Summary

Let’s face it. China is on the rise; it is already one of the centers of a multi-polar world. However, trade tensions are creating doubt for investors. The present crisis should also serve to remind us of the juvenile nature of the Chinese stock market.

I am not downplaying the issue. It is serious and it will be a huge test on the Chinese policymakers, but there are now many positive long-term forces that, I believe, will offset this crisis.

The Asian giant is now a superpower while paying salaries like Greece. Being an effervescent capitalist society, with rising salaries, but nowhere near the US standard means that China will remain competitive and its internal market will keep growing. That is a brilliant combination.

Graph 1 – China average yearly salaries in CNY (USD/CNY at 6.86)

(Source: tradingeconomics)

Growing salaries mean bigger consumer market. And in a marketplace with 1.4 billion people, this means having almost 20% of the world as potential consumers.

Officially a communist state, China is already reviving its capitalist vein thanks to more freedom for private initiative. More and more businesses are springing up in the Middle Kingdom each year. Additionally, lacking inherited infrastructure from previous generations, the Chinese have been building it from scratch. Although costly, they are providing themselves with state of the art infrastructure, accessible to everyone.

They are not building trains, they are building bullet trains, they are not pushing for coal, they are pushing for solar power. The 21st century China seems to be emulating the 19th century United States. If the US had 76 million people in 1900, and the infrastructure it had allowed so many businesses and entrepreneurs to thrive in, imagine what China can do now.