There is no question that we are currently in the most severe financial crisis since the Great Depression and the greatest economic catastrophe of our generation.
As "too-big-to-fail" financial institutions collapsed and the global banking system experienced immense scrutiny, investors’ confidence plummeted and the global economy was pulled into an economic slowdown.
As a result, global stock markets sold off hard this year with everything from real estate to corporate bonds to international stocks losing value. With the exception of low-yielding Treasury securities, no stock market or asset class was spared from the collapse.
To ease the pain and combat the financial crisis, governments here and across the pond made historic efforts: Interest rate cuts, bailout plans of colossal proportions — you name it, it’s been put into action.
But still, these efforts didn’t squash the next round of bad news about the domestic and global economy — job losses, companies filing for bankruptcy, retail sales plunging, and stock markets continuing to spiral out of control.
It seems like with every step forward, there are two steps back.
So it’s no wonder that all of these events combined have investors on the edge of their seats, waiting to see what’s in store for 2009.
There’s no denying that this is going to be a tough investment and economic environment for investors and consumers around the globe next year. In this type of environment, it’s hard to believe that there will be profitable investment opportunities in the New Year. But the reality is…
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…there are always opportunities to make money — you just need to know where to look and what to avoid.
And right now, the best opportunities lie in China.
My 2009 Outlook for China
Of course, China isn’t completely insulated from the global economic slowdown.
China’s economic growth has slowed from a steamy 11.4% in 2007 to around 9% in 2008. And it’s likely that as the current financial and economic crisis continue to unfolds, China’s GDP growth rate will slow in 2009.
But the slowdown in China’s economy will be nothing compared to the stagnant or negative growth that most countries will experience next year. China will instead likely post 7% to 8% growth, which is below the consensus forecast of 8% and represents a 40% drop from 2007’s 11.4% growth rate.
So, how is it that China will still continue to grow at a robust rate in 2009 while the rest of the world drastically slows down? (See also: "Why China, Why Now? 3 Top Stocks.")
Well, China’s government has made reviving economic growth within its borders its number-one priority going into the New Year.
In order to stimulate economic growth, Chinese policymakers are focusing on three things: exports, domestic investments and domestic consumption.
Domestic investments and consumption, in particular, will play a key role in China’s economic growth in 2009, as China’s $586 billion stimulus package is implemented in the upcoming months.
This package is set to spur growth within the country by providing…
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…more funding for infrastructure spending, education and healthcare in the country. This stimulus package is just one path that China is taking to rejuvenate economic growth in the country. I’m expecting Chinese policymakers to stay focused on keeping China’s economy strong with similar stimulus measures in the near future.
In addition to aggressive action by the Chinese government, China’s huge foreign account surplus and reserves — nearly $2 trillion — will allow the country to spend its way out of a severe economic slowdown and avoid a recession. Other nations around the globe won’t be as lucky.
In previous financial crises, like the Asian Financial Crisis in 1997-98, China’s economy was a regional force of economic stability, posting 7% to 9% economic growth. At that time, the country’s ability to maintain the value of its currency and economic growth helped its Asian neighbors recover from the crisis more quickly. But this time around, due to the breadth and severity of the current economic crisis, it will be difficult for China to single-handedly bail out the rest of the world.
The country’s combination of domestic spending and government-driven domestic investments should allow the Chinese economy to hold its own against a global recession, and in turn, create profitable investment opportunities. But it will be unable to provide much help beyond its borders. That’s why I continue to think that China is the best place to be investing our money during these tough economic times.
Because of this, China has brighter days ahead in 2009. To be sure, there will be more bad economic news (such as more unemployment and a decrease in retail sales) in the U.S. in the coming weeks. But China’s economy is ready to weather the storm and even outperform other countries.
In fact, we are already seeing evidence of this in the stock markets — Chinese stocks have out-performed American stocks in recent weeks. Since the global market bloodbath on October 27, the Dow Jones has gained only 9%, while Hong Kong’s Hang Seng Index has jumped a whopping 37%!
I’m expecting this type of decoupling to continue through 2009. And that’s why it’s so important to have a China Strategy right now, so that you can profit from China’s resistant and growing economy in 2009.
America’s bungled bailout means new profits opportunities China right now, and you couldn’t ask for a better time to get started. Join China Strategy risk-free today to learn the best ways to profit from China in the New Year!
