Helping Advisors Blog

As the pace of growth slows in developed economies across the globe, the role of emerging markets becomes more important. Emerging markets will most likely be major contributors to the growth engine that pulls the world out of the economic doldrums. Russell believes there is no more important emerging market country than China.

China has grown swiftly in recent years, accounting for 14.3% of global gross domestic product (GDP) in 2011. The other main drivers of global GDP included the U.S. at 19.1% and Europe at 23.56%.¹

While China’s growth has certainly been impressive, the question of whether or not it can maintain its trajectory comes up every so often. As the country becomes a bigger part of the world economy and transitions from an export-led to consumer-led economy (looking more like a developed economy), it will at some point become difficult to maintain such a high growth rate. But that’s okay.

Even if China’s pace of growth slows to 7.5% as the Chinese government predicts, that’s still a very strong number and one that will provide fuel for global growth.² If you look at the chart below you see that China has consistently surpassed its targeted growth projections for some time now.

China historically beat its numbers³

Even with a recent downward GDP revision by the Chinese government from 8% to 7.5%, China has a history of above-trend growth.

Last year, Chinese authorities began a step-by-step program designed to rein-in growth and slow inflation. The question is whether or not it will work. We think it can succeed and result in a “soft landing” that would bring stable, healthy and sustainable growth. If you consider the combined efforts of China, other emerging markets and the United States, the potential for moderate global growth is alive and slowly getting better.

This should help balance the uncertainties coming out of Europe. Even if global markets hit bumps along the way, which they surely will, our long-term outlook for China remains positive. Overall, we’re calling for modestly positive global market returns for 2012.