This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

China's Economic Reform Goals Are Bullish for Global Economy

NEW YORK (TheStreet) -- Asian markets reacted bullishly Monday to new economic reform goals from China.

Released after a four-day meeting of top Communist Party officials, the objectives are the first major economic reform push from President Xi Jinping, who took office this year.

Because China is the largest trading partner for many nations, financial markets are interpreting this policy document as bullish for  regional and global economic growth. The world's financial sector, in particular, has been looking for the economy of the world's most populous nation to evolve from being export-driven to consumer-driven.

Following are some of the goals Beijing included in the statement:

Opening up the country's financial markets.

Changing registration for stock market listings, which will encourage more foreign investment.

The introduction of a bank deposit insurance program that will create confidence in the country's financial institutions.

Interest-rate liberalization aimed at encouraging savings and rewarding investors.

Reducing state ownership of businesses.

Encouraging competition among private firms.

Reform of the country's household registration system, which has an impact on matters ranging from employment to social benefits.

Greater protection for the environment.

Must Read: Marathon Oil A Top Socially Responsible Dividend Stock With 2.1% Yield (MRO)

Doing away with labor camps.

Promoting social security programs to provide a safety net.

A relaxation of the nation's infamous one-child policy, to increase the number of consumers and workers.

The financial market measures are particularly needed. Beijing needs to allow market forces to determine the value of its currency and interest rates. It also needs to develop greater depth in its capital markets to allow for a more responsible regime of financing development and spending within the country.

Doing away with the one-child policy will lead to an immediate increase in consumer spending. In the long term, it will also provide a greater pool of workers. That is much needed as a shortage is anticipated. More workers will also facilitate the financing of social security programs. The new safety net being created will provide a foundation of consumption for all in China.

This is bullish for companies looking to tap increasing consumer demand in China. Coca-Cola (KO), Wal-Mart (WMT), and Boeing (BA) all have announced massive expansion programs in China. Coca-Cola has announced that it plans to invest $4 billion in China from 2015 to 2017. Mike Duke, Wal-Mart's CEO and President, recently stated that the world's biggest retailer would be 110 new super centers and Sam's Clubs over the next three years in China. The newest version of the Boeing 737 has been touted as being ideal for the regional markets in China.

Commodities such as copper, coal, and iron ore should all gain from increasing consumer demand. China uses more coal, copper and iron ore than any other country. All are needed in the construction process and the operating of factories, farms, machinery and machinery. Increasing growth in China is positive for all of these commodities.

Overall, the economic reforms being advocated are bullish for the global economy.

Greater consumption in China will do much to stabilize the balance-of-payments in international trade. The huge trade surplus of the People's Republic is not in the best interest of growth around the world as the world's most populous nation and second largest economy needs to be consuming more.

At the time of publication, Yates had no positions in stocks mentioned.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

 

Jonathan Yates is a financial writer who has had thousands of articles appear in periodicals and Web sites such as TheStreet, Newsweek, The Washington Post and many others. He has degrees from Harvard University, Georgetown University Law Center and The Johns Hopkins University.

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
SYM TRADE IT LAST %CHG
AAPL $107.72 -4.47%
FB $87.23 -2.46%
GOOG $597.79 -3.31%
TSLA $238.63 -4.19%
YHOO $31.60 -1.99%

Markets

Chart of I:DJI
DOW 16,058.35 -469.68 -2.84%
S&P 500 1,913.85 -58.33 -2.96%
NASDAQ 4,636.1050 -140.4030 -2.94%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs