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Something’s Brewing in China

What do you think they order at Starbucks in China? I’m not sure, but something is being ordered. 

I don’t know much about China; I wish knew more.  What I do know is what I’ve read in the paper and what I’ve heard many times: China’s economy is growing really fast.

So, when I came across an article in the Wall Street Journal about China’s economy, I decided to read it and really try to understand it.

Here’s my take away. China’s economy isn’t growing as fast as it used to. It grew at a double-digit percentage pace for the past thirty years. In the first quarter of 2012, it grew 8.1%, that’s the slowest rate since the 1st quarter of 2009.  (A lot faster than ours. For more info on our growth rate, please read my earlier post Heigh-Ho, Heigh-ho).

What’s happening is a shift in the areas of China’s economic growth. Real estate and exports are slowing, while consumer spending is increasing. This means companies that sell construction and engineering machinery to China are having a tougher time, while consumer based companies are still growing. 

Economists say it’s important for China to move to a consumer driven economy. It’s easier to keep a steady growth rate if consumer spending is the driving force rather than relying on real estate or exports.

Two shining examples of U.S. consumer-based companies in China, named in the WSJ article, are Apple Computer and Starbucks. Apple reported that sales in greater China tripled in the 1st quarter to $7.9 billion. Starbucks says it “continues to see strong traffic growth in China.”

Why is this important for me, living 7,000 miles from China?  For a few huge reasons. We are a global economy, thankfully. What happens in China has a major impact on the economy in the United States. We import a massive amount of cheap goods from China, which helps keep our inflation down. We also export products to China (who can forget the green tea Oreos?), so if the needs and wants of 1.4 billion people living there are changing, it’s going to have an impact on our multi-national companies doing business overseas. 

In some ways, it really may be a small world after all, but it has enormous opportunities.

Peace Love Profits,

Blake

P.S. Big sellers at Starbucks in China are cappuccinos and mocha coffees. Yum:)