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Anticipated Profits From Investment In China Materials Sector

Jul. 25, 2013 1:18 AM ET
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It is important to know that most of the 1.35 billion of the Chinese's Population will be entering into the middle class status. The material sector of lately has been under a lot of pressure due to the falling of commodity prices. Nickel, Tin and Copper have been entering the bear markets and have further increased the pressure ahead.

National Sustainable Development Strategy of the Peoples Republic China has stated that an aggressive development agenda is put into consideration and execution for the development of advanced materials for the Chinese's Industry; advanced materials have been put into the agenda and top priorities for development, thus building a keen equity exposure through the China Materials ETF. China's National R&D system depends on the investment on advanced materials. In the year 2012 an increase of profits by 3.5% has been seen in the constructions materials industry. The industrial value added of China's construction materials in 2012 has risen by 11.5%, but due to the drop in the prices of construction materials and non-metal minerals products constraints have become an issue. As presumed that the year 2013 will see stabilization in the growth of industry and urbanization.

The construction of a new Subway line in Beijing is expected to increase the Demand of Construction goods and create a hustle in the Construction Industry. The line includes 24 stations and 11 transfer stations with a length proposed of 36Km. December 2012 has also seen an addition of 4 new lines with a track length of 442km. According to agencies, the Beijing City Subway Construction Management Company has pumped a cost of $ 5.78billion. By 2015 the Subway Lines are expected to reach a combined length of 561 km and 1,000km by 2020. Boosting a further invest china materials sector.

Our world economies are definitely more interconnected than we assume them to be. The US is the largest performer in the global economy but playing hand in hand with China since the last decade. The effect of the Chinese economy can be felt with big magnitudes in the global scenario. Materials sector, commodity prices and global economy are all driven by the Chinese's economy.

The Chinese's economy has shifted its trend from an export oriented economy to a domestic oriented one. The GDP of the economy has grown at 7.5 % in the second quarter as indicated by National Bureau of Statistics in Beijing. This growth has been much less than anticipated in a forecast as on 2013. Not to forget that the Euro zone has not being doing too well too, and is facing a slow growth period. Let's put it this way, China has been hit by the "Lewis Point" and desperately needs a rebalancing movement to be able to fill up the shortage of its work force. The wages should be rising to enforce an increase in the consumer spending. This will only facilitate the luring of investments back into the system.

But the good news is that the Dragon economy of China is transforming itself into a mature economy. A 7-8% increase in its growth is not required by the economy any more to be able to absorb its total work force, because of the transition of the young work force to an aging population. This economy will not simply stay aloof of its deterioration. The infrastructure of this economy has huge fiscal reserves that can be pumped into the bloodstream of the industries and create a good amount of jobs and accommodate new projects.

A decline in the commodity price by China sees an increase in the profits due to the decline in the material costs. The ideology of stabilizing the GDP Growth and maintaining a steady employment set up by proceeding injections of finance into the veins of the economy will bring a total benefit and project a growth for the entire base material, advance manufacturing industry.

Global X China materials ETF [CHIM] operates at annual expenses of 0.65%. The Breakdown of this industry goes down in three sectors: Metal & Mining, Chemical and Industrials with Metals & Mining holding the highest assets. YINGDE GASES (5.76%), LUMENA RESOURCES CORP (5.17%), CITIC PACIFIC (5.03%) and CHINA BLUECHEMICAL LTD (4.93%) are the top four assets for Global X CHIM ETF as on 7/18/2013.

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