Chinese Recession?

[Beginner]

Mostly I am a bear, seldom a bull, and sometimes I am an ostrich and just bury my head in the sand.  When it comes to purchasing stocks I tend to be a sheep, looking to some kind-hearted shepherd to tell me what stocks to buy since I am a hopeless stock picker.

Today I am a bear – about China.  What if the China bubble were to burst?  All those stocks that depend upon Chinese economic expansion might tank.

We have to look at the larger economic picture.  A recession in the US might backfire on China. 

Here is the article:   http://atimes.com/atimes/China_Business/IL05Cb02.html

Ever since the Chinese communist revolution in 1949, Chinese communism has been nurtured and cultivated by US humanitarians who saw a communist dictatorship as the only means of controlling the Chinese population explosion, or what used to be known in the 19th century as “the yellow peril.” 

About the only politician to object to the stance of the humanitarian politicians was one infamous Joe McCarthy, a US isolationist, who objected to US aid to communist China.  But Dean Acheson and the State Department were behind communist China to a man.  When a government committee asked Dean Acheson how he picked his “far eastern experts” he replied that such experts were ten a penny and he picked the ones who agreed with him.

Perhaps the US will not permit China to have a recession.  That would be a consistent position to take.

[davidslane]

China is a fixed game.

The government has to employ the masses in order to avoid unrest (meaning a revolution).

So, people work in jobs producing things that there may not be a demand for just so they have jobs.


This causes three things:
1) Deflation of goods coming from China --- too much supply
2) Bad investments from outsiders into businesses which will never be profitable which will eventually come back to hurt US investors, but this is a ways off
3) A constant demand for raw materials


As long as investment money flows into China, the economic engine of China will keep on going.


And the government will make sure the masses have jobs and money, which will be spent on the stock market bubble to keep that going.

The stock market is a bubble, but there is a lot of Chinese middle class money going after just a few public companies and their stock shares.  Although there will be sharp corrections, there is a lot of money in the hands of the new middle class to keep the bubble alive for a while.

The engine will keep running into the summer Olympics, but will keep going after that.
Maybe instead of at 11% a year, at 9%.

China is creating the equivolent of a city the size of Houston every month.

That's a lot of copper, cement and other raw materials.


Yes, China will slow down as the government lifts its currency against the dollar to quiet inflation, but a slow down from 11% to 9% is not going to curtail their demand for energy, oil and raw materials.

I would be skeptical about investing in their stock market because of the volitility so I rather invest in BHP, RIO, and RTP which feeds China with raw materials.  Along with EWA and EWZ.

As for China, you could bet some money on the Chinese stock ETFs, PGJ and FXI, but those are riskier plays.

[Uboat]

Although there is more volatility in the Chinese ETF, FXI, than in other foreign ETF’s such as EWA und EWZ, I consider it not riskier than them, since most foreign ETF’s seem to go in tandem with the US market downturn, regardless of their domestic development.