"We are poor."
That's exactly how numerous Chinese in the southern Henan Province start conversations according to today's New York Times article about China: "Lives of Grinding Poverty, Untouched by China's Boom."
While the article contents that China has, more so than any other country, moved people out of poverty, there are still 300 million poor in China.
We've seen a booming Chinese stock market. The iShares FTSE/Xinhua China 25 Index (NYSE: FXI), a popular index of the 25 largest Chinese companies available to foreign investors, was up over 60% in 2007. While we've seen a strong pullback, Beijing is hosting the 2008 Olympics and continued focus and interest on China as an international investment destination should continue as a rising middle class in China spends on consumer products, travel, and electronics.
Chinese officials have been trying to battle rising inflation in commodity prices. I've written recently about some of the government's tactics to rein in prices. It appears that while China is moving more of its poor into the middle class, more can be done to speed up this process.
The article quotes Li Guangyi, a farmer, as saying, "Ordinary people don't get any real benefits from poverty alleviation programs." As China goes through its own industrial revolution, officials should focus on trying to bring inclusive wealth to their nation.
Zack Miller is the Managing Editor of IsraelNewsletter.com and a former equity analyst for a leading multinational hedge fund. Author owns a long stock position in FXI.
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