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155: Monumental GDP Growth - China, India and property investment

08-27-2007 team 


This Special Report describes Gross Domestic Product projections for key economies of the world moving towards 2050. Inflation effects have been deducted – as is standard for the calculation of GDP. Hence these projections are good reflection of the total production value of the world in 2000 compared with 2050 in a mid case growth scenario.


As you can see – the numbers are monumental. China’s GDP rises from $1,500 billion in 2000 to $42,000 by 2050. So anyone that believes property prices in China might be due a sharp fall, if you believe these projections, are living in a different world. China’s GDP has been growing at 10% per annum (compounded) for the last ten years – recently increasing to 12%. There is little change this strong growth will not continue. 1.1 billion people provide the low cost labour to power the new global manufacturing centre that feeds our global consumer society. India is another massive new economy, with population project to be 1.3 billion by 2050, with mainly English speaking and often well educated workforce eager and motivated to succeed and economically progress – like the USA and Western Europe were like in the 1960s.


Lots of Doomongers talk about a sub-prime lending crisis affecting the global economy – we’re probably the only people out there saying it – but sorry, we don’t see the Chinese or the Indian or the Middle East economies stalling for a milli-second over the US lending issue. It may spook the financial markets, but it won’t affect economic development in the Fast East, South Asia or the Middle East. And if the worst news around is that real estate prices have dropped 3% in 2007 in the USA – this is hardly a crash, recession or even a particularly concern for the global economy that is still motoring on at a massive 5% GDP growth a year.


And USA’s GDP is projected to triple between 2000 and 2050 – the population will rise from 300 to 450 million. India’s GDP will rise from $900 billion to $23,500 billion – a 25 fold increase! If property prices don’t rise in Mumbai, New Delhi, Bangalore and Calcutta we’ll eat our hats!


This is why expect property prices to keep rising in years to come – particularly in industrial India and China. We believe the oil price will rise to $125/bbl by end 2008 as supply cannot keep up with demand – the global demand will rise by a massive 4 million barrels a day in 2007 but supply will only rise by about 1.5 million barrels – so a supply crunch is on the horizon (it started June 12th 2007 but no-one noticed!). But if you think this will constrain demand – think again. In the UK, because tax makes up 80% of the petrol price, and prices would have to double to make people change their driving behaviours, then oil would have to rise from $70/bbl to $450/bbl to make the average person change their behaviours. A tripling of oil prices in 5 years from $24/bbl to $72/bbl has not impacted inflation – for this reason and the lack of new supply plus massive increase in demand from China, India, the Middle East and other developing countries, we see oil prices sky-rocketting shortly.


So as previously advised – we re-iterate our stance to invest in booming oil towns. If not, then business services and banking cities in the developed world (USA, Europe) and manufacturing areas in the developing world (India, China) – plus Capital and business cities where profits will be collected (Shanghai, Mumbai, Bangalore).





We believe in giving you the fundamental trends and insights – not the latest news hype and market froth. So if you have an opportunity to follow these GDP trends in the long run with your property investment strategy it will lower your investment risk significantly. If you also refer to our population trends in our Special Reports this should also help.


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