Putting China in context – Part 1

Today, China’s Shanghai Stock Exchange Composite Index (SHCOMP) is trading at 2,200 which is the same level seen in 2011, 2008 and 2006,

You can buy the Chinese stock market today for the same price that it was 7 years ago.

Furthermore, it’s trading at one-third of its 6,124 point high seen in October 2007 with a Price/Earnings Ratio of 11 and Dividend Yield of 2.3%.

Economists are suggesting that for China to move it’s into next phase of expansion and prosperity, the economy would need to move from bing dominated by manufacturing  into one that is driven by domestic consumption. I think this argument is irrelevant.

Sometimes too much analysis can be counter-productive.

I don’t think pundits were wondering when America was going to morph from its industrial manufacturing roots into a consumer society back in 1910. As The Roaring ’20’s came around, it just happened.

Interestingly, many developed economies now yearn for a return of their manufacturing economy.

Recently, the SHCOMP fell 2% because China only reported GDP growth of 7.7% rather than the consensus expectations of 8%. Analysts then expressed their “disappointment” and promptly wrote reports re-iterating their case for a decline in China’s economics.

Many countries could only wish for the growth that China has.

 

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