However, exports from China, which is largely considered to be the world's manufacturing floor, are becoming less and less relevant as the Red Dragon moves toward a more balanced economy.
For instance, imports are expected to grow 11% next year, reflecting a shift toward more domestic consumption. And while the country is known for its massive spending on infrastructure, its service sector is growing twice as fast as its construction and infrastructure sectors, according to Money Morning Chief Investment Strategist Keith Fitz-Gerald, who says exports account for only 20% of China's gross domestic product (GDP).
"Anyone who has lived in China for a couple of years knows that the service sector is teeming with enterprises (i.e. massage parlors, restaurants, hair salons, etc.), which trade on cash. These are far from adequately reflected in the calculation of the GDP figure," Fitz-Gerald said in an interview earlier this month.
Chinese "Purchasing Power" Extends to PopulationIt's not just the government and businesses in China that are "buying the world," as Fortune magazine stated in a feature last fall.
Retail sales in China rose by 15.1% in the first three quarters of the year, and urban incomes jumped 9.3%. Incomes increased 8.5% in rural areas. Additionally, fixed-asset investment increased by 33% from a year earlier, and yuan-denominated loans rose to $75.68 billion in September, from $60.1 billion in August.
"China's internal demand is growing so rapidly and completely, that we're dangerously close to a point where exporting to the West is almost completely irrelevant," Money Morning's Fitz-Gerald said.
While only 4% of the China's 1.3 billion people own an automobile, the nation this year leapfrogged its U.S. rival to become the largest car market in the world. From January to October, a whopping 10.9 million automobiles were sold in China - easily surpassing the United States, where only 8.6 million vehicles were sold.
And while car sales in China's biggest cities are strong, it's the so-called second, third and fourth-tier cities that are seeing the fastest sales growth. Chengdu, a city of 11 million that isn't even among China's top 10-largest cities, now ranks in the Red Dragon's top four auto markets, according to The Associated Press. Year-on-year auto sales there gained almost 60% in September, to 22,585 units.
"Customers are buying because, quite simply, they need a car, their incomes are rising, and they now have the kind of purchasing power they need to buy them," Zhu Yi, who sells minivans from SAIC Motor Co. Ltd. and General Motors Co. (NYSE: GRM), told The AP.
France: A Stronger Yuan Will Stoke China's Domestic DemandFrance joined a growing chorus of Western nations to call for China to adopt a more flexible exchange rate policy for the yuan, which has been pegged to the U.S. dollar since July 2008.
"A progressive evolution towards a more flexible exchange rate regime would reduce Chinese firms' dependence on the international market and would support an increase in consumers' purchasing power," French Prime Minister Francois Fillon said in a speech at Beihang University.
Any hope for economic cooperation between France and China "could be ruined by currency values that do not correspond to economic reality," Fillon said.
Fillon's statement echoes the sentiment by U.S. President Barack Obama, who visited Beijing last month.
Before leaving for China, President Obama warned if currency and yuan issues don't get resolved, "both economically and politically it would put enormous strains on the relationship."
But when the president arrived in Beijing, it appears he got the cold shoulder from Chinese policymakers and instead referred to China's past statements on a more flexible yuan.
"I was pleased to note the Chinese commitment made in past statements to move toward a more market-oriented exchange rate over time," President Obama said as he stood next to Chinese President Hu Jintao, who avoided the topic in his speech.
A stronger yuan won't be in the best interest of France or the United States, argues Money Morning's Fitz-Gerald, who says prices on common items like clothing could "double or triple" if the yuan appreciates.
News and Related Story Links:
China Buys the World.
Vroooom! China's Auto Market Racing Forward.
The Associated Press:
Auto Sales in Rural Markets Boost China to No. 1.
French Prime Minister Calls for More Flexible Yuan.
The Three Key Economic Issues Obama Will Tackle In His First Asia Trip.
Obama in China Faces Currency Strains and a Great Wall Climb.
The Five Things You Need to Know About China.
China Will Continue to Drive the Global Economic Recovery in 2010.