Population growth rates and demographic trends

Population Growth Rates Report

For the past few years, global investors have significantly increased the level of foreign direct investments. The largest emerging markets seem to be more attractive to global investors, being considered as more profitable and less risky compared to the previous years.

Population size is a decisive factor when it comes to determining a country's market size. The top ten countries according to population size (millions) are: China (1,304), India (1,104), United States (296), Indonesia (222), Brazil (184), Pakistan (162), Bangladesh (144), Russia (143), Nigeria (132) and Japan (128). For the same countries, the rate of national increase is: China 0.6%, India 1.7%, United States 0.6%, Indonesia 1.6%, Brazil 1.4%, Pakistan 2.4%, Bangladesh 1.9%, Russia -0.6%, Nigeria 2.4%, Japan 0.1%.

The most attractive two emerging markets are china and India, compared to the rest of the world. Of the six largest index jumps in relative attractiveness, five were achieved by Asian markets, while in Western Europe the U.K., France and Italy also rose in the rankings.

Foreign direct investment (FDI) includes investment in physical assets (plant and equipment) in a foreign country. The main types of FDI are acquisition of a subsidiary or production facility, participation in a joint venture, licensing, and establishment of a greenfield operation.

The top ten FDI Confidence Index values in 2004 have been reached by: China 2.03, United States 1.45, India 1.40, United Kingdom 1.25, Germany 1.17, France 1.03, Australia 1.00, Hong Kong 0.99, Italy 0.98 and Japan 0.97. Profitability targets are expected to be achieved in the big emerging markets mostly, such as: China, India, Brazil, Mexico an Poland.

The most prominent emerging markets by far is represented by China, due to its "positive investor outlook," "likely first-time investments" and investors see it as "most preferred offshore investment locations for business processing functions and IT services." Global investors consider China to be "the world's leading manufacturer and fastest growing consumer market." China is favored also for its market size, access to export markets, government incentives, favorable cost structure, infrastructure and macroeconomic climate. However, the attributes taken into consideration by the global investor when studying China's potential are: highly educated workforce (22%), management talent (27%), rule of law (27%), transparency (30%), cultural barriers (34%), regulatory environment (43%), availability of M&A targets (50%), consumer sophistication (54%), competitor presence (55%), tax regime (58%), political/social stability (59%), quality of life (59%), economic reform (60%), financial/economic stability (61%), infrastructure (64%), production/labor costs (65%), government incentives (66%), access to export markets (71%), market growth potential (78%) and market size (94%).

China has been accounting for one-third of global economic growth during the past three years due to its rapid modernization in the first place. However, no investment can be considered free of risks. The most critical risks to firm operations are the traditional risks (government regulation/legal decisions, country financial risks, currency/interest rate volatility, political and social disturbances), the emerging risks (theft of intellectual property, security threats to employees and assets), and other threats such as: corporate governance issues, absence of rule of law, disruption of key supplier/customer/partner, product quality and safety problems, IT disruption, employee fraud or sabotage, natural disasters and activist attacks on global or corporate brands.

China surges ahead in the index as profitability targets are being met. China takes the number one spot for the third consecutive year and increases its raw score lead over the United States." Total FDI inflows in 2003 hit $53.5 billion. Profit targets in China are expected to be achieved aster than in other emerging markets. Also, new investors are expected to make first-time investments in China, expressing a very positive outlook on China's economy. China's main strong points are the vast low-cost labor pool and the consumer market expansion. The most optimistic investors are the wholesalers and the retailers, followed closely by heavy and light manufacturers.

A very important opportunity on the Chinese market will be possible due to the WTO-mandated opening of the Chinese banking sector, financial service investors awaiting for liberalization.

Another profitable sector appears to be the smokestack and textile industries, China being expected to take a larger share of the global textile market.

All in all, China is considered the most attractive emerging market in the world, and is perceived by investors to be more profitable and less risky compared to its previous year situation.

Reference List

2005 World Population Data Sheet (2005). Population Reference Bureau. Retrieved November 22, 2006 at http://www.prb.org/pdf05/05WorldDataSheet_Eng.pdf