When Airbus recently announced the delivery of its first China-built passenger jet, it was more than just the usual bit of corporate PR. It was an admission that any company that wants to remain a global leader in its industry will have to embrace China as a customer – and probably as a partner.

Airbus – a subsidiary of defense giant European Aeronautic Defense and Space Co. NV, also known as EADS NV – said it assembled the A320 passenger jet in a plant in Tianjin, China’s sixth-largest city. The factory is 49%-owned by a Chinese consortium, and is expected to produce another 10 passenger jets this year alone.

The China connection doesn’t end there, either: The just-completed A320 will be sold to a leasing company and eventually put into service by Sichuan Airlines Co. Ltd., a regional carrier.

Both Airbus and its U.S. rival, The Boeing Co. (NYSE: BA), understand that the Chinese market is crucial to their futures. Boeing has said that China will become the largest aviation market outside the United States by 2028, with the mainland set to require 3,700 additional aircraft - worth more than $350 billion – in that time. Airbus, which projected a slightly lower figure of about 2,800 aircraft, hopes to see its market share rise from about 30% now to about 50% in the next couple of years.

In the near term, the global downturn has left China’s carriers feeling the pinch, too, but it’s the long term that has companies such as Airbus and Boeing feeling both excited – and worried.

In many industries, partnerships represent the price of entry. And in the long haul, China has ambitious plans of its own. In the commercial airliner business, for instance, it is already developing a regional airliner and more recently has launched plans to design and build a globally competitive jumbo jet of its own.

The Rise of China as a Powerhouse Market

One of the hallmarks of any great economy is its ability to produce technically complicated machinery. I’m not talking flat screen TVs here but stuff like spaceships and, closer to earth, commercial and military aircraft. While Airbus is a partner right now, the point is that China is moving up on the technology scale both hard and fast. Faster, in fact, than most Westerners realize.

But the rollout of a completely Chinese-built Airbus A320 highlights something else, the significance of which is lost on most investors: It’s not really about Chinese airplanes or even the fact that China is making something new. The real key here is that Airbus – like many companies – understands that the Chinese market is growing so fast, and has the potential to be so huge, that that it has to invest there, and do so as a partner, or risk getting left behind.

Chances are good that Airbus understands something else that I’ve been telling investors since I first visited China nearly 20 years ago: There will come a time when China makes the transition from just being the world’s biggest manufacturer and becomes the world’s biggest market. In the long run, it’s not about China the export machine – it’s about the Red Dragon’s transition into a full-fledged consumer market.

With more than 300 million people – the majority of whom save an average of 35% of their income, China’s quickly emerging middle class is by itself potentially larger than the entire U.S. population. And the top 2% of China’s academic community – I’m talking the best and brightest only – is larger than our entire university population.

The bottom line: China not only has the capability to produce entirely new and different products, but its consumers increasingly have the ability to buy them. Consider Snow Beer. Most people have never heard of the ubiquitous green bottled stuff because it’s sold only in China. Yet according to beer-market-researcher (yes, they do exist) Plato Logic Ltd., Snow Beer sold about 6.1 billion kiloliters of beer in 2008, up 19.1% from the year before – outselling such former brand leaders as Bud Light and Budweiser.

Not surprisingly, Snow Beer is a partnered product - the result of a collaboration between China Resource Enterprise Ltd., and London-based SABMiller PLC (OTC ADR: SBMRY) news portalalibaba.com reported.

Maybe this won’t surprise you, but it never fails to surprise the majority of people I talk with when they learn that China is now the world’s largest beer market, having surpassed the United States as early as 2001.

It’s much the same story with cars. For the past four months running, China has been the world’s largest automobile market. There are still a dozen or more automakers slugging it out for Chinese consumers’ hearts and minds, but all the biggies are there – including the only profitable business unit of General Motors Co., the Japanese, European makers and more. China this year also became the world’s largest producer, consumer and exporter of light-duty electric automobiles.

China Profits Poised to Zoom

And that brings us back to Airbus.

After delivering the 10 planned A320s from its Tianjin factory this year, Airbus plans to deliver aircraft at a rate of four a month by the end of 2011. Overall, Airbus expects to deliver 70 A320s to China in 2009 – a total that includes jetliners built in Europe.

But it’s just not enough, notes Airbus China President Laurence Barrons. In fact, the executive told the China Daily that the “ramp-up [production] capacity of 48 planes a year is insufficient to meet [domestic] demand.”

It’s not surprising, then, that Airbus is planning on boosting production to 286 aircraft a year in Tianjin, which puts the China production facility on par with Toulouse and Hamburg, where the company has its European plants. Ultimately, and again here’s the really important stuff, there’s no reason in the world why Airbus won’t begin selling Chinese-made aircraft overseas to non-Chinese carriers within the next few years. Not only will this further pressure Boeing, but also it demonstrates yet again that there isn’t an asset class on the planet that won’t be affected by China’s growth – a point that I’ve made so often that it’s basically become a Money Morning mantra.

Speaking of which, Chinese domestic air passenger growth would make a western air exec drool. According to China’s Aviation Administration, domestic traffic is up 17% to 56.9 million in the first four months of 2009, at a time while international traffic fell 17% to 5.6 million. Some consider that a wash, but get this: Over the past 30 years, air passenger traffic rose at an average annual rate of 16% – reaching 190 million at the end of 2008.

In a statement issued on April 8, Li Jiaxiang, the director of the Civil Aviation Administration of China, stated that China intends to boost travel to some 700 million trips a year by 2020. And that underscores yet again the projected growth in China’s middle class strength. Somebody’s going to be paying for all that travel. My own travel experiences in China suggest that it will be the Chinese Yuppies, or “Chuppies.”

With the increase in demand has come an escalation in quality – of products and services. Gone are the days when flying Air China meant taking your life into your own hands and ghostly silent terminals at a few scattered airports. Also gone are the formerly ubiquitous souvenir shirts depicting overcrowded aircraft with parts falling off as they zoom skyward.

Flying in China today is a wonderful experience that I look forward to each time I visit China. The airports are modern and well staffed, the security is generally excellent and the flight crews are as sharp as they get. Increasingly, the aircraft are mostly all new – a welcome change from some of the timeworn airframes I routinely hop aboard when traveling back here in the United States. Of course, having real food with real silverware is a nice perk, too, in an era when a boxed lunch sets you back seven bucks.

Now, before you guys jump all over me with comments about state subsidized travel and the like, I know – you’re right. But that doesn’t change the fact that air travel in China is a throwback to an earlier – and eminently more pleasurable – time when travel was an experience to be enjoyed, and not just time spent getting from Point A to Point B, as is now the rule in the Western world.

In a recent interview, the president of Sichuan Airlines Co. Ltd., showed me that China understands the path to take to win in the global game of business when he said that “when air travel becomes a consumer pastime, that’s when you will see the real peak of aviation demand and industry growth.”

That’s true of virtually every market in China these days – which is why investors better not miss their flight: The Red Dragon’s domestic market is just getting ready for takeoff … 

Source: Airbus Deal Shows Investors That China Profits Are Cleared For Takeoff

Editor’s Note: Fifteen trades. All profitable. Since launching his Geiger Indextrading service late last year, Money Morning Investment Director Keith Fitz-Gerald is a perfect 15 for 15, meaning he’s closed every single one of his trades at a profit. And he did this during one of the most volatile periods for the U.S. stock market since the Great Depression. Fitz-Gerald says the ongoing financial crisis has changed the investing game forever, and has created a completely new set of rules that investors must understand to survive and profit in this new era. Check out our latest insights on these new rules, this new market environment, and this new service, the Geiger Index.

The move surprised many analysts, as it will make it easier for Western countries to prevent Chinese companies from acquiring overseas targets and discourage other large corporations from pursuing mergers in China.

China’s Ministry of Commerce blocked the deal saying the biggest takeover of a Chinese company failed to meet the country’s anti-monopoly law and would be “negative for competition.”

“If the acquisition of Huiyuan went into effect, Coca-Cola is very likely to take a dominating position in the domestic market and the consumers may have to accept the high price fixed by the company as they don’t have more choices,” the Ministry of Commerce said in a statement.

Huiyuan Juice is a household name in China, and controls 42% of the country’s pure-fruit-juice market. Coca-Cola controls 54% of China’s soda market.

Coke could challenge the ruling under Article 53 of China’s anti-monopoly law, but the company said in a statement that it would not pursue the deal any further.  “We are disappointed, but we also respect the Ministry of Commerce’s decision,” said Coca-Cola Chief Executive Officer Muhtar Kent.

Coke launched a $2.4 billion bid for Huiyuan Juice last September. At HK$12.20 a share, the deal valued Huiyuan at a 195% premium to its market value prior to the offer. Indeed, the offer was so generous, that some investors thought Coke might actually be overpaying.

Huiyan stock was suspended 13 minutes after trading started on the Hong Kong exchange. The stock plunged a record 19% to HK$8.30 a share during that time.

Implication on China’s Overseas Acquisitions

Analysts were surprised that authorities blocked the deal, which had few economic implications and posed absolutely no threat to national security.

“This seems to me to be against China’s best interest,” Chris Ruffle, Emerging Markets Director at Martin Currie Investment Management Ltd. told Bloomberg. “It plays into the hands of protectionists who will not find it easier to block acquisitions which Chinese companies make overseas.”

Aluminum Corp. of China Ltd. (ADR: ACH), also known as Chinalco, is already facing resistance in Australia, where the company is trying to finalize a $19.5 billion tie-up with Rio Tinto PLC (ADR:RTP).

Australia’s Foreign Investment Review Board is considering the deal amid political opposition that doesn’t want to see key mining assets fall into foreign hands.

Under terms of the agreement, state-owned Chinalco would pay $12.3 billion for a piece of Rio’s iron ore, copper and aluminum mining assets, and $7.2 billion for convertible notes that would double its stake in Rio to 18%.

“I think we should be selling the milk, not the cow and in this case, the minerals, not the mine,” independent senator Nick Xenophon said Wednesday on Australian radio.

Senator Barnaby Joyce, an Australian politician who took out television ads on Tuesday urging the blockage of the Chinalco deal, Reuters reported.

“The Australian government would never be allowed to buy a mine in China. So why would we allow the Chinese government to buy and control a key strategic asset in our country,” the ad said. The ads aired in the capital of Canberra and Joyce’s home state of Queensland, where Chinalco will mine new assets.

Chinalco’s bid for Rio Tinto is just one of many overseas acquisitions being made by Chinese companies, as the nation scrambles to lock in long-term supplies of resources at low prices.

In February, China Minmetals made a $1.7 billion (A$2.6 billion) bid for OZ Minerals (ASX:OZL), the world’s second leading zinc miner. Hunan Valin Iron & Steel Group Co. quickly followed that deal with an agreement to buy $793 million (A$1.2 billion) worth of shares in Fortescue Metals Group Ltd. (ASX:FMG), which has significant iron ore holdings in Australia’s western states.

In February, China Minmetals made a $1.7 billion (A$2.6 billion) bid for OZ Minerals Ltd., the world’s second leading zinc miner. Hunan Valin Iron & Steel Group Co. quickly followed that deal with an agreement to buy $793 million (A$1.2 billion) worth of shares in Fortescue Metals Group Ltd., which has significant iron ore holdings in Australia’s western states.

“I think the Coke decision will backfire on China,” an unidentified dealmaker told the Financial Times. “It will embolden nationalists in countries like Australia, who are unhappy with all these resource deals.”

Source: China Blocks Coke’s Bid for Huiyuan, Jeopardizing Resource Deals in Australia

“If oil prices keep going up, it is simply not in any country’s best interest to keep subsidizing these prices indefinitely,” says Peter Gastreich, a UBS oil and gas analyst, in the Financial Times. More from that story:

The recent surge in the price of oil has been particularly painful for Asian oil importers such as India, where imports cover 73 per cent of petroleum needs. But it has also deprived state energy companies of additional revenues to make bigger investments in exploration, as well as downstream infrastructure.

Analysts warned that planned cuts in subsidies and controls would have to be followed by more substantial energy market deregulation.

The Chinese government said that stock market rumors of an imminent increase in domestic fuel prices were “groundless”. However, analysts forecast that Beijing would eventually endorse subsidy cuts.

“The story of oil is no longer a U.S.-centric story,” says Chris Mayer in The Daily Reckoning. “China and India are only beginning to consume oil at any meaningful level. Right now, they are consuming oil at a rate the U.S. did in the early years of the 20th century.

“But look, we don’t need China to start guzzling oil like we do. Even if it moves half the distance between it and Hong Kong, that’s a lot of extra demand. The way I look at it is this: What’s more likely, China stays at 1910 oil usage or moves somewhere closer to, say, 1950s U.S. oil usage? I think the latter.”

Jason Simpkins in Money Morning says: “Every investor must have a China strategy. And that also holds true for the energy sector.

Read on here for a long-term play on both China and on oil prices. Jason reckons investors with the patience to let such a strategy play out may find this a profitable pick.

Here’s the thing… Jim Rogers has a gift for exploiting sleepy markets no one else has thought of. He’s made money in Ghana, Botswana, Zambia, and Zimbabwe.

He put money into Uruguay before people “even bothered with shares,” Bolivia when the stock market was less than two years old, and Peru while it was still in a civil war.

And in Austria, Rogers made one of his biggest coups of all. In 1984, he noticed Germany was becoming an industrial powerhouse and was dumping its socialist politics. Austria is next to Germany. Rogers figured the Austrian stock market was ready for a boom…

He called a manager at Creditanstalt – Austria’s largest bank – and asked him how to invest in Austria’s stock market. The bank manager told Rogers Austria didn’t have a stock market. Austria’s market was so obscure, the manager of the country’s largest bank didn’t know about it. His ignorance was a buy signal for Rogers, who made 500% gains in three years.

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“You have not really been to a country,” he says, “until you have had to cross the border physically, had to find your own fuel, a place to sleep, until you have experienced it close to the ground. My success in the market has been predicated from seeing the world from a different perspective.”

Rogers thinks China will become the world’s next superpower. Last year, he sold his house in New York and moved his family to Singapore. He wanted to move to China, but said the pollution was too bad there. He’s using Singapore as his Asian base instead. “It’s like moving to New York in 1907 or London in 1807,” he says.

Rogers thinks the Chinese are the most capitalist people on earth. They save almost 35% of their income and don’t worry about how many vacation days they might get. Instead, they worry about how many days they are allowed to work.

“I recommend you all start to learn Mandarin,” he always tells audiences at investment conferences. “And tell your children and grandchildren to do the same.” Jim’s daughter has a Chinese nanny, who speaks only Mandarin.

In 2006 and 2007, Chinese stocks rose 500%. It was one of the most memorable bull markets in history. Newspapers published stories every day of Chinese taxi drivers and hairdressers making fortunes in the stock market. We read about queues of people waiting to open brokerage accounts.

Then the market collapsed…

Now I’m starting to get excited about China. I’ve been researching Chinese stocks that trade on North American exchanges. I call these “Chimerica” stocks.

I found some interesting agriculture companies. They do all their business in China, but they report in English and conform to U.S. regulations. These stocks have better valuations than Shanghai-traded stocks because so few people know about them. They even have better valuations than most of their American and Canadian peers.

Yesterday the papers announced Jim Rogers is buying China again. “All the panic looks like a bottom,” he told an audience at a conference in Beijing. “I have bought in the last four to five weeks. I’ve been buying shares in China for the first time in a long time.”

Jim Rogers is rarely wrong about these trends. We need to get our money into China soon. I’m going to wait for the Shanghai Composite to form an uptrend before I invest… It’ll improve my odds of making a profit. In the meantime, I’m going to keep researching Chimerica stocks, and I suggest you do the same.

Good investing,

Tom

But, I am enveloped by the sudden warmth that has temporarily descended upon Boston… teasing us with implications of what’s too come.

Of course, it has been warm and dry, so I am crushed under the weight of pollen, which makes me ache, and sneeze, and itch and occasionally gasp for breath.

The garish-yellow forsythia are gloriously in bloom, but they draw my eye to vast sections of the yard that didn’t get raked last fall because the snow came too early. Those damned oak trees in the west that help keep the house so cool in the summer also dump millions of leaves all fall.

But, man is it nice to be semi outside. It’s even possible, on occasion, above the din created by the 10 or so lawn crews working in the neighborhood at this moment, to hear a woodpecker hunting food… a robin and finch chatting with their peers.

So, nothing is ever exactly right… well, in the big picture that is. Because, moments can be perfect as long as you’re ready to appreciate them.

The Perfect Investment Moment

That search for the perfect moment is of course a dangerous thing for investors. There is never a prefect moment to place your hope and money on a stock, bond, business or real estate investment.

Even if you’ve done your homework in regards to the risk you’ll take, you can easily find a negative voice – a gloomy outlook – at just about every turn. In fact, those are the voices that seem to be shouting the loudest.

This is especially true with stock investing.

In fact, the loudest voices during the past three or four years seem to be the ones within the financial media that are trying to convince you that buy and hold – the strategy in which you buy solid companies and pretty much forget about them – is a stupid way to invest today.

Now, I will agree that if your tolerance for risk is high and you play penny stocks or other risky speculations that you should constantly have your hand on the pulse of those trades. That’s the price you pay for accepting a high-risk potentially high-reward position.

But anyone who espouses that buy and hold is dead is peddling you bunk. And, it’s repackaged bunk at that. For these death-to-buy-and-holders were likely the very same characters who, during the past 20 years, have tried to sell you Internet, tech, gold and the change from pension funds to 401ks as radical new investment paradigms… that holds for China, too, my area of expertise.

Investment Attention Deficit Disorder

You see, it’s imperative for the investment crowd that flits from fad to fad to sell you on the critical notion that buy and hold is dead… how the hell else can they convince you to follow their flights of fancy.

I see a lot of this new paradigm crap surrounding China investing. I once, for about seven months, was even involved with a newsletter that peddled such bunk. It was not a happy partnership. The divorce cost me a small fortune in money left behind.

Of course, the reality today is that China has graduated from an investment trend to an investment reality. And, that’s not a new paradigm.

If anything, it’s an extremely old paradigm. And it will take the usual amount of work to separate the good from the bad and downright criminal, just like it does with the 10,000 or so US-based stocks that trade every day. Come on now, do you really believe that all those OTCBB and Pink Sheet companies are run by patriotic Americans whose sense of fiduciary duty extends to taking your money and making it grow?

If you do, have I got a Chinese granite mining stock for you, or a Chinese fertilizer outfit… or a (a thankfully formerly traded) public company that wanted you to finance its drive to sell chewable vitamins to Chinese children.

Shift This

You see, just as it is with European, German and Indian stock markets, the US stock market is home to every sort of scam, including those from China.

That’s the way it is with investments that are sold as major paradigm shifts. Instead of frank talk about China, the majority of what the financial press and publishers feed you is useless pie-in-the-sky stuff (and yes I approved my newsletter’s marketing in case you think I am peddling it ala mode) or useless news such as what the Shanghai Stock Exchange is doing.

The media peddlers are only in two moods… bubble up or bubble down.

That makes the deal with China exactly the same as the deal with Silicon Valley or Austin, Texas. It’s a simple proposition.

Do you easily understand what it is that a Chinese company does? Is it more than a story… or does it at least admit it is just a story, now? Are its financial reports up to date and audited with generally accepted accounting practices? Does its management seem stable and adept? Do you understand the risk?

Would you buy and hold this stock?

See, China may be an emerging market that allows you access to tons of new public companies, but it is not exotic.

But, churning and burning your portfolio is.

So, let’s put this silly, death-to-buy-and-hold mindset behind us now.

Anyone who’s peddling you that hokum merely wants access to your wallet… nothing more.

Now, let’s move on to more of your opinion pieces. The one from Jennifer suggests that my pool could be a cash cow. Actually, my glibness aside, she makes a heck of a point…as does Larry in the second piece. Wish we could get him the chance to buttonhole Condoleezza Rice.

See you next Saturday. Have a great weekend.

Lock and load.

Andy

P.S. To let me know what you thought of today’s article, send an e-mail to: feedback@investorsdailyedge.com.