Three reasons why they will explode out of this worldwide slow down; they have no debt and a three trillion dollar surplus, six-percent growth is considered a recession, and most importantly, a government that puts China first.

One more thing, the Fed just bought up a huge amount of our debt to guarantee the three trillion dollars the Chinese hold will be worth enough to keep them from selling it.

Of course, our Fed said the purpose was to assist homebuyers by lowering interest rates. But what really happened was that we just paid a huge ransom to the Chinese to keep the price of our bonds propped up.

With this move, the Chinese just graduated from emerging economy status to key player in the world. When we have to prop up our bond prices to keep the Chinese from selling them, they have arrived.

Don’t let this news get you upset, get even. Let’s make some money on them!

First idea, China Life Insurance Company, symbol LFC.

It is essentially a monopoly that is fully backed by the totalitarian regime in China, and it is protected from competition by the government. It has a 50% market share and has only developed about 10% of its potential.

Earnings this year are around $1.39 and are expected to grow to about $2.14 in 2010. The stock price is around $50 now and has been as high as $69 in the last 12 months.

You have to love monopolies!

Next idea, China Mobile Limited, symbol CHL.

This company has more mobile phone subscribers than we have people in the U.S., 470 million. It grew its subscriber base by 6,000,000 just last month. It has no debt, is swimming in cash and is expected to add 7,000,000 new subscribers per year going forward.

The stock is around $43 now, down from $90 in the last 12 months, with a 3.7% dividend.

Mobile demand in China is insane. Mobile technology has allowed them to develop an entire communication system nationwide with virtually no infrastructure costs. The future is unlimited for this company.

Don’t feel like a stock play, try an ETF, FXI. It has a few non-performers in its portfolio, but it is currently selling for about $28 and has a 12-month high of almost $55. That’s a lot of upside potential for an ETF with a 3.1% dividend.

The key to a successful China strategy is the inevitability of the play. Patience will be rewarded, but don’t get antsy if it doesn’t fly off the charts in the next six months. Give this a three to five year time horizon and you won’t be disappointed.

Don’t tread water in the U.S. market for five years to see any appreciable growth. Hit the road and get in on this far eastern money monster.

Source: Buy China Now: Making Money There Will Be Too Easy

William says every successful investor needs a China investing strategy, despite the fact that China’s benchmark index, the Shanghai stock index, is down 56% so far this year.

Following Jim Rogers’ bullish comments on China in a recent exclusive interview with Money Morning, Bill gives six reasons to invest in China and five solid China profit plays.

In an exclusive interview with Money Morning, global investing guru Jim Rogers said that giving up on that country now would be like selling all your U.S. stocks at the start of the 1900s – before America created massive wealth by evolving into a world superpower.

“I have never sold any of my Chinese companies,” Rogers said. “You know, selling China in 2008 is like selling America in 1908. Sure, let’s say the market goes down another 40% – so what! You look back over 100 years, you look back from the beauty of 1928, or even 1938 [in the depths of the Great Depression], and there is somebody who bought shares in 1908. He was still a lot better off having not sold in 1908.”

Even if the U.S. economy skids into a recession, China’s long-term growth outlook remains strong – and that’s after nearly 30 years of double-digit growth that country has already logged.

Here are some of the key points – as well as some profit plays – to consider:

First, China remains one of the strongest economies in the world. Even after China reduced its growth outlook, the country remains on track for an economic expansion of better than 9% for the year to come. We aren’t so naïve as to expect a straight path of uninterrupted growth. But neither do we expect a U.S. downturn to squelch the Red Dragon’s long-term growth prospects.

For broad exposure to China’s growth, consider the China Region Opportunity Fund (USCOX), managed by the San Antonio-based U.S. Global Investors Inc. (GROW).

Second, China remains awash in liquidity, with $1.68 trillion in foreign reserves. And much of that excess capital is being focused on the upside, particularly when it comes to boosting disposable income and then building brand awareness for its own products.

And now that liquidity is allowing the country to go on a global shopping spree, enabling its companies and its state-run sovereign wealth funds to pick up such choice assets at bargain prices. One beneficiary of such outside capital: Companies such as MGM Mirage (MGM), which is being positioned as a high-profit play on China.

Third, China’s markets are quickly becoming much “narrower.” Money is being reallocated from highly risky ventures into more-predictable enterprises. That’s an important trend for investors to track, for history shows time and again that these more-predictable ventures fare the best during uncertain, volatility-laced markets. One advantage that these companies have, believe it or not, is that they don’t have to tap into the credit markets at a time when credit is costly, or not available at all. Weaker companies won’t be able to get financing, even if it is available. Consider such potential “New Dragon” companies as online media player SINA Corp. (SINA) or fast-growing advertising play Focus Media Holding Ltd. (ADR: FMCN), for instance. As the economy becomes more “normalized,” consumers will increasingly need such products as insurance, so take a look at China Life Insurance Co. Ltd. (ADR: LFC).

Fourth, many of China’s companies are now reporting real profits. For decades, most Chinese companies operated on the slimmest of margins, with profits that were actually based on taxes or export-incentive “loopholes.” They were kept on life support with an endless stream of bank loans. All of this is being eradicated by Beijing. Money is being taken out of highly risky ventures, or the uncompetitive, state-run enterprises that are ridden with debt. In China, that capital is now being redeployed into the innovative, more-promising ventures that we refer to as the “New Dragons” – many of which are destined to rival the U.S.-based “Global Titans” as the dominant global brands and investor stalwarts of tomorrow. One New Dragon that’s already making a global splash is solar-energy player First Solar Inc. (FSLR). Also consider Huaneng Power International Inc. (ADR: HNP), the domestic China power producer that’s also getting involved in projects outside its home market.

Fifth, the still-weak U.S. greenback will make brand-name imports (both products and services) even more popular in China. And rapidly growing consumer income will give China’s consumers the cash to spend on such one-time luxuries as travel and tourism. One big beneficiary: The Boeing Co. (BA) of the United States, which says that China and other Asian nations will need $340 billion worth of new aircraft over the next two decades.

Sixth, look for companies that generate revenue “from” China, even if they’re not based “in” China. This is a great risk-management strategy: It’s a way for investors to profit from China, while enjoying the investor protections and regulatory oversight of such developed markets as the United States and Europe. The Global Titans are our No. 1 choice here. Many pay a dividend, as well.

If you’re seeking some solid, specific picks, some of the best ones to consider include PepsiCo Inc. (PEP), Diageo PLC (DEO), Yum! Brands Inc. (YUM), McDonald’s Corp. (MCD), The Coca-Cola Co. (KO), and a few others.

The bottom line is this: These days, and forever more, every investor has to have a China investing strategy. And while choosing to sit on the sidelines certainly qualifies as a strategy, remember this: Over the long haul, it’s probably not a profitable plan to follow.

P.S. The first part of this two-part story, Why Every Investor Should Have a China Investment Strategy, appeared in the Aug. 8 issue of Money Morning.

Source: How to Profit From A China Investing Strategy

Justice gave six reasons why China is a buy now. These included the recent correction in crude oil prices, China’s high level of personal savings and the country’s massive foreign reserves.

Today’s Financial News editor J. Christoph Amberger says Justice is wrong about China. The Shanghai and Shenzhen stock exchanges have plummeted since the opening of the Beijing games. J. Christoph says China now looks more like Japan in the ’90s than a strong buying opportunity…

Olympic medal counts look different to Americans than they look to the rest of the world. In the US, all medals count equally. The team with the most gold, silver, and bronze medals “wins” in the standings. Elsewhere, it’s just the number of gold medals that determines who leads the pack. Which may explain why China feels its superiority complex validated with 17 gold medals (vs. the United States’ 10)… while Americans really couldn’t care less about leading with 29 (vs. 27) total medals.

Still, for a country that just put on the most expensive halftime show ever, with lip-syncing girls, computer-generated fireworks, and thousands of young men in light-studded green “fruit suits” (as my teenage son called their skintight garbs), the stock market is sure looking like the last flea-bitten chihuahua in the pantry of a Korean short-order cook.

If China is leading in the medals count, the fruit-suit optimism isn’t filtering through to investors. Both the Shanghai and Shenzhen Stock Exchange have simply plummeted since the August 8 side show. On Wednesday, the Shanghai Stock Exchange closed at 2,470 points, falling 135 points to close at a 20 month low after touching an even lower intra-day low of 2,372. The Shenzhen exchange slumped more than 6% to close at 698 points.

Shanghai set an all-time record last October at 6,092. That’s a drop of 3,720 points in ten months – a loss of 61% at today’s lows.

The last time I saw an index plummet like this was 1990, after Tokyo’s Nikkei had posted a record high at 38,912. The only difference: It took the Nikkei fully five years, until April 1995, to fall by this amount. China managed this in just 10 months.

There are now accusations that the government of causing the problem by misleading traders. (I’m glad this very Western tradition has finally made it to China…)

But here’s the odd part: There are some Western stock gurus who are not worried. In fact, one just came up with six reasons to buy China.

Let me summarize:

Reason to Buy China #1: The Silly Season Is Over. Now that the frenzy has subsided, real values are starting to show up again. The hot money has burned itself out, providing opportunities for those who see longer-term value and aren’t out to just flip a quick buck.

Reason to Buy China #2: Oil Is Coming Down. With oil backing off, China and India can breathe a little easier. The fear that high-priced oil might kill the Asian miracle is lifting. That gives them more time to tap alternative energy solutions and build economic strength at home.

Reason to Buy China #3: The Locals Are Optimistic. A recent survey from the Pew Research Center shows that most Chinese feel positive about where their country is headed. According to the survey, 86% are “content with the country’s direction.” (That’s up from just 25% six years ago.)

Reason to Buy China #4: The Growth Is Still There. China moves up the quality food chain. As China gets better at enforcing intellectual property laws, its high-tech skills will only increase… and profit margins, too.

Reason to Buy China #5: Personal Savings and Domestic Demand. Perhaps even more impressive than China’s long-term growth rate is the personal savings rate.

Reason to Buy China #6: Huge Foreign Reserves. China has somewhere between $2.3 trillion and $2.4 trillion in excess reserves.

Let me respond why I am hesitant to wear that fruit suit of optimism:

1) The “silly season” is over. If China managed to double and double again in two years on that supposedly “bad” hot money… where is the money coming from that will power the Shanghai to recover even 20%? Japan’s Nikkei has a cautionary tale to tell about markets that see the hot money born out. For the Nikkei, that meant a low of 7,831 in April 2003 – 80% below the record high. For the Shanghai, that would mean a level of 1,218 – another 50% drop. (Given the accelerated failure rate the Chinese, we could see this level within the next 16 months!)

2) Oil may be coming down, relieving some pressure on wafer-thin Chinese margins. But labor cost – China’s biggest competitive edge – is going up. So are environmental regulations… healthcare cost (they say breathing the air in Chinese cities is the equivalent of smoking 3 packs of cigarettes a day)… and unemployment.

3) Local optimism. May I point out that the people are fickle. Consumer confidence is the least reliable indicator of an economy’s health. More importantly: investors are chafing with just over 60%  losses under their belts… and more to come!

4) Growth will be there as long as Americans and Europeans place orders. Recession, anyone? Some analysts like to argue that the Asian economies have “decoupled” from the West. Someone must have forgotten to tell Japan…

5) Personal savings and domestic demand. The latter may be there… and is usually a prelude to the destruction of the former. Plus, those personal savings have taken a beating since Chinese citizens transferred their renminbis from their passport savings to their stock brokers by the billion each week last year. Add in inflation and tally it all up once you account for two months of forced idling of factories and work forces, and an overall low average income of just $2,025 a year (in 2006)… and those personal savings factor in far less than you might think.

6) Huge foreign reserves may be more than made up by huge non-performing and “special interest” loans… a looming real estate crash… and of course the potential for the predicted devaluation of these reserves, most of which are kept in dollars. (May I also point out that Japan’s incredible foreign reserves did not help it one bit from 1990 to 2005.)

In short: China is a potential train wreck in the making! Analysts who predict Armageddon for America based on a 20% drop in the Dow and discount a 60% drop in the Shanghai Stock Exchange may just have sand in their slide rules. Those who buy wholesome into official Chinese numbers and believe the U.S. government manipulates GDP numbers may not do their readers a favor.

The big Chinese companies that trade as ADRs, such as China Life Insurance Company Ltd. (NYSE:LFC), China Petroleum & Chemical Corp. (NYSE:SNP), and China Telecom Corporation Limited (NYSE:CHA) have declined at a far less precipitous clip than their home markets.

Chinese solar stocks such as LDK Solar Co. (NYSE:LDK), China Sunergy Co. (NASDAQ:CSUN), and ReneSola Ltd. (NYSE:SOL) have actually risen in price as the Shanghai Exchange collapsed. Then again, they move with their global industries… not with China.

But while I am getting more bearish on China’s medium- to long-term prospects by the day, I think there are a small number of Darn Good Stocks you can make some serious money with.

P.S. J. Christoph says Today’s Financial News’ new trading service, Hot Stock Confidential, is currently pursuing a small company with key technology set to profit from big demand in China. This keystone technology will reach deep into China’s interior – tapping into its rural market and creating wealth on a scale like never before. It has been earning between $80-$100 million a year on total revenues of $450-$550 million in revenue.

The company has just come back up from a bit of a dip, and is charging forward with gains of 8% in a day. Hot Stock Confidential is already up 20% over the recommended entry price. But you still can buy it for less than five bucks. Read on here for more more details on how to profit from this China success story.

“This place is one big construction site,” Fitz-Gerald said. “You cannot turn around without finding scaffolding, piles of materials, construction equipment and the like [no matter where you look] here.”

With the U.S. economy suffering its worst downturn in years, and China’s stocks down more than 40% in the past six months, the bustle of construction-related activity in this Asian giant seems incongruous – if not downright contradictory.

Surprisingly, it’s neither. This divergence between China’s ailing stock market and its still-spunky economy is an early manifestation of “economic decoupling” – an emerging trend being fueled by the globalization of worldwide markets.

In fact, China’s ability to maintain its frenetic growth rate of nearly 11% per annum while the U.S. market could well be mired in a recession is yet another example of economic decoupling, says Fitz-Gerald, the investment director for Money Morning who is currently leading a group of investors on a tour of Mainland China.

“Economic decoupling will continue and is accelerating with each passing day,” Fitz-Gerald said in an e-mail interview from China.

But the main point to remember is that economic strength is a function of consumer power – which China has plenty of, with more still to come – whereas stock markets are a function of expectations.

And the amount of new investors in and outside of China blew expectations too high for companies to deliver, especially in the face of a U.S. slowdown.

“Economic strength and stock markets do not have to move simultaneously. In fact, history suggests they don’t. Cycles nearly always reflect underlying economic movement prior to financial markets separating,” Fitz-Gerald said.

A Tough Deal

Not everyone agrees with Fitz-Gerald’s assessment. The broadest of the three key U.S. stock indices – the Standard & Poor’s 500 Index – is down 8.38% in the past six months, although it was down nearly double that before a recent rebound. And the U.S. economy is near – if not actually in – a recession.

Until recently, the U.S. economy was such a key element of the global market that a downturn here made it a near-virtual-certainty that overseas economies would sour and spiral downward – hence the Wall Street adage: “When the U.S. economy sneezes, the rest of the world catches a cold.”

Perhaps no longer. Rich in both commodities and cash, China’s economy continues to advance. But here’s the part that makes decoupling tough to understand: Although the Chinese economy is still growing at a double-digit rate, its benchmark Shanghai Composite Index is down a painful 40.3% in the past six months.

And some of the country’s all-star companies have really taken it on the chin. The past six months, for instance:

• Aluminum Corp. of China Ltd. (ACH) is down 40.65%.
• iShares FTSE/Xinhua China 25 Index ETF (FXI) is down 22.34%.
• PetroChina Co. Ltd. (PTR) is down 40.44%.
• And China Life Insurance Co. Ltd. (LFC) is down 33.75%.

Skeptics of decoupling will argue that China’s index is tanking in lockstep with the U.S. economy. However, Fitz-Gerald, who lives in and around Asia, sees a different story both in the numbers and on the ground.

So what gives?

“Most of [the critics of decoupling] are Anglos sitting in the heart of New York City, never having visited and seen this first hand,” Fitz-Gerald said. “Economic progress here is unstoppable and market slide is temporary.” 

The real answer is that different forces are influencing Chinese stocks and the Chinese economy, meaning the two aren’t always as interlocked as people would like to think.

For a long time, most China stocks were off-limits to foreigners, and even domestic investors faced restrictions on where they could put their cash. As an increasing number of China-based companies went public and made their shares available to both domestic and foreign investors, cash poured into those firms, running their shares up much higher than the company’s underlying value really warranted.

“There is so much capital chasing them that it’s natural they’re going to move,” Fitz-Gerald said.

Granted, some investors who knew when to cash in and pull out made quick fortunes.

But many first-time investors (or first-time China investors) bought Chinese stocks blindly, lost a ton of money, and are now scratching their heads wondering why investment analysts keep talking about China’s vast investment potential.

The major culprits that dragged down China’s indices are stock market linkages between the United States and foreign markets – meaning that currency devaluations and slowing foreign economies (such as China’s major trading partner, the United States) pinched the profits of some Chinese companies – but nowhere near enough to cause a downturn there.

Plus, unlike past emerging-market downturns, there hasn’t been massive “capital flight,” with foreigners taking their money and heading for the safety of their banks at home. China has too much long-term profit potential for foreign investors to give up now.

Besides, even if they did, China has record foreign reserves of $1.68 trillion – more than enough to weather a rainy day in the economy there.

On top of sightseeing, shopping, food, and hospitality well beyond the standard tourist fare, Fitz-Gerald is leading a tour of one or more of China’s stock exchanges. [Fitz-Gerald is also the editor of the New China Trader, an investment newsletter dedicated solely to finding value and profits in China’s red-hot economy].

And although it’s difficult for investors to navigate through the volatile markets, the long-term payoff is worth the pain.

The bottom line is that China is on track for 10% to 12% growth this year – and that’s after China’s government has taken steps to slow the country’s economy down.

“Investors who abandon China now will live to regret their decision,” he said. “Even if the U.S. economy skids into a recession, China will continue to grow for decades to come. And that’s after nearly 30 years of double-digit growth that country has already logged into the history books.

With main indices down significantly since Jan. 1, a slew of companies – including many financial firms – recently (and gladly) offered to share how much they pocketed from their stake in Visa’s IPO:

• Bank of Hawaii Corp. (BOH) said its net income would jump by $7 million to $9 million in the first quarter, much of which will come from a mandatory redemption of its Visa stock, the Star Bulletin reported.

• National City Corp. (NCC) said it would post a $450 million cash gain from selling about one third of its stake in Visa, BusinessWeek reported.

• West Virginia’s City Holding Co. (CHCO) banked $2.3 million from a partial redemption of its Visa holdings.

• Overseas, federally owned Banco de Brasil took in $207 million from selling a portion of its Visa stakes. Its private sector rival Banco Bradesco (BBD) made $201 million from Visa’s IPO. Both figures are before tax, Business News Americas reported.

• South African bank FirstRand said last week that it received a pre-tax gain of $123 million from its shareholding in Visa, iAfrica reported. Of that, $69 million was from the sale of its Visa’s shares and $54 million is the value of the remaining shares. FirstRand is locked into holding those remaining shares for three years.

• Melbourne-based Australia and New Zealand Banking (ANZBY) reported that it expects to pocket $350 million pre-tax from 50% to 60% of its shares in Visa. Follow Aussie banks National Australia Bank and Westpac are expected to turn a $200 million and $100 million profit, respectively, The Age reported.

• And in China, China Life Insurance (LFC) sunk $300 million into Visa’s IPO. Assuming it bought its shares at Visa’s opening price of $44 a share, that investment is now worth more than $439.5 million at Friday’s $64.46 closing price. Also, China Investment Corp. – the country’s $200 billion sovereign wealth fund – made an undisclosed investment in Visa’s IPO, Today’s Financial News reported.

“It’s not standard practice to say it, but typically big institutions do if they are part of the IPO process and receive allocation,” said Money Morning Investment Director Keith Fitz-Gerald.

Still a Buy?

For its March 19 IPO, Visa’s 406 million shares were originally priced at $44 each – well above the expected price range of $37 to $42 a share. The $17.86 billion proceeds it took in made it the biggest U.S. public offering, shattering the $10.6 billion AT&T Wireless raised in its April 2000 IPO.

Globally, only one deal was larger: The October 2006 IPO of the Industrial & Commercial Bank of China, or ICBC, which raised $19.1 billion – or nearly $22 billion when the over-allotment provisions were fulfilled.

However, $44 was the price underwriters and large-scale investors got in at.

Visa’s shares opened at $59.50 on the New York Stock Exchange (NYX), and traded as high as $65, before closing at $56.50, up $12.50 a share, or 28.41%. The following day, shares jumped another 13.89%.

The initial run-up and continued growth gives the San Francisco-based Visa a market value of more than $52 billion.

And shareholders are still piling on – despite companies publicly declaring they are cashing out – because of Visa’s dominant market position and the growing shift into electronic payments.

“Visa’s CEO has got it together,” Fitz-Gerald said. “He’s targeting Chinese growth and that should go right to the bottom line.”

As far investing in the company, Fitz-Gerald suggests buying in increments to capture safest gains.

“I wouldn’t jump all in now, but there is long term value.”