By Profit Confidential
I know many of you probably don’t even look at Chinese stocks anymore. I wouldn’t be surprised given the years of fraudulent reporting by numerous China-based companies that decided to come here and steal your money through deception.
The reality is that the flow of new Chinese initial public offerings (IPOs) to America is dead. Whether that flow will be revived is anyone’s guess, but I’m not betting on it, at least not until Chinese companies are subject to a similar audit process faced by U.S. companies. That’s in the works with the U.S. Securities and Exchange Commission (SEC).
For now, China is struggling to hold onto its gross domestic product (GDP) growth, which came in at 7.5% in the second quarter. But I wonder if we can trust that number as accurate or if it’s some fabrication by the Chinese government. Based on what we have seen, you never know.
But I still consider China to be the top growth area in the world and a place where you should have some capital invested, albeit carefully. (Read “China: The New Breeding Grounds for Capitalism.”)
What’s interesting is that China is undergoing an economic transformation under the leadership of its new government, which took control earlier in the year. The strategy is to focus on driving up domestic consumption and relying less on exports and foreign investment.
So far the shift to the new paradigm appears to be working, as domestic consumption has been rising, helping to decrease the dependence on foreign demand.
In June, retail sales surged 13.3% year-over-year, according to the National Bureau of Statistics. (Source: “National Bureau of Statistics of China: Total Retail Sales of Consumer Goods in June 2013,” 4-traders.com, July 16, 2013.)
The report indicated that retail sales in the urban markets jumped 13.0% in June and accounted for a whopping 86% of total sales. Sales in rural areas increased 15.1%.
Those readings show the importance of the urban markets; but they also suggest that consumer spending in the country is expanding at a faster clip, as the government puts in programs to increase the wealth of the rural regions.
If President Xi Jinping, who is widely known to be a reformer, can deliver on his vision of a much richer China for all of its citizens, then the economic opportunities in the country will only get better—not only for its citizens, but also for foreign companies and investors.
Article by profitconfidential.com
