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Concerns over a "hard-landing" in China has caused some investors to avoid investing in companies that could be impacted. Even though we haven't seen a major drop in China's economy, there has been a slowdown over the past few months. However, there are new signs that demand from China has stabilized and could even be picking up. Analysts at Citigroup are expecting a recovery in demand from China in the next couple of years and a Barron's.com article sums up the positives by stating:

Jon H. Bergtheil and colleagues predict that gold's allure will wane and precious metals' industrial brethren will do better in 2013 and 2014 if, as they expect, mature economies stabilize and China recovers. Chinese demand is key to this idea. It would drive prices higher at the same time as it drives economic expansion.

It seems that interest rate cuts and other stimulus measures taken by China are finally starting to create stronger growth and that means a strong multi-year rebound is possible in stocks that have exposure to China's economy. Vale S.A. (VALE) is based in Brazil and it is one of the world's largest producers of iron ore. This is a basic component in the process of making steel. China has become one of the largest consumers of steel thanks to its growing industrial production, as well as major construction and infrastructure projects. Policymakers in China approved about $156 billion in new infrastructure projects earlier this year. As those projects get underway, additional iron ore demand could take place in the coming quarters.

Of course, there is always the risk that the financial crisis in Europe will deepen, or that the U.S. economy will go off the Fiscal Cliff and take both the Chinese and global economy down with it. That would be tough on Vale and there are also political risks. Earlier this year China barred some Vale shipments from docking in an attempt to reduce imports of iron ore. That attempt at protectionism did not seem to have a long-lasting impact, but these issues can come up again in the future. Vale has managed these types of risks successfully in the past and there is a good chance it can do so in the future.

Vale looks well-positioned to benefit from a rebounding Chinese economy and the shares appear undervalued. The stock trades for about 9 times depressed earnings while the average stock in the S&P 500 Index (SPY) now trades for about 14 times earnings. Plus, it offers an above average dividend yield of 3.4%. The stock is starting to show strength recently and it now trades above its 50-day moving average of $17.84, and close to the 200-day moving average, which is $18.98.

This could be signaling the start of a major new uptrend and investors should consider buying this stock on weakness. Earlier this year, analysts at Barclays reiterated an overweight rating on Vale shares and set a $31 price target. That would give investors plenty of upside (about 60%) from current levels.

Key Data Points For Vale From Yahoo Finance:
Current Share Price: $18.88
52-Week Range: $15.77 to $26.87
Dividend: 62 cents per share which yields 3.4%
2012 Earnings Estimate: $2.10 per share
2013 Earnings Estimate: $2.36 per share
P/E Ratio: about 9 times earnings

Data is sourced from Yahoo Finance. No guarantees or representations are made. Please consult a financial advisor before making investments.

Source: Vale Shares Are Trending Higher Now And Analysts See 60% Upside