Best Ideas 2013: Goldman's Jim O'Neill On China's Transition To Domestic Consumption

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Jim O'Neill, Goldman Sachs Asset Management

http://www.forbes.com/sites/afontevecchia/2012/11/26/best-ideas-2013-goldmans-jim-oneill-on-chinas-transition-to-domestic-consumption/?partner=yahootix

Jim O’Neill – Chairman, Goldman Sachs Assets Management
BUY: China consumer play.  The man who coined the term BRIC to explain a structural shift in the global economy over the last decade thinks there has been a new twist.  The “old China” of 10% GDP growth and “derived income” from cheap exports “has had a hard landing,” O’Neill explained, and it’s time to turn the page.  The biggest theme for 2013 will be the transition from quantity to quality in China, pushing up incomes and the middle class.  “I’m bullish quality, earned, consumer China,” said O’Neill, citing “luxury light” brands like women’s apparel maker Karen Miller which is expanding in China and Qeelin, a jewelry and accessory brand that offers diamond panda necklaces and jade necklaces.
SELL: Australia.  One of the “biggest winners of Old China,” Australia will suffer the transition of its largest trading partner from commodity guzzler to domestic consumer of goods and services.  China accounted for a fourth of Australia’s $313.3 billion exports in 2011, when resource commodities made up about half of its two-way trade.  This has pushed Australia’s trade balance deep into a deficit that is set to continue growing.  While China’s slowdown will force all emerging economies to boost competitiveness in non-commodity sectors, Australia, given its geographic proximity, its reliance on primary resource exports, and the extent of its trade relationship, will bear the brunt of the pain.

Australia's Q3 current-account deficit widens

Dec. 3, 2012, 8:01 p.m. EST 

By Sarah Turner

SYDNEY (MarketWatch) -- Australia's current-account deficit widened to 14.9 billion Australian dollars ($15.5 billion) in the three months to Sept. 30, the Australian Bureau of Statistics reported Tuesday. In the three months to the end of June, the deficit stood at A$12.4 billion on an adjusted basis. Economists had been expecting a current-account deficit of A$14.5 billion in the quarter, according to estimates compiled by Dow Jones Newswires.