No Moss

Considerations on Investing in China

Here are some things to think about when investing in China. First, China has a big inflation problem right now. Inflation is a problem for the middle class and a nightmare for the poor. The government has to take action to reduce inflation to avoid serious instability. One of the things they're doing is tightening the reserve requirements for banks, i.e., raising the amount of deposits the banks have to hold to lend the same amount of money. This, in turn, depresses growth in the long run.

Another problem for China is that many private companies would love to go public, and that has the potential to dilute the market to the point where you don't get the huge runups that you saw prior to late last year.

China is still growing rapidly, and there is still demand for stocks, since the alternatives are real estate, which is falling in my area (Shenzhen) and bank deposits, which don't offer a negative return viz a viz inflation.

Lack of transparency in financial statements, endemic corruption and theft of company assets, and government involvement in both regulation and ownership of the companies are all factors to look out for.

On the other hand, the RMB is rising vs. the US dollar, which gives American investors a hedge, and there is an arbitrage opportunity to investing in shares listed on the Hong Kong index (Hang Seng Index, or HSI) and one of the China exchanges (Shanghai and Shenzhen).

It's all to complex for me. BTW, my guess is that Duder is Chinese. No pollution in Shenzhen? Check out the river, the bay, and the sky the next time you're outdoors, Duder. Nasty stuff. And Shenzhen is way better than most Chinese cities. I've been here five years.

6 Themes Affecting the Global Economy

Er, make that a consumer market of $1 trillion. Sorry about that.

6 Themes Affecting the Global Economy

Iwishing, I'm an American who lives in China, and you cannot be serious about air quality! The filthy air of any Chinese city, including Shenzhen, where I live, cannot be compared to any US city outside of Los Angeles, and Los Angeles would be a clean air city in China. The air in Beijing and 10 huge cities I could name is filthy. FILTHY!! There is nothing to compare with them in the developed West.

The internal market you speak of is an infrastructure buildout, not a consumer market, since the consumer market is about $1 billion, or perhaps 15% of the US consumer market.

Product safety is an issue in China, and so is product quality. It's an issue within China as much as it is outside of China. Food products, toys, baby forumla, toothpaste, medicines, pet food, pretty much every consumer product category that could pose a hazard has been been implicated at one point or another. The former head of the Chinese equivalent of the FDA was implicated recently for taking massive bribes. I believe he was executed.

Despite government efforts (and Beijing is trying, although the realities of government of such a large country require that they frequently wink at the activities of the local communist party), corruption, shortcuts, and indifference to product safety and efficacy are endemic.

You are right, though, when you say that China is exporting inflation. Besides the strong RMB, China has high inflation. Food, especially pork and chicken, which are staples in the Chinese diet; ; rents; imported goods because of their high tariffs and price gouging at the retail level; coal, oil, natural gas, iron ore, metals and minerals in general, coking coal; and even rice and other grains are up substantially. This represents a real problem for a country where 2/3 of the population are truly poor and susceptible to even small price rises in basic goods. The government has acted to increase incomes, and more of this is on the way.

China is amoral in its approach to geopolitics, meaning that it looks after its own interests without considering the needs or suffering of others, and I don't see that they're too much worse than others in that regard. It certainly has no basis for criticizing others, though, since it will deal with the devil to advance its own interests.

Visa IPO Aftermath: Europe’s in Trouble, China’s Buying in Bulk

UnionPay is used for the vast majority of domestic bank withdrawals and purchases. It's almost free, universal, secure, and dependable. It's virtually useless overseas--a big fee for a cash withdrawal in Hong Kong, for instance. It's also useless for foreigners, since it's only available in China.

Chinese need Visa or MasterCard (or AmEx) cards for use overseas. I believe most credit cards are Visa or MasterCard cards. The people who can get credit are also people who can afford to travel, I imagine.

The two companies will dominate Chinese spending overseas, and foreignrtd spending in China.