And I’m going to tell you what that secret is.

Stop making the same mistake most Westerners make. Don’t waste your time trying to figure out just where China will fit into our future. Instead, try and figure out where we will fit into theirs.

That’s more than an exercise in semantics. Think of it more as an investment screen that will determine which countries from “our world” will advance enough to be relevant to China’s future. Those are some of the companies that you’ll want to go with – the companies that will profit “from” China without having to actually be Chinese companies.

The problem with trying to figure out where China’s headed is that the changes are just too dramatic. I mean, 35 years ago China was like North Korea is today; 30 years ago it was like Cuba. Now it’s like no place on the planet.

That’s why the so-called “Panda bashers” – who view this as one huge economic train wreck that’s just waiting to happen have got it all wrong.

Look, I’m not saying that there won’t be challenges or corrections along the way – indeed, we’ve been experiencing just that over the past few months – but one visit here is all it takes for a person to fully understand that the proverbial genie is out of the bottle, and there’s no putting it back.

The Big Buildup

The first thing you’ll notice here is that China looks like one big construction zone. There hasn’t been an infrastructure boom like this one anywhere on earth since the Marshall Plan reconstructed much of Europe after that region was devastated by World War II.

Everywhere you look you see piles of building materials – bricks, pipe, cable, wiring, lumber and glass (and that’s merely a sampling) – just waiting to be installed in buildings all over this capital city. Some will renovate small family housing units in Beijing’s ancient and narrow hutongs, while much of the rest will give life to the modern new high-rises reaching skyward from the construction sites arranged like chessboard squares in almost every key city here in China.

It seems like the entire country is going “up,” which is why I was not surprised to hear from one of my local contacts that as many as 50% of the world’s high gantry construction cranes are now being used in China.

The East Coast city of Shanghai – with its modern, almost-Western atmosphere – already has more than 4,000 skyscrapers; that’s twice as many as New York City, and Shanghai has another 1,000 on the proverbial drawing board.

China’s also going “out.” And in every direction.

In the late 1980s, Beijing had only two beltway-style “ringed” highways encircling the city. Now it has six – to serve the 14.5 million people who live here.

Two decades from now, China will have more than 50,000 miles of freeways – more than our entire interstate system – and even that won’t be enough.

Incomes are on the march. Everywhere I’ve been in recent days, I’ve seen my share of Gucci, Dior and Rolex – and not just the “knockoffs.” As we’ve reported repeatedly, China’s consumers are becoming more and more brand-conscious, especially in the first-tier cities like Beijing and Shanghai (Money Morning editor Bill Patalon has dubbed this “The Baywatch Effect,” and only partly in jest), but also in second- and third-tier cities, as well.

The escalation in traffic has been breathtaking, simultaneously choking the roads and the pedestrians on the sidewalks. And it’s only going to get worse.

In 20 years, China will have more cars on its roads at any one time than we do in our entire country, running or parked. At the moment, Beijing alone is adding 14,000 vehicles a day to its rolling roster.

If all these new cars were the small, economical, fuel-efficient cars you typically see in emerging economies, that would be one thing. But the growth in incomes and in wealth has enabled many China consumers to buy luxury cars, just as they buy luxury goods.

On this trip, shiny black Audi A6s (at $43,000 to $73,000 a copy in the U.S. market, depending upon the model and options picked) in particular seem to be ubiquitous. So are Buick sedans. I’ve even spotted a few Hummers.

If you look at several of these brands – Audi, Buick and Hummer – you’ll get a poignant illustration of how well it pays off to become part of China’s future, and the risks of waiting for that country to become part of yours.

Here’s what I mean.

The “Secret” Pays Off

Let’s first look at Audi. Some of the Audis are being built by a China operation managed by Volkswagen AG. VW became one of the first foreign companies to begin manufacturing facilities in China when it started operations there in 1982. Audi AG and both VW long ago decided to make itself part of China’s future – and now it’s reaping the rewards. The German carmaker actually holds a 10% stake in the FAW-Volkswagen Automotive Co. Ltd. operation that produces the Audi cars in China. And  Audi just this week announced plans to expand its dealer network in China from the current 132 to 220 by 2012, underscoring again the importance it places on that market.

Hummers are appearing because they confer status on China’s “new money crowd.” If you have a Hummer, everyone knows you’re successful. There’s a real value in that in most societies – and China, where status is important, is certainly no different.

But Buicks? That one doesn’t quite compute, yet. You see, when it comes to China, my sense is that parent company General Motors Corp. (GM), was a bit late to the party – like most U.S. carmakers – in terms of embracing the reverse mindset of success that I outlined above.

But at least they’re working to redress that. For instance, GM last fall announced plans for a new $250 million research-and-development center in Shanghai. The facility will serve as GM’s headquarters in the China and Asia-Pacific regions, and will work on China’s pollution problems through research on such eco-friendly technologies as alternative fuels, hybrid cars, and more-efficient power trains, including those utilizing new technologies.

The email I received today was a bit breathless. In it my old friend told me that the competing guru liked one of my companies so much the he’d recommended it to his readers. And, that in less than two weeks it had gone up 138%.

Of course, he was recommending that they take profits.

That brought a smile to my face… and it put a knot in my stomach.

I was happy his people did so well… though AB&I readers have made more than 500% on the company because they met with it in Beijing back in 2004. Oh yeah, and they suffered with it too as it moved from the OTCBB, to the AMEX to the NYSE… a journey in which it was down more than 60% at one point.

As for the knot in my stomach? Well, a good friend of mine runs these tours to China and another good friend from Beijing leads them. So I did them a favor by lining up a couple of my best contacts.

But, you know what? I gave away the farm this time.

Now, a guy who had nothing to do in China five years ago when I was going there – and whose newsletter is new to the market – can brag to his readers about what a genius he is. Not only that, he can use this gain in his marketing as “real” as opposed to the pretend stuff he uses now.

The problem with China is that it used to be just a small fraternity of us who went there and we treated each with a nobles oblige shared by all forerunners.

It makes me sad that I have to now change my game plan – be more cautious.

You see, the guy who made the big 138% claim today – built it on my solid relationships in China – charges about $2,000 a year for his newsletter.

That’s 20 times the price of mine – millions of times more if you consider the time I have invested in China.

But, you already know that this is the way of life.

One day, “old school values” are merely yesterday’s values… clinging to them means you’ll get left behind… or worse.

You end up feeling as I do today – like a sanctimonious old fud.

Game on!

Lock and load.

Andy Carpenter

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

“Chimerica stocks are Chinese companies,” says Tom. “They do business in China, with Chinese management, Chinese employees, and Chinese currency. They make products for Chinese consumers.

The key is that these Chinese companies list on US stock exchanges.

Chimerica stocks list in the US because they can’t list in China or Hong Kong. “Going public” in China takes about three years. But in America, it only takes about six months. According to Barron’s, “Even now, for every company that goes public [in China] there are probably a hundred in the queue, and a lot of companies want money sooner rather than later.”

How does this happen?

A shell company is a stock without a business. The business has no assets or operations, but it still has a name and a stock symbol. To list in America, Chinese companies find an American shell company and back themselves in. Lawyers call this a “reverse merger.”

Why are Chimerica stocks good for investors?

According to Barron’s, they sell for an average 10 times earnings. The price-to-earnings ratio of the Shanghai Composite – China’s main stock exchange – is 27. Chimerica stocks are cheap because Chinese investors cannot open brokerage accounts in the United States to buy these stocks. American investors don’t know about them. Analysts don’t cover them.

Tom has put together a list of these stocks, which can be found here: Tom Dyson’s list of Chimerica stocks.

The buyer? An anonymous Chinese billionaire.

According to the report: “The anonymous Chinese entrepreneur bought a mix of vintages of Romanee Conti, a Burgundy wine and considered to be among the world’s most exclusive with only 450 cases produced each year.”

China is booming, despite the recent sell-off of Chinese stocks, but how do US investors profit from the China story without getting burnt?

Tom Dyson reckons he’s found the answer: ‘Chimerica’ stocks.

“Chimerica stocks are Chinese companies. They do business in China, with Chinese management, Chinese employees, and Chinese currency. They make products for Chinese consumers.

“Chimerica stocks are the best way to invest directly in China. According to Barron’s, they sell for an average 10 times earnings. The price-to-earnings ratio of the Shanghai Composite – China’s main stock exchange – is 27. Chimerica stocks are cheap because Chinese investors cannot open brokerage accounts in the United States to buy these stocks. American investors don’t know about them. Analysts don’t cover them.

“I’m not ready to invest in China right now. The Chinese stock market is down 44% from its highs in October 2007 and is still in a downtrend. When the market turns around – which should happen later this year – I’ll pick my China investments from this list…”