China poised to overtake US: Fidelity

World's largest manufacturer by 2011/12

By Victoria Papandrea
Thu 09 Sep 2010

China is on the brink of overtaking the US as the world's largest manufacturer in the next financial year, according to Fidelity.

China is poised to overtake the US as the world's largest manufacturer by the 2011/12 financial year, according to Fidelity.

"China has already leapt ahead of Germany as the world's largest exporter and has already displaced the US as the world's largest user of energy, according to a recent report by the International Energy Agency," Fidelity Asia Fund portfolio manager David Urquhart said.

"With the Chinese economy still expanding at close to 10 per cent a year, Goldman Sachs forecasts China is likely to overtake the US to become the world's largest economy by 2027."

Urquhart said one reason for China's continued economic growth is because the Chinese government has encouraged domestic consumption.

"It realises that relying on exports to over-leveraged western consumers as the hub of its economic policy may not be the best long-term approach," he said.

"China and other emerging markets already account for more than a third of the world's manufacturing output. China accounts for 18.6 per cent of global value-added manufacturing, up from 7.5 per cent in 1999."

Urquhart said the growth of Chinese manufacturing comes at the expense of the US and Japan where manufacturing output, though constant, has dropped relatively compared with other countries that have grown output.

"The US accounts for 19.9 per cent of manufacturing output, down from 25.8 per cent in 1999. Japan has dropped to 8.4 per cent from 16.7 per cent over a decade ago. The European Union's share has been largely unchanged," he said.

"The rise of China means major changes in the world order - changes that investors need to be aware of."

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