China's government implements billions of dollars stimulus in its domestic economy. There is no doubt that China is an export-oriented economy, which has been negatively affected by global recession, especially by belt-tightening US consumers. With the US consumers saving more money and spending less, China exports are down significantly. To maintain China's economic growth, the China government has put in billions and implement policies to stimulate domestic demand. Of course, some economists maintain that China's domestic economy cannot replaced US consumers. I will not argue that when talking about China economy as a whole. But no doubt that China local economy is doing fine relative to the rest of the world. The reduction in exports have greatly affected multinational companies, but the domestic stimulus have help small China companies.
For example, China Architectural Engineering Inc (NASDAQ:CAEI), a small construction company has received projects to help building the world's longest automated rail system in Zheijiang. The projects are amount to $500 million. The stock price went up 77% to $2.27 with more than 19 million shares traded yesterday, while the average volume is only about 900,000 shares. This little China company now received great attention from investors. Of course, I am not suggesting to buy into the stock now since the stock has a great run up.
My point is this: with the world economy is still in recession, the best way to invest in China is to buy small China companies that can benefit from local domestic demand and stimulus, rather than investing in big multinational companies, which will continue to suffer from the world slow economy.