China Investment

For people who are fluent in Mandarin, China investment is easier and more profitable.

“There’s much more to the Chinese economy than in the 1990s,” said the manager of the Guinness Atkinson China & Hong Kong Fund, Edmund Harriss. According to Harriss, foreign investment has a major role in the growth of a country. The communist government is increasingly opening its doors to free markets, as well as privately owned businesses.

For people who are fluent in Mandarin, China investment is easier and more profitable.

“There’s much more to the Chinese economy than in the 1990s,” said the manager of the Guinness Atkinson China & Hong Kong Fund, Edmund Harriss. According to Harriss, foreign investment has a major role in the growth of a country. The communist government is increasingly opening its doors to free markets, as well as privately owned businesses.

The Ministry of Commerce (MOC) has released statistics showing that the FDI in China dropped to 8.4 billion U.S. dollars in March consecutively for the sixth month. However, the good news is that in January 2009, the percentage decline in FDI was 32.67% and in February 2009 it was 15.81%. So, it is showing signs of improvement.

According to Zhang Hanya, the director of the Research Institute of Investment, “Foreign investment actually climbed 44 percent in March from 5.8 billion U.S. dollars a month earlier. The month-on-month increase shows a recovering investor’s confidence toward an economy stimulated through governmental efforts.”

China Investment Opportunities: How to Invest

Here are some important China investment opportunities:

• Stocks: For non-citizens, gathering information about Chinese stocks is a Herculean task. This is because most of these are not covered by stock analysts and there may be uncertainty in the financial reports. It is ideal to look at the Hong Kong exchanges and invest in shares of Chinese companies listed there. In US exchanges, Chinese stocks are listed as American Depositary Receipts (ADSs) or American Depositary Shares (ADRs).
• Mutual Funds: By investing in Chinese mutual funds (there are hundreds of them), one can include Chinese stock diversification, since many mutual funds invest in Chinese stocks. Also, several brokerages allow account set-up online, which makes the process easier. However, to avoid any uncertain consequences, foreign investors should get into the past performance of the fund. Investing in Chinese mutual funds also calls for investigation of the fund manager’s background. Also, don’t forget to go through the investment strategy of the fund.
• Exchange-Traded Funds: The best way to invest in China is through ETFs, since they track some big indexes. Unlike mutual funds, there are fewer loads associated with ETFs, except for the broker’s fee. ETFs also entail lower risk, since individual investors can get in and out without much effort.

• Chinese Exchanges: Individual investors should steer clear of exchanges, since these are mainly dominated by government-run companies. Although the country is adopting innovative approaches, it will take time to offer some level of comfort to investors in the individual stock exchange.

China investment could be a risky proposition, considering the uneven information disclosure, political composition and booming growth. Anything, from currency revaluations to stock exchanges, can lead to dubious results. So, it is ideal to consider a long term view. Avoid investing for more than two years if you don’t want the inevitable downdrafts. Preferably, invest not more than 10% of your investing money in China investments.