How to Invest in China
To put it simply, business in China is booming, and it comes at a good time for American investors looking for ways to diversify their portfolios, in the light of recent failures of U.S. interests. The world is constantly changing. Decade to decade things have changed in the world, and certainly they have changed for the countries of China and India. Once among the most economically struggling peoples of the world, both these countries in the 21st century have begun to rise as technological advances have leveled the playing field for them. Getting in on this trend is simply a matter of knowing how to invest in China.
Finding the right business and learning how to invest in China
China might very well become the world’s next economic giant and the time to get in on the ground floor is now. With a gross domestic product growing at about 10% annually, compared to 3% or so in the U.S., business in China is experiencing a growth spurt which is great for the investor. Just as with American companies, Chinese companies will be looking to sell stock so they can grow, renovate, and hire more staff.
As business thrives, so do the workers. In China, the middle class is now estimated at 150 to 200 million people and is expected to double in size in the next decade. This growth can result in a win for those who have found how to invest in China. The average mutual fund that invested in China over the last few years has gained 17.5%. This is better than the Standard & Poor 500’s 5.4%, for example. That doesn’t mean there is no risk in putting money on China’s growth. In the 1990s there was a push in China when they added manufacturing too fast, creating a bubble which burst in 1994 and 1995, sending their economy and investor’s portfolios into a tailspin. Some experts firmly believe that this time its different, and this growth is built on real change and not exploitation, but it is something for an investor to consider.
How to invest in China- no short term bets
Because of the fast growth and difficulty getting information about companies and learning how to invest in China, it is best not to look for short term results. Instead, look for two-year commitments, which will give the investor time to ride out any downdrafts. “Going all in” is not advisable at this time either. China should be used as a tool for diversifying a good sized portfolio and not the only investment made. This is not the basket to put all your eggs in yet. Using a mutual fund where the damage and benefits can be shared as a group is a better bet.
Companies to look at include Columbia Newport Greater China (NGCAX), Dreyfus Premier Greater China A (DPCAX), Eaton Vance Greater China Growth A (EVCGX) and iShares FTSE/Xinhua China 25.