6. Fiscal Management: China is America's biggest creditor, holding more than $700 billion in U.S. Treasury debt. This is a reflection of the country's growing financial might. As the Treasury and the Fed started to increase our money supply, which will likely devalue the U.S. dollar, China is wisely starting to diversify away from dollar denominated instruments. Individual investors like us should do the same as well, focusing on Chinese stocks valued in yuan -- rather than dollars.
7. Wages: Though the average wage in China is substantially lower than the U.S. -- $4,000 compared to $45,000 -- Chinese wages are on the rise. In fact, it's expected that China's wages could increase 6.7% next year. And the lower wages are actually still a strong positive for the country because it is still able to produce high-quality products at a fraction of the cost in developed countries.
8. Savings Rate: China has the highest savings rate in the world. Currently, the average savings rate in China is 35%, but it will likely drop below 30% in the next decade. A high savings rate means that there is pent-up consumer purchasing power in the huge savings pool. The savings rate will drop as China moves toward an economy increasingly driven by domestic consumption.
9. Relative Strength of China: The Chinese economy continues to move from strength to strength, now most recently growing 10% again in the third quarter from year-on-year levels. And the spillover effects of China's resurgent economic boom are spreading throughout Asia and countries with strong ties to China.
10. Racing to Overtake #1 Spot: China is expected to overtake the U.S. economy by 2050 -- as a very conservative estimate. However, after my latest trip to China where I observed all these trends first-hand, I feel very strongly that possibly within the next 20 years, we will see China overtake the United States as the predominant, number-one economic power in the world.
After analyzing the data above, it is clear that China seeks to maximize economic growth with a government that focuses on wealth creation, friendly taxation policies, low wages, high savings and strong fiscal management. All of these factors make China one of the most competitive players in the global capitalistic economy and -- in my opinion -- our best bet for investment opportunities.
We're taking advantage of all these trends with our China Strategy portfolio -- up 40% year-to-date! Don't wait -- join my readers at China Strategy today!
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