We’ve been cautioning readers against expecting any near-term returns in China under the current economic malaise. With unemployment at record highs, a 100-year drought crippling agriculture and exports at a mere trickle, China is not the place to be right now.

But looking out on the horizon, we wonder if China should be your primary investment destination for potential long-term returns.

Car data for January 2009 certainly suggests a strong bias toward China.

The China Association of Automobile Manufacturers said Tuesday that 735,000 vehicles were sold in China in January. That surpassed the 656,976 vehicles sold in the U.S. the same month.

While car sales slowed in China along with most other countries, U.S. sales plunged 37% in January to a 26-year low. Meanwhile, vehicle sales in China dropped 14.4% from a monthly record 860,000 in January 2008.

January sales were 0.8 percent below those in December, and below the 790,000 some analysts had anticipated.

Last week, Mike DiGiovanni, General Motors Corp.’s (GM) executive director of global market and industry analysis, forecast that China’s car sales could hit 10.7 million vehicles in 2009, more than his estimate of 9.8 million unit sales in the U.S.

China is certainly a major market for G.M. but the company is also losing market there. In October 2008, Toyota (TM) beat out G.M.’s Chinese venture as the number-two auto maker in China for the first nine months of the year. VW/Audi holds the coveted top spot in China.

If you’re interested in securing your financial future, you may want to contact your broker about ETFs and other funds based on Chinese equities.

Sales of cars, minicars, trucks and buses hit a 28-year low, falling 5%, or 5.08 million, from the 5.35 million sold in 2007, according to figures released by the Japan Automobile Dealers Association (JADA) and Japan Mini Vehicles Association, Bloomberg reported.

Worse, domestic auto sales in December totaled 183,549 vehicles – a 22% decline and the biggest drop on record – showing the sales crunch is a growing problem.

“We never imagined sales would fall this badly,” JADA Director Takeshi Fushimi said, Reuters reported. “This is a bleak situation.” Widespread job losses plagued the industry, sapping consumer demand and chopping hundreds of thousands of vehicles from sales tallies.

“The industry is going through a blizzard,” said Ichiro Takamatsu, chief investment officer at Alphex Investments Co., a Tokyo-based hedge fund, told Bloomberg. “In Japan, people don’t see cars as their status symbol anymore with this economic slowdown.”

According to JADA figures, Toyota sold 1.47 million vehicles in Japan last year, a 7.4% fall. Nissan’s sales came in at 537,553 units, down 5.8%.

Honda Motor Co. (ADR: HMC), however, sold 423,628 units – a 6.4% gain – partially because of higher demand for new and moderately priced models of the Fit compact and Freed compact minivan. The latter only sold domestically in its first year.

Last month, the Japan Automobile Manufacturers Association projected annual sales would fall again in 2009. It estimates that new automobile sales will fall to 4.86 million vehicles, which would be the first drop below 5 million in 31 years.

Source: Dour Demand Sends Japan 2008 Auto Sales Down Dramatically