KEY POINTS:
I have been reading of the economic boom in China for years, but nothing prepared me for what I saw during a visit there last week. I had heard people tell of the scale of building and business in China, the forest of construction cranes and the bustle of a confident nation on the
move - but only when you see it can you truly understand the sheer
magnitude of what is happening.
I came away more convinced than ever that China is a very good place
for long-term investment.
With much of the Western world in recession, China has some problems - the customers who take its exports are no longer buying them in the same
quantities. The Chinese Government has responded with an economic expansion package worth US$500 billion ($938 billion), but most commentators are expecting lower economic growth than the 10 or 11
per cent it has enjoyed in the past few years (perhaps 7.5-10 per cent
next year, depending on who you listen to).
Whatever might happen in the next year or two, China's long-term
resurgence seems to be secure. The Chinese people have the will and
the drive that you do not see in other countries - as a nation, they are
determined to be "Number 1".
Such is their unwavering single-mindedness, it is hard to see what can stop them.
But investing in China is not without risk. The sharemarket is quite new
to Chinese investors - the financial education conference I attended in
Beijing heard the results of a study which, in my view, will mean a lot of volatility for Chinese shares over the next few years.
This study found that there were around 100 million Chinese sharemarket investors. About 50 per cent had started investing in the past two years and, during that time, the main Chinese markets had fallen by around 70 per cent.
Moreover, many investors bring a gambling mentality to the market. In fact, a large number are traders rather than investors - the average time an investor holds an investment is just three months. And 70 per cent of those active on the Chinese sharemarkets are low- or middle-
income earners.
The overall picture is that the Chinese sharemarket is full of inexperienced traders who cannot afford to hold on through heavy losses.
In spite of this, Chinese growth and resurgence will eventually be reflected in the sharemarket and therefore it represents a major investment opportunity.
I recommend playing this by way of managed funds, which invest in
Hong Kong and Taiwan as well as China. Alternatively, you can enjoy the effects of Chinese growth by investing in the big Australian mining
companies and others who supply China with raw materials.
The China story is a mega-trend and will take decades to play out. It
seems to me a "must" forany long-term investor.
Each week best-selling financial author Martin Hawes will share his strategies to help you grow your wealth. You can email your burning personal finance questions to info@wealthcoaches.net or andrea.milner@heraldonsunday.co.nz On the web: www.wealthcoaches.net
