Did you know that there’s a military-style financial recovery operation under way in China? Probably not, but it’s true.
China has one choice right now: Save the U.S., or watch their economy collapse.
The U.S. economy has already gutted the profits of low-cost Chinese electronics, toy and furniture producers who employ millions of workers. And a further slowdown in the U.S. economy could result in billions in even greater capital losses that could affect the Chinese economy for years.
That’s why Chinese Premier Wen Jiaboa met with U.S. Secretary of State Condoleezza Rice recently. They sat down to outline the measures that China is taking to safeguard its own economic development and to outline their efforts to boost the U.S. economy.
This plan could create greater growth between the two countries and make investors richer if they’re investing in the right China plays.
Please note, I said the right China plays. There are plenty of wolves in sheep’s clothing out there just waiting to snag your hard-earned money.
China Investments to Avoid
China’s unprecedented economic growth and a struggling U.S. economy has caused investors to flock to its investments, trusting naïve fund managers or advisors who don’t understand the true dynamics of investing in China. In turn, many of these investors lost a lot of money.
But don’t let this keep you from investing in China. If you know what to avoid, you can make a fortune in China stocks (see also, “Investing in China: Separating Fact From Fiction“). Let me briefly explain what you need to be avoiding.
In general, what you want to avoid falls into two categories: 1) Chinese stocks that are dangerously vulnerable to market or government pressures; and 2) American stocks wrongly hyped as “China plays.”
First, most state-owned enterprises (SOEs) are bad investments. They’re corporations owned by the Chinese government and publicly traded. But the private sector has replaced SOEs as the primary economic growth engine in China, and these SOEs don’t stand a chance of competing against these more effectively run businesses. I’m expecting at least half of China’s SOEs to be obsolete in the next decade if they don’t make necessary changes to compete in the current marketplace.
Secondly, you should avoid stocks listed in Mainland China. Hong Kong’s Hang Seng index offers a more favorable investment environment–year to date, the Shanghai stock exchange has lost 47%, while the Hang Seng index has only dropped 18%. Plus, the Mainland Chinese indexes are packed full of SOEs.
Also, the Mainland Chinese stock markets include poor-quality companies, while China’s top publicly-traded companies are listed in Hong Kong and New York. The companies listed in Shanghai and Shenzhen are unable to meet the more rigorous accounting and corporate governance standards that are required in Hong Kong and New York.
And thirdly…> don’t follow the crowd and invest in American companies that aren’t China plays. Not every company with a presence in China is truly benefiting from the economic growth there. Here are a few examples of companies wrongly hyped as China plays: Wal-Mart (WMT), Starbucks (SBUX), ExxonMobil (XOM) and McDonald’s (MCD). (See also, “Firsthand Stock Research From China.”)
Where Are the Opportunities?
Now that you know what you should be avoiding, let’s take a look at where the true opportunities are. Because, make no mistake about it, there will be a ton of money to be made as China helps save U.S. investors and enriches itself at the same time.
The current situation is comparable to the post-war reconstruction in Europe after World War II. The plan then was commonly referred to as the Marshall Plan, and it involved the U.S. injecting more than $13 billion in economic assistance to Europe for four years.
At that time, you could have made a fortune investing in companies that rebuilt war-torn Europe. Well, today you have the same opportunity as China helps rebuild the U.S. economy — which has been devastated by the worst financial crisis in 50 years.
This may be surprising to some, but not to me or to my China Strategy subscribers. China is truly the leader in economic growth, amassing double-digit growth for years. And the country will continue to grow despite high oil prices, the declining U.S. dollar and U.S. housing market collapse.
China’s economy is growing like a weed, and its people finally have the means to lift themselves out of a dirt-poor country existence to one filled with cell phones, big screen TVs and cars. By 2020, China will have 221 cities with more than one million people living in them. This expanding consumer class is going to replace the American consumer as the supreme driver of world growth (see also, “Chinese Stocks Ready for an “Olympics Rally“).
When you consider that the U.S. economy is projected to grow at 2.2% this year, while China is on track to grow at 9% (or more!), you can see that the big money to be made is in China. And the strength of China’s economic growth is going to form the foundation for a U.S. stock market turnaround, as well as leading China stocks traded in Hong Kong and the U.S.
The Time to Act Is Now
In a world that’s been driven by the U.S. consumer for the past century, the shift to China-led global growth will put upward pressure on stocks fueling China’s growth. In order to maximize your profits in these companies, you need to act now!
In the past three weeks alone, three of my top China Strategy recommendations jumped higher…
• Up 13% in China’s Google
• Up 11% in China’s leading education services company
• Up 8% in China’s top medical devices manufacturer
And this is just the beginning. As China’s thirst for oil, hunger for food, demand for infrastructure and love for electronics (think cell phones and computers) grows stronger, we’re going to see the shares of select Chinese companies skyrocket.
We’re at just the start of the second wave of profits in China, don’t miss out! Find out what stocks are at the top of Robert Hsu’s China Strategy buy list right now and the best ways to make money in the second wave of profits! Join China Strategy, RISK-FREE today.
