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Category: China Investors Fieldtrip 2008
Is China's Economy Doomed?

Is China’s Economy Doomed?

Boom or Bust
Making Sense of Many Predictions about China

  Is China's Economy Doomed
 

“Once known as  an economic miracle, China now heads for an economic catastrophe.” This recent internet posting contained terrifying words to be sure. But this isolated publication was just one of countless predictions calling for everything from boom to bust for China over the past few days. Whom should we believe?

There’s no doubt that China faces big challenges as western economies slip into recession. Orders for China’s exports are still increasing by double digits, but the rate of increase is definitely falling.

One key index, the Purchasing Manger’s Index (PMI), slumped by 68 percent from its record high last October. Export orders shrank by the largest degree since the surveys began, as the worldwide financial crisis weakened demand for China’s toys, textiles and computer products. So why does China’s economy continue to grow?

As we detail in this month’s issue of the China Stock Digest, Beijing has opened the floodgates of government spending. As much as one trillion dollars worth of stimulus is being injected into key sectors of the Chinese economy.

Just today Beijing upped the ante by committing another $145 billion to help poor families buy Chinese-made appliances. This new campaign is designed to absorb the excess production capacity caused by the export slump and to benefit industries like steel, plastics, and electronics.

This will be the key to keeping the Chinese economy in expansion mode, boosting the internal economy.

The worst case scenario? Probably the lowest authoritative prediction for the growth of China’s economy
comes from the World Bank. Just a few days ago the bank cut its forecast for China’s expansion from 9.2% to 7.5%. If only the U.S. could manage to grow half as fast.

As deeply as the World Bank cut its forecast, it said the country has "adequate tools" to keep the economy
moving at a healthy pace. Sure enough, one of those measures came out of the toolbox this week as the value of the Chinese yuan tumbled by record percentages against the dollar. This won’t be popular in Washington, but it will make Chinese exports more attractive to western buyers.

Not surprisingly, the brightest projections about the future of China’s economy come from 

Beijing. A key member of  China’s State Council declared to the state-controlled media that the economy would
  grow at a blazing-fast 10% rate next year. How is that possible?

The “huge” potential of domestic consumption and investment can counter the impact of a global slowdown.
While President Hu Jintao admitted that the central government faces enormous challenges coping with the global financial crisis, the shift to internal economic expansion is the key.

Exploiting the “vast development potential” of the world’s most- populous nation is crucial, so says the powerful State Council. Beijing is now working on further steps to help struggling companies in the steel, automotive, petrochemical and textile industries. It may also expand insurance for the jobless, a critical measure to avoid civil disturbances.

How times change! Just a few months ago China was clamping down on credit and reining in price increases to prevent the economy from overheating. With amazing speed, the government has changed from jamming on the brakes to hitting the gas with both feet.

The state pension fund has pledged to invest more in China’s depressed domestic stock markets. Insurance
  companies have also been instructed to boost their stock investments. Whether or not we believe that any government should tamper with the markets, the fact remains that

Beijing is committed to do whatever it takes to keep the nation’s economic engine humming.

What does all this mean for investment in China? Although shares in Shanghai tend to rebound with every new stimulus announcement, we invest mainly in ADRs in the U.S. For the time being ADRs continue to follow Wall Street trends.

As we know, U.S. stock markets are continuing to gyrate wildly, and China-based ADRs are fluctuating in tandem. We don’t foresee stabilization among U.S. markets in the near future. That’s why we’re maintaining an extremely conservative policy towards China investments.

For the short term, new reports of weakness in the Chinese economy may further depress shares. But the
Beijing’s stimulus plans may have widespread effects during the first half of 2009. That’s when we may see the U.S. and China moving even more decisively in opposite directions.

As long as Chinese shares are being discounted, future buying opportunities are being created.

Doomsayers who predict catastrophe for China are always coming out with new predictions. The evidence says they are wrong again. Challenging months are ahead but challenge can create new opportunities.

Keep your eyes on your email inbox as we look for new opportunities. Our investment recommendations for this period will depend on quick buys and equally fast sales.

December's issue of China Stock Digest put 8 stocks on the watch list. Subscribe now to gain access to these 8 stocks that have already earned an average of a 28% return in the third quarter of 2008. Subscribe now to gain access to these 8 stocks that have already earned an average of a 28% return in the third quarter of 2008: http://www.chinastockdigest.com/Page.php?Category=risk-free-subscription

Committed to your PROFITS from China,

Jim Trippon 
Editor In Chief 
China Stock Digest
  

P.S.
Did you know that May's earthquake in China was first reported on Twitter -2 hours before it was on any syndicated news station. Do you want that same early warning system for the most recent development in the China Stock Market? Follow China Stock Digest on Twitter: http://twitter.com/csdtrippon

 

 
China Trade Mission - The Great Wall Of China
China Trade Mission - The Great Wall Of China

The Great Wall Of China

One of the most famous stops was saved for our last full day in China, The Great Wall. Our group left early to head up into the mountains to Badaling to tour the Great Wall. The Great Wall was built, rebuilt, and maintained between the 6th century BC and the 16th century to protect the northern borders of the Chinese Empire. The Great Wall stretches over 6,400 km (4,000 miles) from Shanhaiguan in the east to Lop Nur in the west, along an arc that roughly delineates the southern edge of Inner Mongolia, but stretches to over 6,700 km (4,160 miles) in total .It has been estimated that somewhere in the range of 2 to 3 million Chinese died as part of the centuries-long project of building the wall.

Although it is a myth that the Great Wall can be seen from space, it is a site that is spectacular none the less. Over 1 million people a year visit this ancient monument of the growth of China and its heritage

The Great Wall Of China

The Forbidden City was the Chinese imperial palace from the mid-Ming Dynasty to the end of the Qing Dynasty. For almost five centuries, it served as the home of the Emperor and his household, as well as the ceremonial and political centre of Chinese government. Built from 1406 to 1420, the complex consists of 980 surviving buildings with 8,707 bays of rooms and covers 720,000 square metres. Construction lasted 15 years, and required more than a million workers.

The Beijing Central Business District

Forbidden City - Imperial palace

This afternoon, we met with key Beijing business leaders. Amoung the group of leaders were executives from China Life Insurance which gave us an update on the relief efforts following the earthquake in Sichuan that killed over 69,000 people. The Beijing Central Business District (CBD) is the primary area of finance, media, and business services in Beijing, China. Beijing CBD occupies 3.99 sq km of the Chaoyang district on the east side of the city.

Wushu Kung Fu Show

Tiananmen Square

The term wushu consists of two Chinese terms. Wu, meaning, military, and shù, which translates into discipline. The 2008 China Investors Field Trip watch a Wushu Kung Fu show where this ancient art is demonstrated. Wushu is one of the most artistic of all the martial arts. The show combines both open hand techniques and a variety of traditional Chinese kung fu weapons. Wushu is both an exhibition and a full-contact sport derived from traditional Chinese martial arts.

China Stock Digest - Follow Jim Trippon - China Stock Market Expert

Don't forget, you can follow me on Twitter for up to the minute update of the
China Stock Market and the 2008 China Investors Field Trip.

Coming to you live from Beijing on the 2008 China Investors Field Trip.

Committed To Your Profits In China,

Jim Trippon, CPA
Editor-In-Chief
China Stock Digest

P.S. Don't forget about the special offer going on while I am in China. Order between now and October 24th, and receive $100 off the regular subscription price.


1 Year - $297 - includes $100 Off

2 Year - $497 - includes $100 Off
 
China Trade Mission - Beijing - Imperial Palace - Tiananmen Square
China Trade Mission - Beijing and the Forbidden City, Imperial Palace

Beijing - One of the World's Great Cities

Today our tour visited Tiananmen Square and The Forbidden City's Imperial Palace. We had a special tour of the living quarters and some of the inner areas of the Imperial Palace. After lunch we will be meeting with silk, jewelry and the museum business leaders to discuss the role of the open market system in the Chinese economy.

Beijing Forbidden City - Imperial Palace

The Forbidden City was the Chinese imperial palace from the mid-Ming Dynasty to the end of the Qing Dynasty. For almost five centuries, it served as the home of the Emperor and his household, as well as the ceremonial and political centre of Chinese government. Built from 1406 to 1420, the complex consists of 980 surviving buildings with 8,707 bays of rooms and covers 720,000 square metres. Construction lasted 15 years, and required more than a million workers.

The Imperial Palace

Forbidden City - Imperial palace

The design of the Forbidden City, from its overall layout to the smallest detail, was meticulously planned to reflect philosophical and religious principles, and above all to symbolise the majesty of Imperial power. Some noted examples of symbolic designs include:

  • Yellow is the colour of the Emperor. Thus almost all roofs in the Forbidden City bear yellow glazed tiles
  • The main halls of the Outer and Inner courts are all arranged in groups of three — the shape of the Qian triagram, representing Heaven. The residences of the Inner Court on the other hand are arranged in groups of six — the shape of the Kun triagram, representing the Earth
  • The sloping ridges of building roofs are decorated with a line of statuettes lead by a man riding a phoenix and followed by an imperial dragon. The number of statuettes represents the status of the building — a minor building might have 3 or 5.
  • The layout of buildings follows ancient customs laid down in the Classic of Rites. Thus, ancestral temples are in front of the palace. Storage areas are placed in the front part of the palace complex, and residences in the back

Tiananmen Square

Tiananmen Square

Tiananmen Square has great cultural significance as a symbol because it was the site of several key events in Chinese history. The Tiananmen Gate was first built in the 1420s in the Ming Dynasty.

Tiananmen Square has been the site of a number of political events and student protests. These include the proclamation of the People's Republic of China by Mao Zedong on October 1, 1949; annual mass military displays, and of course the Tiananmen Square protests of 1989.

China Stock Digest - Follow Jim Trippon - China Stock Market Expert

Don't forget, you can follow me on Twitter for up to the minute update of the
China Stock Market and the 2008 China Investors Field Trip.

Coming to you live from Beijing on the 2008 China Investors Field Trip.

Committed To Your Profits In China,

Jim Trippon, CPA
Editor-In-Chief
China Stock Digest

P.S. Don't forget about the special offer going on while I am in China. Order between now and October 24th, and receive $100 off the regular subscription price.


1 Year - $297 - includes $100 Off

2 Year - $497 - includes $100 Off