China calling but there is a problem

As you tour China’s wide, clean and trouble free streets in which ever massive City you are located, there is one huge difference to a similar journey in Britain.

China and its people are on the move – upwards! The roads are full of new BMWs and sports cars. The shopping malls are packed with the best consumer durables.

The citizens of China are smiling and it is infectious. Just compare this to the state of the UK. The Government seems hell bent on convincing the voters that the economy is bust, benefit claimants are parasites, that our educational system is pre-historic and tax planning is a social evil (unless you are a member of the Cabinet).

China is worried about inflation and recently the People’s Bank of China made its fifth increase in the year in its required reserve ratio up to 18%. This will reduce lending quotas by 5%. There is, however, a much bigger problem facing the National Government.

The Middle Class conundrum
The conventional, sociological thinking in China is that in a modern society there are four ranks:
  • the wealthy
  • the Middle Class
  • labour
  • the disadvantaged

In 2005 China’s Middle Class was established at 18% of the total population. It is now 23%. In 2020 it will be 40%. It should, according to the social planners, be 60% – 70%. China is due to begin its 12th five-year plan. It promises “inclusive growth”.

There are 200 million migrant workers who are described by Tang Jun, secretary-general of the Social Research Centre of the China Academy of Social Services, as “the supporting pillar of industry.”

China will need to satisfy the aspirations of many of these people if the minimum of 30% of the population in Middle Class is to be achieved. This will increase demand for minerals (oil etc.) and consumer goods. This will increase inflation.

But China – its aspiring Middle Class – expect.

Three decades ago, Deng Xiaoping said: “Let one part of the people get rich first.” Tang Jun suggests that today the statement might be: “Let one third of the Chinese people become Middle Class.”

Dave wants to encourage entrepreneurs. We at Enterprise Britain believe that action speaks louder than political rhetoric. China knows how to encourage its budding business people.

The picture below shows, in the centre, Jin Jin Leung whose English name is Jessie. She was educated in China, Singapore and Sydney University in Australia. Her family built a business advising on the development of shopping malls. Jessie is building which puts these services on the internet. Tesco last week announced it is developing 50 new retail outlets in China.
We are in early stage talks on what the UK financial markets might offer Jessie’s business. The picture was taken in Guangzhou which is so massive I can’t describe it. It is two hours from Shenzhen across the border from Hong Kong.

I am on Jessie’s left. To her right is Nicholas Littlewood. He is an experienced UK and US investment banker and is chairman of Ford Eagle Group, a dynamic corporate finance house based in China (Shenzhen) and Hong Kong. I was involved this year in introducing Ford Eagle to the PLUS-quoted market.

During my four days in Hong Kong and four days in Beijing I had meeting after meeting with Chinese entrepreneurs. They are alive, focused and fiercely ambitious.
I spent hours and hours selling Britain’s junior stock markets.

The only downside of my trip was returning to London and reading more about verbose aspiring members of the Upper House and the continuing agonies of this Coalition Government.

Hey Dave, I’m trying and I remain proud of my country.

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