workplace politics, ethicless conduct, bribery and favourings. :rofl:
 
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If investors are looking for a lower risk emerging market play, India may be the answer. Our work suggests that India is unique for a few key reasons.

Domestic Demand: India is not an export-driven country. It is an insulated country that booms on local demand, and is not subject to the fluctuations of international markets or currencies.

No economy can survive insulated for too long. The example of soviet Union economic collapse.

Demographic: India’s middle class is larger than the entire population of the US. This allows the country to produce robust amounts of domestic economic activity.

Population numbers do not factor much in economic calculation. It is the PPP which matters.

Protection: India has put in place protective business policies that defend domestic companies from direct international competition.


Which definately thawrts away international investors from potenially low quality local competition.

While India and China are two very different countries with very different economies, a case can be made for both when looking at potential emerging market investments. However, from our perspective, we favor India at the present time.[/QUOTE]

Definately India has some pros and economic policies are not tied up to one nation.
 
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