Centuries ago, China built its “Great Wall,†the longest man-made object in the world. This wall of stone and earth stretches for about 4,000 miles from Beijing to the west, and once separated China from Mongolia.
I’ve been to the Great Wall twice. In fact, I’ve seen all but one of the eight wonders of the world (the Taj Mahal), and to me, the Great Wall is by far the most impressive.
China itself is the longest continuous civilization in the history of the world. Now, an upwelling of nationalism and pride among the country’s citizens – along with the rise of market-based capitalism – is giving China’s economy a momentum that no other country can match.
Today, I want to tell you about a new, massive Chinese effort, one that will help drive the country’s economic growth over the next few years. In some ways, this modern-day project is even bigger in scope than the Great Wall …
Beijing Will Spend $40 Billion
On the 2008 Olympics
The Chinese government is sparing no expense as it ramps up for its role as host of the 2008 Summer Olympics. In 2008, Beijing is expected to welcome more than a million Olympic attendees.
Here are just some of the initiatives the country is undertaking:
$59.5 billion will be spent on infrastructure projects in Beijing, including roughly 2,400 projects to ease traffic concerns, improve energy distribution, and increase water supplies.
228 miles of new roads will be built to increase the traffic volume of Beijing’s streets to handle three million people an hour.
$1.45 billion will be spent on subway upgrades and new underground transit lines.
$7.9 billion has been earmarked for upgrading Beijing’s airport, effectively doubling its size to handle 60 million passengers annually.
252 new hotels are planned, including 37 five-star properties and 83 four-star facilities.
Nearly $4 billion will go toward new and upgraded telecommunications infrastructure.
12 Olympic venues will be built, including the National Stadium, which will cover nearly four million square feet, with another 1.18 million square feet devoted to retail, entertainment, and dining establishments.
14 new water treatment plants will be built in Beijing to improve the quality of drinking water to World Health Organization standards.
There’s even more going on behind the scenes, too!
China will increase its use of natural gas by 500% to help cut down on pollution, and reduce exhaust gas emissions by 60%.
And by 2008, all garbage in Beijing will be treated through a new and improved sanitation system, with 30% of the material being recycled. All garbage generated at Olympic venues will be sorted and centrally treated with a recycling rate of 50%.
With all this in mind, here are …
Three Important Points
You Need to Understand
First, the 2008 Beijing Olympics represent the biggest publicly-sponsored works project ever.
Consider this: The Hoover Dam was the largest single public works project in the history of the U.S., with an estimated total cost of $2.22 billion in today’s dollars.
China will spend eighteen times that amount on the 2008 Beijing Olympics!
Second, whenever government money is spent, it spreads through the economy, multiplying itself as the banking system creates new credit. This might sound complicated, but it’s not. Here’s how it works on a real-world level:
Companies that get the government contracts borrow money from banks … new jobs are created … and, in turn, many employees see their standards of living rise. These employees go on to build homes and buy cars, and in the process they borrow more money themselves.
In the case of the 2008 Summer Olympics, an estimated 1.8 million jobs will be created. And by the time the government’s money works its way through the economy, the total economic impact might be up to eight times the original dollar amount spent.
That would mean the original $40 billion spent in and around Beijing, could ultimately boost China’s gross domestic product by as much as $320 billion.
By the way, that doesn’t include the billions that will be spent by companies from other parts of the world, nor does it include the billions that tourists will spend as they see China for the first time.
Third, the 2008 Olympics is not the only massive project in China. All along, the country has been pouring billions of dollars into developing coastal cities and rural areas.
And two years after the Olympics, Shanghai will host the 2010 World’s Fair. That will be yet another boon to the country’s economy.
Add it all up and you can see why I think …
China’s Economy Will
Continue to Roar Ahead
A lot of analysts and investors use complicated methods to come up with their forecasts. But in China’s case, all it takes is common sense.
In fact, no economic model or formula can quantify the human spirit when it’s unleashed. The only way you can possibly comprehend China’s emergence is by looking at the big picture:
- China is currently consuming half of the world’s cement.
- The country’s energy needs keep increasing, with oil imports rising 24% in September alone.
- Just 15 years ago, China was tenth in terms of aluminum consumption. Now it’s the biggest in the world, with consumption increasing at 20% a year.
- By next year, the country will consume more than one-third of the world’s steel.
Just think about the simple things that we take for granted here in the States. For example, imagine how much beef and chicken Chinese citizens will consume as their lifestyles improve. After all, per-capita GDP is expected to leap six-fold over the next five years!
I think the Olympics are so important that I’m issuing a special report on the subject in the November issue of my Real Wealth Report. In it, I’ll be including as many as six Olympic investment recommendations.
And remember, as big as the Olympics are for China, they’re just a drop in the bucket compared to how much money will be created, spent, and reinvested as the country catches up with the rest of the world.
Best wishes,
Larry
P.S. I think another wave of inflation is about to hit the U.S. economy, sending natural resources prices – and my Real Wealth Report recommendations – higher. If you’re on board, hold all positions!
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