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The iShares China 25 Index Fund (NYSEARCA:FXI) is a diversified exchange-traded fund [ETF] that invests in 25 of the most liquid companies traded in China. That includes a broad basket of stocks in different industry groups, including financials, energy stocks and telecoms.

Some analysts have already dubbed the 21st century "China's Century," and for good reason. In fact, the nation's rapid economic modernization over the past decade has had major ramifications for the entire global economy.

Specifically, China has an almost unlimited labor force approaching 1 billion people. Foreign companies have been investing heavily in manufacturing capacity in the nation in recent years. And domestic firms, sometimes aided by foreign investment, have also expanded rapidly. The result is a rising, growing middle class of Chinese consumers. Most analysts estimate the Chinese middle class to be over 300 million -- about the size of the entire U.S. population.

Granted, what passes for middle class in China isn't the same as in the U.S. However, as Chinese incomes rise, more consumers are demanding items like cars, modern electronics and the latest fashions from the West. China represents a vast pool of potential consumers for businesses around the world.

Apart from the consumer story, China is seeing booming foreign trade. After joining the World Trade Organization [WTO], the Chinese government pulled down tariffs and made it easier for foreign companies to invest directly in China. This sparked a massive boom in trade. At first, most of China's exports headed to the U.S. However, more recently, Japan and other nearby Asian nations have become increasingly important markets for the nation. Growth in trade is yet another positive for this market.

Although the Chinese market is bound to see periodic setbacks, I believe China is on a growth curve similar to Japan's in the 1970s and 1980s. As such, we expect to see rapidly rising incomes and consumer buying power in the years ahead. This should translate into huge gains for shareholders in FXI.

Disclosure: The author holds no position in FXI.

FXI 1-yr. chart

FXI Investment

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Source: China iShares Taps Growing Chinese Economy