Investment Contrarians

Why Obama Must Be Aligned with China’s New Leaders

By for Investment Contrarians |

Obama Must Be Aligned with ChinaWe are at a major point in the history of China as the country gets ready to welcome its new leadership group that will dictate what China does, especially with its economic growth, for the next decade. Moreover, it will be critical for President Obama to establish a stronger relationship with whomever will run China during his second term in office, as it could set up how the world looks in 10 years.

The world’s two top economies have similar economic growth goals: to expand their economies, drive income levels higher, and push consumer spending.

The 18th National Congress of the Communist Party of China, which began yesterday. will set in motion the transfer of power in the communist party that occurs every 10 years. There is yet to be an announcement on the new appointments, but the good money is betting on Xi Jinping, the vice-president of China, becoming the next president, replacing Hu Jintao. Li Keqiang, the vice-premier, will then become the next premier, replacing Wen Jiabao.

Already there are questions regarding what type of people the new leaders will be. The consensus is that the relative youth and moderate stance of Xi Jinping and Li Keqiang could make China more in tune with the modern world, which could see the development of better relationships with its key trading partners, including the United States, and could drive economic growth.

For China, the change at the helm comes at a critical juncture, as the country is currently facing stalling economic growth following years of explosive gross domestic product (GDP) growth that propelled the country to overtake Japan as the world’s second-largest economy.

China may be ready to take the next major step toward eventually becoming the world’s biggest economy, with surging economic growth and rising political clout. The country is the world’s top manufacturing power and is becoming the world’s major buyer and user of resources in a move to drive economic growth.

Soon to be ex-President Hu Jintao reiterated his grand goal for China to double its 2010 GDP by 2020, while making sure its citizens’ income levels also double. (Source: “China talks reform as transition begins,”Yahoo! Finance via CNNMoney, November 8, 2012.) The desire to raise income levels is not a surprise, as the country has long wanted to increase consumer spending to drive economic growth and rely less on export demand.

For America, the key will be to partake in what is expected to be a booming next seven to ten years of economic growth for China.

President Obama needs to walk a fine line to try to benefit from China’s upcoming golden years of economic growth, as I feel he will. While the question of currency valuation of the yuan needs to continue to be addressed, Obama has to avoid being accusatory toward the Chinese, as the culture is based largely on protocols, respect, and honor. We need to get jobs back to America, but the truth is that companies will continue to manufacture in the lower-cost centers, and I do not expect this to change.

Ultimately, if President Obama is open and non-confrontational, America will benefit, as a richer China also means more wealth to Americans.

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  • nitwin

    Why must he be aligned with China's leaders? Because they share the same vision in regards to a citizen's relationship with government.