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China is the No. 1 country to invest in for the next decade. Maybe two or three decades.
But even though the opportunity is tremendous, the dangers are high, too. You can’t simply throw a dart and expect to make money in China. You need to be very careful what parts of the Chinese economy you invest in because some segments are doing just awful.
There is a right and wrong way to invest in China.
What’s the wrong way? A recent comment from Chinese Vice-Commerce Minister Fu Ziying made things crystal clear to me:
“The global economy is unlikely to recover in the short term,” Fu said.
Avoid Chinese Exporters
What does this mean for investors? The message is twofold: First, Chinese exporters are in for some very tough times; and second, those are the companies you should avoid investing in.
The Chinese government’s data supports Fu’s comments. Chinese exports in July dropped by 23 percent from the year-earlier period. Not only is that worse than June’s 21.4 percent decline, it is the ninth straight month of falling numbers.
At the same time, imports into China in July rose from June levels, to $94 billion. What that tells me is that domestic Chinese consumption is vibrant and growing.
The retail sales numbers out of China back that up. In July, retail sales reached $165 billion, a 15.2 percent year-on-year rise.
Focus On China’s Domestic Markets
Moreover, the buying was widespread. Auto sales jumped by 32 percent, building materials by 25.8 percent, clothing by 19.6 percent, and there was a 16.3 percent increase in sales of basic consumer products.
This wasn’t just a one-month blip, either. In the first seven months of this year, China’s retail sales surged 15 percent from the same period last year.
In short, the companies that are selling to Americans and Europeans are hurting, while companies that sell to Chinese are thriving.
I must disclose that my Asia Stock Alert subscribers own China Nepstar Chain Drugstore (NPD) and New Oriental Education & Tech Group (EDU), but they are definitely worth considering.
Regards,
Tony
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Uncommon Wisdom (UWD) is published by Weiss Research, Inc. and written by Sean Brodrick, Larry Edelson, and Tony Sagami. To avoid conflicts of interest, Weiss Research and its staff do not hold positions in companies recommended in UWD, nor do we accept any compensation for such recommendations. The comments, graphs, forecasts, and indices published in UWD are based upon data whose accuracy is deemed reliable but not guaranteed. Performance returns cited are derived from our best estimates but must be considered hypothetical in as much as we do not track the actual prices investors pay or receive. Regular contributors and staff include Kristen Adams, Andrea Baumwald, John Burke, Amy Carlino, Selene Ceballo, Amber Dakar, Dinesh Kalera, Red Morgan, Maryellen Murphy, Jennifer Newman-Amos, Adam Shafer, Julie Trudeau, Jill Umiker, Leslie Underwood and Michelle Zausnig.
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{ 2 comments… read them below or add one }
We talk of US FED Reserve selling Notes to China & Arab States but on the other hand how much $ is leaving the US to invest in these countries? how can you measure the interdepedence and US companies directly or indireclty doing business there?
Perfect TONY. Short, clear and very useful