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Category: China Energy
China Stock Market Leading World To Economic Recovery

Shanghai Trumps New York

During my high-speed tour of China it has been impossible to ignore the contrast between America's slump and China's ongoing boom. Everywhere from Hong Kong to Beijing, the signs of growth are simply impossible to miss. Construction cranes dot every skyline, and city stores and streets are jammed.

Obviously China is the right place for investors seeking capital appreciation in today's economy. Just take a closer look at the bustling city of Shanghai which hopes to challenge New York as the world financial capital. The numbers are stunning.

Retail sales in the city continue to boom, jumping 12.4 percent in May to 43.4 billion yuan or $6.34 billion! Fixed asset investment (FIA), which includes spending on bridges, tunnels and other infrastructure projects, has jumped by 7.8 percent from a year ago to 165.4 billion yuan. That's $24.2 billion of investment in this one bustling Chinese city alone!

Beijing's massive stimulus plan, announced just last November, is already showing major results here in Shanghai. The rate of increase in urban infrastructure spending shot up by 18.5% during the first five months of this year. Talk about "shovel ready!" Construction projects are everywhere, and the people of Shanghai are preoccupied with ongoing economic growth, hoping to become the world's primary financial capital.

Even the restaurant industry is booming here. Statistics confirm that spending in the "catering" industry has jumped by 13.6 percent from a year ago. That might seem like a minor indicator,  but statistics on what the Chinese call catering provide a glimpse of the sense of optimism in a city which enthusiastically embraces socializing and spending big money in restaurants.

Has all of this demand created an inflationary bubble? Not in Shanghai. The city's consumer price index is off 1.2% from last year. Food and appliance prices are the only categories that have risen this year due to increasing demand. Prices for transportation, communications and health care are all easing slightly.

The familiar bellwether of the U.S. economy, housing, is one of the biggest growth sectors in this sprawling metropolis. Chinese banks in Shanghai extended $1.15 billion in new individual housing loans in May, the biggest monthly jump in 4 years. The surge in housing loans indicates that home buyers are increasingly optimistic according to one of the city's biggest lenders, the Bank of Communications.

The Shanghai Uwin Real Estate Information Service predicts that the volume of new home sales will likely continue to grow through June because the second quarter of the year usually is the traditional peak season for property sales.

Of course, A shares on the Shanghai stock Exchange are also booming as we have reported in the China Stock Digest. The recovery on New York's stock exchanges this year has been dwarfed by Shanghai's exploding growth. Seeing the hustle and bustle of China with my own eyes, just strengthens my belief that China will lead the rest of the world out of the economic downturn.

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China Stock Digest

Billionaire Bets on China - Will You?

Billionaire George Soros may be politically controversial in America but his financial track record is still very impressive. He made a fortune by betting against an overvalued British pound and he was among the first to predict the U.S. financial crisis, caused by what he called a credit "super bubble."

Now Soros is making headlines within China. His predictions are right in line with our own forecasts at the China Stock Digest, and very encouraging for our model portfolio. Speaking at Shanghai's Fudan University, Soros predicted that China's economy will grow faster than people expect and so will its global economic influence.

China will be the first country to recover from the global financial crisis, Soros says and indeed it is on track for continued expansion. As we have reported, China's GDP grew by 6.1% during the first quarter while the U.S. shrank by the same amount. China's continuing growth and its powerful position as America's banker will transform the world's financial order.

Despite signs of recovery in U.S. stock markets, Soros told the Chinese that the world is still in a bear market, and China is the exception. He went even further, predicting that China could "replace the United States as the engine of global economic growth."

During the height of the financial crisis, the China Stock Digest made substantial profits with short term bets on several Chinese banks. As Soros noted, Chinese banking has benefited from being isolated from the rest of the world and is in better shape than the international banking system. China's extensive capital controls helped to shield its financial institutions from the worst of the global financial crisis.

China's banks have also become an important force in helping the Chinese economy recover from a sharp decline in exports to western nations. In addition to a massive government stimulus program, China's biggest banks have flooded the economy with new loans to boost internal consumption and development. As Soros put it, "when the government says 'lend', banks lend. This puts China in a better position to recover from the recession and that is in fact what has happened."

Few economists agree with Soros about China's potential ability to become the new engine of worldwide growth. But there's little doubt that China is moving faster than the United States to boost its own economy.

The success of China's stimulus plan is already showing up in a number of key indicators, as we noted in the current issue of the China Stock Digest. Although China may not save any western economies, it is clearly a beacon of hope to its trading partners in Asia.

We remain very cautious about the stock market rebound in the United States. The problems in the U.S. economy remain critical and we may be seeing a bear market rally on American exchanges.  In Shanghai, Chinese "A" shares are still trending strongly upward with a gain for the year of 52 percent, substantially better than U.S. stock performance. Although some observers are warning that certain companies on the Shanghai Exchange are overvalued, the soaring value of "A" shares is one more indicator of China's economic expansion at a time when the rest of the world is still reaching for a lifeline.

As George Soros put it, "China should play a constructive role in the reconstruction of the global economic system...China is a positive force when the world economic and political orders are in disarray."

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Dedicated To Your Financial Freedom,

Jim Trippon
China Stock Digest

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China Phone Stocks Ringing up Profits!
China Phone Stocks Ringing up Profits!

China Phone Stocks Ringing up Profits!

Industry giants China Mobile and China Unicom are currently among the market’s biggest Big Cap gainers. Both companies are soaring in anticipation of a new generation of 3G phones entering the world’s biggest wireless market.

For China Unicom (CHU), it’s all about the much-coveted 3g iPhone. Unicom executives have been in negotiations for months with Apple about exclusive use of the 3g iPhone on its network. An agreement had been expected on May17th, according to a number of sources, but the lines of communication went silent during the middle of the month.

The breaking news that is driving both stocks into positive territory is a report that China Mobile (CHL) will be receiving access to Google’s Android phone. Negotiations between China Mobile and Apple for the iPhone had broken down several months ago because Apple was holding out for substantial revenue-sharing, something that China’s largest phone company flatly refused to concede.

The latest reports about China Mobile’s access to the Google Android phone are also very good news for China Unicom. Regulators have been holding back news about China Unicom’s introduction of the iPhone until the company’s biggest competitor, China Mobile, concludes its deal for a comparable 3G phone on its network.

In other words, China Mobile gets the Android. That clears the way for China Unicom to get the iPhone. In the tightly regulated Chinese telecom world, both sides win and there are no losers. (except perhaps the smallest of them all, China Telecom.)

This win-win story means that both stocks have been outperforming the market in recent days. We are up more than 20 percent on China Mobile and almost 40 percent on China Unicom.

Reports indicate that China Mobile has struck an especially rich deal for apps, the applications (or small programs) that make 3G phones so versatile. Telecomasaia says the world’s biggest phone company will demand a 50 percent cut of revenues from its app store. The industry norm is 30 percent. (This is exactly the point of contention that had derailed talks between China Mobile and Apple.)

China Mobile’s app store, the so-called “Mobile Market” will be the world’s first carrier operated storefront.

The terms of the China Unicom deal are still unclear but it’s obvious that the market feels access to the iPhone will be a huge bonus for the nation’s second-largest carrier. China Mobile has 482 million subscribers and China Unicom has 126 million users, a vast and rich market for new 3G products in years to come!

Check out our most recent special on China Stock Digest:

Committed to your profits in China,

Jim Trippon
China Stock Digest