How to profit from a changing China

More than a decade ago, the acronym, BRIC was coined. Most investors know the countries it stands for, but few remember the name or background of the man who came up with the term.

It was back in 2001 when Jim O’Neill, formerly of Goldman Sachs, grouped Brazil, Russia, India and China to represent the economic shift away from developed countries toward emerging nations. According to a 2010 story in the Financial Times, he came up with the bold prediction that “by 2041 (later revised to 2039, then 2032) the BRICs would overtake the six largest western economies in terms of economic might.”

For China, it was an incredible call. Back in 2001, China’s share of world GDP growth was only about 11%. Now, it’s almost double that. As O’Neill points out, China’s economy is three times France’s and bigger than Brazil, Russia and India combined.

You’d have to rewind the clock another seven years to when I first began hunting around China for companies to invest in. At that time, the Asian country made up only a fraction of global growth.

Today, while the economies of Brazil, Russia and India may be disappointing to O’Neill, he remains staunchly bullish toward China. In a recent article on Bloomberg View, he put the Asian nation into perspective for perma-bears who believe that while China averted a crisis today, the country might not succeed next year. He writes:

“It isn’t clear to me why China’s economy must deteriorate next year. China’s slowdown to its current 7.5% growth rate was well signposted by a sharp slowdown in leading indicators. Those measures, including monetary growth and electricity usage, are no longer flashing red.”

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