China is getting a great deal of attention upon its 60th anniversary. This is great news for the Canadian economy and investors in Canada's well-positioned market. Bloomberg reports today that the IMF has raised its 2010 GDP growth forecast for China to 9%. It also trimmed its forecast for India by 0.1% to 6.4% from 6.5% which is still very good, given that India has not embarked on as bold a spending strategy. The two are altogether different though. China is an economy now more equitably balanced between its exports sector and domestic spending, with domestic spending taking a near 60% share of the economy, versus 60% exports just ten years ago. India's GDP consists of 85% domestic spending and has been far better insulated economically from the credit crisis, that the Indian parliament was not forced into providing a massive stimulus as India's economy was not as vulnerable to a downturn in exports as China's was. The silver lining here is that China's bold 4-trillion Yuan (US$ 586-billion) stimulus may successfully transform China into a formidable domestically biased economy, well ahead of original expectations, from once being held as export dependent or vulnerable to export shocks.
As the year progresses though, India's GDP forecast may get upgraded again on increased spending plans. During the course of the last year, India has begun a new political cycle, and its incumbent Congress party won a mandate in the election earlier this year. In the midst of the credit crisis in the spring, and in the midst of campaigning, India's spending plans were criticized as being somewhat anemic as compared to China's. In hindsight, it would have been political suicide if the incumbent party had embarked on bold stimulus initiatives when so many were fearful of the credit crisis. Don't ignore India at China's expense. On this basis, its very likely that the Indian government will step up spending, though on a gradual basis over the coming year, which could push growth forecasts higher for 2010. It is notable that India has a sound fiscal position and a nice and clean banking system, and a strong tradition of high savings rates.
Investors looking at investing in emerging markets should consider positions in both India and China, rather than one or the other. These are the only two economies in the world that have sustained their records of growth throughout the current crisis.
Either way, if you choose not to invest directly in India and China, this is good news for the commodities complex, and its good news for Canadian investors taking exposure in the commodities sector.
Mark Mobius says China is his top pick among the emerging markets:
Jim Rogers says he likes China for the next 60 years:
HSBC CEO, Sandy Flockhart says China is the strategically the most important market to HSBC:
