China's Fast Growing Economy- Industrialization, Consumption and the Quest for Resources   by ECON Corporate Services

China's Fast Growing Economy- Industrialization, Consumption and the Quest for Resources

China-AsiaStocks.com Gains Insight into China's Energy-Renewable Energy, Water, Steel-Coal and Healthcare Sectors from Industry Participants

China's economy is growing faster than predicted, with the first quarter numbers of 2006 coming in at 10.2%, outpacing last year's strong growth. This pace is expected to continue according to an Economist Intelligence Unit (EIU) research report that projects China to contribute nearly 40% of the total global GDP rise over the next 15 years, with India representing almost 12 % of this growth. With this significant expansion and a world economy the EIU expects in 2020 to become two-thirds larger than 2005 levels, it becomes evident that reaching China's economy translates into opportunity and concern as their insatiable consumption of commodities and resources, fuelled by a more affluent consumer base, impacts global trade, supply and demand. Issues that could slow or halt growth include shortages in energy and clean water supplies, the resulting pollution, potential pandemics, and trade imbalances. China's President Hu Jintao is on a global hunt for solutions with recent visits to the US, followed by Saudi Arabia. China-AsiaStocks.com discusses how the world's fastest growing economy impacts sectors including energy- renewable energy, water, and coal - steel and healthcare. Participating companies XsunX, Inc. (OTCBB: XSNX), Vitasti, Inc. (OTCBB: VITS), Hendrx Corp (OTCBB: HDRX), Puda Coal, Inc. (OTCBB: PUDC), and Bridgetech Holdings International, Inc. (OTC.PK: BGTH) provide insight from a first hand perspective of how smaller companies are feeling the impact and capitalizing on the opportunity.

Two Hot Investment Sectors Converge - Renewable Energy and China

The renewable energy stocks sector has gained a growing mainstream investor following as oil prices continue to rise. Renewable energy companies with global market potential, in particular, with ties to China, are some of the investment community's most favored.

Chinese President Hu Jintao's visits to the US and Saudi Arabia addresses issues of potential energy shortages in China. China, like the rest of the world is investing in renewable energy technology as both a contingency plan for energy shortages and a more environmentally friendly solution. Solar and wind technology investment and implementation are on the rise, evidenced by five China-Solar IPO's in the pipeline as well as China's largest wind turbine maker, Goldwin Science and Technology. The success of Suntech Power Holdings Co., Ltd. (NYSE:STP), a global solar energy company founded and based in Wuxi China that gained 34% its first day of trading in December 2005, has paved the path for newcomers in this industry.

XsunX, Inc. (OTCBB: XSNX) a Building Integrated Photovoltaics (BIPV) developer and Vitasti, Inc. (OTCBB: VITS), a company building wind farms in China, are two examples of renewable energy participants that have identified China's alternative energy needs as creating global market opportunities.

As Tom Djokovich, CEO of XsunX, Inc. explains, "Building Integrated Photovoltaics, such as XsunX's Power Glass(R), a thin-film solar technology that allows glass windows to produce electricity from the power of the sun, has the ability to address the growing need to produce clean renewable on-site power to help meet China's rising energy demands. BIPV technology offers viable, solutions for developing countries like China by providing them with alternative methods of power production and significant cost savings as it enables the building of distributed power networks. As one of the largest and fastest growing commercial construction marketplaces, the opportunity for incorporating BIPV into China's infrastructure makes this area an attractive target for XsunX, Inc."

As described by Shannon deDelley, Director of Vitasti Inc., a wind power company, "Vitasti is focused on China as they have a very aggressive plan to install 20,000 megawatts by 2020, an investment by the country of $40 billion. There is a realization that China has to mitigate green house gas emissions that inherently come with industrial growth and they are also very thirsty for electricity. With the costs of green house gas emissions directly affecting any country's gross national product, China has created laws requiring provinces and cities to purchase the wind power. Overall, renewable energy is playing a growing role in the Chinese energy supply, and there is no other country with such aggressive plans for growth and opportunity in the wind industry today."

China is a key member of the Asia-Pacific Partnership on Clean Development and Climate, an international non-treaty agreement between Australia, India, Japan, and the People's Republic of China, South Korea, and the United to address climate change, energy security and air pollution. China is taking its role seriously and moved up its global rankings in wind energy from 10th position in 2004 (764 MW) to 8th in 2005 (1,260 MW), and with installations, and has now reached the sixth position worldwide.

China is seeking to diversify its energy sources from oil and coal to renewable energy technology to ensure that it can meet future growth demands without additional environmental damage. China is currently trying to find a balance and solution to two critical areas: energy consumption and the discharge of pollutants.

China's Water Shortages, Water Pollution

As President Hu Jintao is looking for global allies to address energy issues, the possibility of China facing a shortage of a resource more critical than oil is looming, pending to reach its peak in 2030. News out of China that there is a pending water shortage can have a dramatic impact on both industry and healthcare.

The rapid industrialization could come to a sharp slow down if water shortages continue. Pollution, increasing desertification and a growing population has resulted in China's annual per capita water availability at 2,200 tonnes, representing 25 per cent of the world average.

Hendrx Corp (OTCBB: HDRX), a manufacturer of water purification technology such as Atmospheric Water Generators, has technology that can address residential, industrial and commercial needs. As George Solymar, Director with Hendrx describes, "Not only are we concentrating on the drinking water for domestic use, but we are also looking to industrial and commercial water use. Our focus is to treat the incoming water, the processed water and the outgoing water at the same time because we are yielding a customer responsibility for taking care of their total water needs. Hendrx is working to become the name that is synonymous with providing this complete solution."

Hendrx's solutions, according to Solymar, are especially beneficial for developing countries such as China where industrialization has created a cross pollution that effects the farmland, the drinking water, plus the personnel that comes into the working areas that need to be supplied with high quality water to ensure disease prevention. "China which used to be extremely fragmented and mainly agricultural, has through population expansion, economic growth and industrialization, become cross-connected with infrastructure, which means that disease, water and prevention can all be dealt with on a regional basis instead of on a village basis creating opportunity for the utilization of Hendrx's products," states Mr. Solymar.

Just like we are witnessing in the renewable energy stock sector, investing in water stocks has become popular with the average retail investor. Water stocks were quietly outperforming most sectors for years and have garnered more attention as the world takes heed ( not just in China) that water could be the "next oil".

Coal - Steel Industry: Steel Production and Consumption in China

China is a major player in the global steel market in terms of global consumption and production with crude steel consumption representing 32 percent of the world's total in 2005 and an annual crude steel production capacity that has surpassed the combined production of Japan, Unites States, the Republic of Korea and Russia. The China steel industry is facing current and future restructuring, mergers and consolidation as pricing and supply and demand issues are addressed. China's economy continues to impact the steel industry's growth on a global basis as its consumption levels escalate.

Demand for quality grade coking coal, used to make coke - an essential ingredient in steel production, has grown alongside China's economic surge, driven by high levels of steel demand and the construction boom the nation is experiencing.Puda Coal, Inc. (OTC BB: PUDC) one of the largest suppliers of metallurgical coking coal in the Shanxi province of China, an area that provides 20-25% of China's coal output and supplies nearly 50% of China's coke, has been a recipient of the increased coking coal requirements.

As Zhao Ming, Chairman and Chief Executive Officer of Puda Coal Inc. (OTC BB: PUDC) explains, "The Chinese government explicitly made the 'Building New Countryside' program one of its core social and economic development goals for the next 5 years, which means improved infrastructure, higher living standards, and cleaner environment; demand for steel will therefore continue to be strong in China. It's estimated that about 70% of China's 1.3 billion citizens currently reside in generally underdeveloped countryside. This new policy will create enormous demand for various basic materials, including steel. Puda Coal is well positioned to take advantage of the Coking Coal - Steel supply chain and contribute to the long-term development of China's countryside."

According to the China Coal Industry Association, prices for coking coal were set to almost double next year, to $100 a tonne. As the coal industry faces changes in China with supply and demand issues, environmental issues and concerns are also forcing several mines to close. Coke is burned with little or no smoke under combustion conditions, unlike bituminous coal, which produces large amounts of smoke

Healthcare Industry- Rising Incomes- New Demands

China's growth has resulted in high levels of pollution in both air and water in industrialized areas. It is said that in some areas the pollution costs would negate all economic growth if factored in. Pollution, desertification, clean water shortages and the potential of a pandemic make healthcare a sector directly impacted by growth.

China's healthcare and medical technology market represents one of China's fastest growing markets. With a growing population with rising incomes creating a whole new set of demands and needs, the consumer driven healthcare market is on the rise.

As Michael Chermak, Chairman and CEO of Bridgetech Holdings International, Inc. (OTC.PK: BGTH), a provider of Western healthcare in China describes, "the improving standard of living in China, an aging population and growing middle class who are more health conscious, has increased the demand for quality healthcare. In addition, the inadequacies of the current system have caused deaths and social dissatisfaction which in turn has prompted the Central Government into action." The Government's plan to improve the healthcare system Chermak explains "will create a shift in the nation's focus from disease treatment to prevention and will encourage Medical NGOs to lead the improvement in the standardization of medicine/treatment delivery, overall quality of Chinese medical practitioners and providing reliable healthcare information to the general public."

Bridgetech is working to capitalize on China's demand for Western Healthcare by establishing itself as the leader in the transfer of Western technology to China. "The improvements in the Government's plan will open up opportunities for Bridgetech as it will support the Company's efforts to bring into China drugs and diagnostics for prevention and treatment, it will encourage international exchange between medical professionals and build Contract Research Organizations to promote good clinical practices and provide training," states Mr. Chermack.

Conclusion

China's rapid growth, like any previous civilization's rise has a cost attached .The cost is realized on a global basis with the increase in prices of commodities. It also brings the new global economy moving forward into the 21st century to our attention and offers opportunity for the astute members of business and investment community. China is confronted with potential oil shortages, water shortages, commodity price increases, pollution and resulting health cares concern as result of its industrialization process. Any one of these issues, left unattended could negate the growth. Suppliers and companies that offer solutions in each of the effected sectors can capitalize on the opportunity as the current President finds ways to balance and manage growth. Companies positioned with a marketing strategy that compliment China's growth and demands but are also leveraging other global markets in parallel merit attention from investors. Investing in China is a speculative venture, with highs and lows, as global supply and demand issues fluctuate, but it represents an opportunity like no other we have seen, with an economy that has grown at an average of 9 % cent per year for the last 25 years.

About the Author

InvestorIdeas 2006

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