Invest in China

I spent the month of September in China and I came back with the opinion:

"Invest in China."

China is where the United States was in 1840.  They are moving from an agrarian society to an industrial society.  The big difference is that it took the U.S. one hundred sixty-seven years to get where we are today, China will get to the same point in less then twenty-five years. In fact it is estimated that by 2050 China's economy will be twice the size to the U. S economy. 

Yesterday the World Bank's (WB) forecast for China's 2007 growth remained unchanged at 11.3 percent. China's GDP grew by 11.5 percent in the first three quarters of 2007 from the same period last year, decreasing from 11.9 percent in the second quarter but higher than 11.1 percent in the first quarter.

These figures compare to a U.S. GDP growth rate of 3.2% for 2007 YTD.

China's total retail sales grew 15.9 % year on year in the first three quarters of this year, 2.4 percentage points higher than in the same period of 2006, according to the National Bureau of Statistics(NBS).  This would suggest that much of the growth of China's economy is going to satisfied the growing needs of it's population rather then stiffing the needs of it's trading partners. 

It became apparent during my visit to China that the majority of the 1.5 billion people in China do not have refrigerators, can openers, cars or any of the day to day items we take for granite.  China's growth is not dependent on our consumption of toys, tires and toothpaste.  The slow down of our economy will have an effect on China's growth but not to the extent that many would like us to believe.

I invest in China through an Exchange Traded Fund (ETF).  The trading symbol is FXI.  From November 1, 2006 to November 1, 2007 the price of FXI has increased from $87 to $212 or 150%. In the last fifteen days the price has dropped to $174 or 18%, a trading correction that had been anticipated. 

I see this as a long term investment of five to ten years, and the markets have presented a good buying opportunity with the current correction.

Let me know what you think.