10 Reasons Why China Is Your Best Investment Bet

10 Reasons Why China is Your Best Investment Bet

Robert Hsu, November 03, 2009

China has received a massive amount of attention this year due to their quick recovery from the global economic slowdown. And now the country's robust economic growth is even boosting many other countries out of their economic doldrums, particularly its Asian neighbors like Taiwan, South Korea and Singapore.

Because of China's economic strength this year, the Shanghai A-Share Index in China is up a whopping 71% year-to-date. Compare that to the 15% gain in the S&P 500 and the 11% gain in the Dow Jones Industrial Average, and it's not hard to see why China is offering a better investment opportunity right now.

In fact, as growth remains sluggish in developed countries around the world, Chinese stocks will offer better returns on investors' capital. So to really make money in the current investment landscape, you need to have a strategic and successful China investment strategy.

Here are 10 of my top reasons why…

1. Economic Growth: China has been the fastest growing economy in the world for the past 10 years. Due to quick action in implementing a massive $586 billion stimulus package that promoted domestic consumption and investment -- key drivers of economic growth -- China recovered first from the global financial crisis. After posting nearly 9% GDP growth in the third quarter, China is well on its way to posting 8% or more economic growth in 2009.

2. Favorable Seasonality: We are past the historically weak September-October seasonal period for stocks and entering into the strongest holiday months of the year. Right before hitting last year's market bottom, China stocks underwent a period of capitulation selling -- followed by a year-end rally. Last week I saw signs of capitulation selling in Chinese stocks, and I expect to see a similar year-end rally pattern play out this year, making now a prime time to load up.

3. Domestic Consumption: Unlike American consumers, the Chinese middle-class was largely unscathed by the current financial crisis and economic slowdown. As a result, the Chinese continue to spend this year, not only helping to drive Chinese economic growth, but also sales at many Chinese retail businesses. This trend has greatly boosted domestic Chinese companies selling to the Chinese consumer.

4. Wealth Creation: China is very friendly to investors and other owners of capital -- despite calling themselves "socialists." Leaders in Beijing understand that investors take risk when they put their money to work in the stock and real estate markets. So, it has very friendly taxation policies -- China doesn't have a capital gains tax or an estate tax or a property tax. Instead, the country rewards its owners of capital, allowing maximum wealth creation.

5. Government Leadership: The majority of China's policymakers are engineers, and engineers tend to make and build devices that create wealth, rather than redistribute it. Currently, all three of China's top government leaders -- President Hu Jintao, Premier Wen Jiabao and Congressional Chairman Wu Bangguo -- were engineers by training.

1 | 2 | Next