Tuesday, August 4, 2009

Americans Have 'China Envy'

I can't take it any more! Over the past several months, all I see are articles about how China will fail and how China is in a bubble. Most of the articles are written by people who know nothing about China and little about financial markets in general.

Chinese markets, like most other stock markets, are high right now and I'm sure will have a decent correction. But that does not mean the China story is over. Not by a long shot.

Many of the articles I've read are just a bunch of immature jingoistic rubbish. It looks to me like a bad case of 'China envy' - "Our American economy is bigger and better than your economy, China!"

Many of these article writers are the same people who completely missed the Credit Bubble, the Housing Bubble, the Stock Market Bubble and are currently ignoring the Treasury Bubble.

I have a question to ask these people. Following the sort of "advice" you are giving made you how much money in the past decade? Oh, that's right - you probably lost a bundle. I suspect the same will hold true in the next decade too.

Let's look at some facts - China and India have a combined population of nearly 2.5 billion people. Per capita consumption in these countries remains far below the worldwide average and is extremely small compared to the US.

These countries can (and will) maintain a high rate of economic growth for many years to come before their markets become saturated with consumer products that even poor Americans take for granted.

The middle class in China already has reached a total of 330 million people - greater than the entire population of the United States. And it continues growing rapidly.

Just one example of the growth of consumer demand in these countries came from Coca-Cola's latest report - volume growth in China was 14% and volume growth in India was 33%.

And here is an important point about Coke's sales in China. Coke pointed out that there had been a geographical shift in demand away from the coastal cities to the center and west of the country.

Wall Street isn't even aware of that part of China - they still think China is a few large coastal cities totally dependent on US exports. Meantime the majority of the growing consumer demand in China is coming from the center and west of the country. What a surprise - Wall Street is again asleep and missing a major investment theme!

My advice to the doubters about China is to get informed and if you want to make money going forward - grow up and get over your 'China envy.'

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