Is It Time to Invest in China?

Now might be a good time to grab a short-term seat on some Chinese-based ETFs. Investors might consider looking into PowerShares Golden Dragon Halter USX China (PGJ), iShares FTSE/Xinhua China 25 Index (FXI) and SPDR S&P China (GXC).The reason being that with inflation heating up there, it is expected that the Chinese will soon begin moving their money out of banks and into stocks and real estate. The effects of this changeover could be beneficial in several respects.

First, the Chinese real estate venue should benefit from new capital flowing in via equity purchasing. This could effectively support the rapid growth that was threatening to end in a bubble. Second, fresh capital into Chinese stocks could be coming close on the heels of markedly increased manufacturing output, thus providing tangible validation of the ramp up.

The survival of everything economically good that is happening in China right now hinges on several key concepts, the most important of which is an available market for its goods. While American consumers seem to be loosening up their spending attitudes, disposable cash remains tight and purchase by credit is yet undesirable. The European economic climate remains tenuous at best, and the Asian block is having problems of its own.

As long as China can steadily accomplish a complete manufacturing loop, with continued rise in raw material purchases, efficient manufacturing of quality goods, a steady stream of available energy assets, and a willing pool of cash wielding consumers, things look pretty good for Chinese investment. However, I cannot stress this one final truism strongly enough:

This situation could change, without prior notice, in the blink of an eye.