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China’s Exports Recovery - We Don't Buy It

China should send every US citizens a stimulus check! With the money we can buy more Made-In-China products...

The Chinese Consumer in Time of Financial Crisis

China is facing unique challenges in its own way. There are millions of migrant workers are going back to their villages because factories have closed its doors. There will be more factory closing in February. When the workers go back home for the Chinese New Year they will find out their factories will be shut down permanently.

Unfortunately those workers return to their villages to find out that they unlike their parents are never trained in being farmers. The Chinese government is well aware of this problems and is not keeping tabs on the number of returned migrant workers.

Many countries such as US and other western countries are hoping that China and India can pick up the economic slack. Unfortunately the purchasing power of those people is quite small and will not have much effect on the worldwide economy.

In other words the outlook for China's economy is gloomy indeed, although not as dark as the US economy.

Shanghai Should Continue to Sell Off

To those who can access Chinese newspaper the decline in Shanghai stock market is not surprising. You just have to understand a little bit about how the market comes about.

Maany years ago all companies are government owned (state owned enterprises, SOE). After all it is a communist country. A company will have shares, owned by different government agencies. The shares were not tradeable.

In 1979 the government started to reform the economy to a more market approach economy. Some companies were allowed to convert some of their shares to be freely tradeable, while a bulk of them were
still not freely tradeable.

Four years ago the government instituted a number of measures to make all the shares tradeable. They set a time table to make all shares tradeable in three years. This is similar to the lock up periods of the IPOs. Unfortunately the amount of restricted shares is more than the entire market capitalization of both the Shanghai and Shenzhen market.
At this rate it will be 2010 before all the restricted shares become fully tradeable.

Shanghai Should Continue to Sell Off

With a US$1.8 trillion foreign reserves the country can afford to pay for their mistakes along the way.

Want to See a Bursting Bubble?

Thanks for the beautiful insights! Does the editorial board at Seeking Alpha screen articles for quality?

When and Where to Go in China

Price is determined by demand and supply.

For 2008 and 2009 the government has allowed the restricted shares to be released into the public. Depends upon when and where you read the figures quoted are like 30% of all shares outstanding are freely tradeable in the market which means 70% are still restricted. Or you figure there will be about two more times supply of stocks coming onto the market this year and next year.
Granted a substantial portion is held by government agencies and will probably not be sold.

Until the market has absorb this supply it will be difficult for the market to get any traction. I am looking at 1800 as a good entry point. Instead of getting into ETF I will stay with the major names such as China Mobile, China Life, Guangshen Railway, Huaneng Power, PetroChina, and Yangzhou Coal.

China's Worst Bear Market

I agree with James V, too many posters make half correct comments which I think is a disservice to the community. Some posters are still confused that there are indeed two Chinese stock markets for the mainland stocks - the mainland A shares and the Hong Kong H shares. The A shares and H shares are identical cousins but are traded at different market values.

When you buy FXI or Proshare Ultra you are buying or shorting the H shares. Again the same company stock can go in different direction on the same day. If you do not know what you are buying you are going to hurt yourself.

The other correction is that although many big enterprises are government owned (State Owned Enterprises) there are many more private enterprises which have come into the market. Those shares are not in the hands of corrupt government officials.

In summary China stock market is an emerging market. Just like Hong Kong in the 1970's we used to laugh at how immature and how volatile the market was. But who has the last laugh now...

For those who does not know Hong Kong market I bailed out the market in 1973 when the Hang Seng Index dropped to 153. Now it is over 25,000. China will be similar in a lot way. The market is full of great potential but there is a lot of volatility and hiccups along the way.

The recent pullback provides a great opportunity for people to get back in. I was in when Shanghai Index was 1800 and got out when it fell to 4800 after reaching 6100. Now I am very tempting to get back in... I am not sure if the bottom is 3000 or 1800.

If your goal is to make money where else do you have this opportunity to triple your money in two years?

What's Next: A Chinese Housing Crisis?

I like to clarify certain false statements made in your article. China is a big country with inconsistent policies. What works in Beijing does not necessarily work in Shanghai or Shenzhen.

There is NO NATIONAL restriction in purchasing real properties by foreigners in China. I am a US citizen, living in Guangzhou. I have been able to purchase MULTIPLE apartments and commercial properties without ANY restriction.

There are restrictions if one wants to apply for multiple mortgages from banks. Foreigners are being asked to put an additonal 10% down payment but all other restrictions are identical to the local residents.

There is also a 10% upcharge on interest rate if one is buying a second apartment. The central government also encourages banks not to make loans for the third and addtional units. But this higher interest rate applies to local residents as well.

I just completed the purchase of another apartment in Guangzhou 45 days ago....From some one who is still there.

Going Long China: Seeing Is Believing

Very interesting observation! At least from some one who has spent time outside the U.S., unlike writers who write about investments in China but they have never been here!

I am a firm believer in China because I saw how the economy in Hong Kong expanded when I was much younger. China is following the footprints of HK but in a shorter time frame. I saw how my mother bought a property for US$17K and in ten years she was collecting US$5K/month! I can point out different areas in Shenzhen or Guangzhou in which rentals go up 7 times in 5 years.
Try to explain to an outsider!

Thank goodness for those people who have doubts. We can use more of them. The more doubts they have the more opportunities are left behind for us.