Beijing 2008 XXIX Olympiad has given China a great launch-pad to future fuel its already heated economic growth. Mammoth China wants to progress, and progress fast. From WTO negotiations, to the very active Chinese equity markets to corporatization of its SOEs and more…, the neck-breaking speed of its economic revolution is probably unsurpassed by any other country.

With 20 years of the communistic thought taking a back seat and planned economic revolution has landed China as the preferred primary investment destination since 2000, with certain repercussions of course.

WTO and China - Work Harder!
The speed of economic progression is a catalystical to say the least. As close back as 2002, China still lacked the financial system to attract and convince investors of its vast potential yet immature financial system. There have been apprehensions on how investors could repatriate profits and investments with such a system.

Since then, China has proactively executed structural reforms including trade liberalization, have resulted in annual real GDP growth rates in excess of 10% over the past 4 years, rising per-capita income and poverty reduction. And China continues to be one of the largest recipients of inward FDI and has become a large provider of outward FDI, reflecting its increasing integration into the global economy.

Sadly, therein lies imbalances in the sources of growth in the economy, which is mainly driven by exports and investment rather than by consumption, a widening gap between savings and investment reflected in China’s growing current account surplus, and rising income inequality despite high GDP growth.

No Bulls! Can Equities Still Make a Fast Buck?
Stability of the economy is not congruent to that of its equity markets. This is by virtue of the fact that as the Chinese stock market liberalizes itself at also a breakneck speed, therein lies an onrush of savings being siphoned into equity markets.

There is no harm in participating in equity investments. However, the mass mindset is skewed towards speculation, a very dangerous proposition for any individual not equipped with the basic fundamentals of equity investments.

The latest Epoch Times report in June 21, 2008 discloses a massive China stock market loss of whopping 14 Trillion Yuan or US$2.03 Trillion within a short span of 8 months! 92.5% of investors suffered losses, with loss capitalization of more than 50% of their financial assets. Indeed, a sad story of greed and lack of market knowledge.

You Just Can’t Short Change that Learning Curve, or Could You?
Within a short span of 20 years, the Chinese economy progressed from agricultural intensive to industrialization intensive, with State Owned Enterprises spearheading the change. Granted they did a great job in expediting the change with an accelerated learning curve, but one major issue exists to plague the future of business enterprises in China - Lack of Experience and Management Expertise.

Understand how many years it took for US or Europe to explore the trials and tribulations of Entrepreneurship and you would understand the above point. True Business or Corporate Management expertise of large corporations must be nurtured over time, not short circuiting the learning curve.

China-focused venture capital and private equity funds raised close to $20 billion from investors around the world. However, the common complaint of venture capitalists is that there is too much money yet not enough fundable people, with recruiting and retaining good people as the biggest obstacle to growth.

So is China Really Ready for the World?

China’s Economic Learning Curve has been steep and the above experiences are unavoidable in any country’s growth stage of the Economic Life Cycle. Given time, and as China phases into the maturity stage, by it’s sheer history of passion, perseverance & massive powess of its 1.33 billion population, changes for the positive are imminent.

And I am confident the answer to the question above is still a resounding YES ..!