Monday, August 06, 2007

China Powers On

Whilst China had a 9% one-day drop in the stock market shook global indexes, many analysts argue that even though the Shanghai stock exchange may seem overvalued and there may be concerns about the veracity of corporate reporting, the long-term prospects for China outweigh many of the risks.

Instead of a collapse, analysts say there will be corrections in a bull market that will see equity prices continue rising and profits keep growing.

The key to this approach is taking a long-term outlook and buying into the view that the so-called Bric nations of Brazil, Russia, India and China are reshaping the world economy.

Already the changes are being felt and in the first three months of this year China accounted for a greater proportion of the global economy than the US.

Jim O'Neil is chief economist at Goldman Sachs and is the man who coined the term Brics.

"People worry a lot," he explained. "There can be a boom, but it doesn't mean it is a bubble."

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