Quite frankly, China is the global economic engine on the planet. What makes China the economic engine is the fact that China is the largest manufacturing house and world exporter. China is also the second largest global importer. Additionally, China possesses about $3.2 trillion in foreign exchange reserves. This means it is the single most affluent country in the world in terms of its monetary reserves. With $3.2 trillion in foreign exchange reserves, this further means China has the financial resources and liquidity to buy over two-thirds of the NASDAQ quoted stock companies.
In 2009, China purchased $50 billion worth of IMF bonds. In doing this, China made IMF its debtor entity which means IMF is indebted to China not the other way around.
Basically, this means China owns 33% of the IMF bonds issued for purchase in 2009. In the past, China advised the other BRIC economies (Brazil, Russia, and India) to stop arguing and confronting IMF but simply make IMF your debtor entity. That is what has happened as BRIC economies purchased a combined amount of $80 billion of the $150 billion IMF bonds issued in 2009. This has resulted in BRIC economies owning a combined 58% of the IMF bonds issued.
Currently, China is the driving engine of BRICS economies (Brazil, Russia, India, China, and South Africa) and wields premier veto power over the other BRICS emerging economies in the BRIC alliance. According to May 2011 US Treasury Department data, China is the largest foreign investor or holder of U.S. Treasury bills, with holdings reaching $1.16 trillion. In fact, five (5) of the world’s 20 largest companies are Chinese owned. China’s current economic growth rate stands at about 9.5%. Turkey is the only other G-20 economy with an economic growth rate surpassing China’s at about 11.8%.
China led the BRICs with a 600 billion stimulus package or 6% of its GDP in 2009 in a time when the rest of the world was trying to climb out of the global economic crisis. China has also committed about $34 billion in the country’s energy renewable program. This figure is almost twice what the US has committed and only about $7 billion less than the EU commitment of $41. Among the G-20 economies, China has overtaken the US for the first time in a league table of investments in low-carbon energy. In reality, China is key to any final climate change deal because China is now the largest greenhouse gas emitter of carbon dioxide foot print.
China is the world’s fifth largest stock market with a market capitalization of $2.7 trillion as of December 2010. In 2010, China stood in third place after Japan with regard to the percentage of market capitalization at 6.89%. In 2007, China’s market capitalization stood at 3.0 billion one year before the global economic crisis took hold.
Recently, China has been the key player to General Motors (GM) global growth. GM now sells more vehicles in China than the US. General Motors’ recent growth has been in the People’s Republic of China, where its sales rose 66.9 percent in 2009, selling 1,830,000 vehicles and accounting for 13.4 percent of the market. GM increased its sales in China by 68 percent to 230,048 vehicles in March 2010 and outsold its U.S. sales of 188,546 by 22 percent.
Given that China is behind the US and Japan in terms of smart grid development, China recently invested about $7.3 billion in smart grid projects in 2010 according to Zpyrme, a market research firm in Austin, Texas. In fact, IBM has opened the China Development Laboratory accommodating 5,000 workers in Beijing to develop smart grid software for the global market. The new lab is working with the State Grid Corporation of China on pilot projects to integrate wind and solar power with the grid, manage grid operations, and increase the efficiency of nuclear power plants.
Basically, smart grids include computerized monitoring of the electricity flowing through a power grid and allow utilities to manage electricity usage automatic. Smart grids are also intelligent power-distribution systems designed to be more responsive and interactive than today’s traditional power grids.
FINAL WORDS: China is a globally important economy and nation which strategically thinks, plans, and implements its moves, investments, and resources. This strategy has enabled China to become the premier global economic engine. Many other global economies can learn from China’s prudent fiscal management.