China’s Investment in Developing Economies

The economic rise of China has provided a strong tailwind for the regional growth of Asia. Similarly, China's growth is disproportionately benefiting many economies across the larger asset class of emerging markets. The desire of China to maintain its economic growth as wages rise, to find an outlet for its labor-intensive businesses as it moves into services and knowledge-based industries, and to expand its international influence, both economic and political, are the major forces shaping the emerging market economies today.

China's government is pushing to expand the infrastructure of the nation across the world—East, West, and South. As it does so, it brings into the global economy many of the emerging nations of Asia, Europe, Africa, and Latin America. Government-built infrastructure includes roads, railways, air-routes, as well as the virtual and physical infrastructure of telecommunications and online platforms. Surely as night follows day, private enterprise follows. Many businesses and investors see opportunity, too. Opportunity in addressing the many new consumer markets; opportunity in investing in the rising Asian corporate champions; opportunities in investing in the corporations across the emerging markets that will both facilitate and benefit from this new wave of growth.

This new direction from Asia and China is not without its complications, such as international relations, cross-border financing, building the manufacturing bases in emerging economies, dealing with labor issues, and competition with incumbent domestic elites. Change of this sort causes all kinds of friction; each vested interest will try and make change seem a burden. In fact, whereas these interests are not entirely self-serving, change from China's overseas development, like other global investors who have come before it, is likely to be overwhelmingly for the good.

Asia's companies are already crossing borders within emerging markets. Japanese companies are building the modern manufacturing processes to allow Chinese companies to drive productivity gains in an era of higher Chinese wages. As wages continue to rise in China, Chinese companies are also moving their production overseas to ASEAN and Latin America to tap into less expensive labor markets. Asia's internet giants are buying up stakes in online businesses across emerging market economies. As wages rise, consumer companies find new markets and new opportunities to help spread the middle class lifestyle. For their part, other emerging market nations are growing their own business champions and supplying the land, labor and raw materials to partner with Asian and Chinese capital to fund this new growth.