Market Outlook
Summary
Economic trends in China bear watching closely, and not just because the country appears to be a guiding light for other countries trying to emerge from the GDP-crushing grip of COVID-19. China is a $14 trillion economy and represents about 16% of the $86 trillion global economy. Thus, China is a critical contributor to overall global economic growth, even if it "only" grows 5%-6%. In fact, 6% growth in the Chinese economy today adds more to global output (by our reckoning, 20% of incremental GDP growth in a normal year) than the 10% growth achieved five years ago, when China was growing faster but was smaller. Of course, this is not a normal year. Even so, while the global economy is expected to contract 3% this year, China is still forecast to eke out a 1% gain. Over the long run, China is an important growth market, to which U.S. companies want access on fair terms. We think it is important that the U.S. secure greater protection for corporate intellectual property rights during its ongoing trade discussions with China. The U.S. economy is evolving, and its greatest contributions ahead are likely in non-manufacturing areas such as IT design, healthcare and finance. These are the industries that U.S. politicians need to protect for the long run.