China - Is China A Truly Free Economy?
The Dynamic Wealth Report
June 5, 2009
Why China's Fighting For Freedom
American soldiers put their lives on the line every day. They’re
protecting our country. They ensure our safety and guarantee the freedom
America cherishes so deeply. These are brave men and women are
selflessly fighting for freedom.
My cousin and her husband are both in the military. They’re serving
their third tour in Iraq.
It’s been years since I’ve seen them… but I often think of them and pray
for their safety.
Most Americans have no idea how difficult the struggle for freedom is.
Our fight for freedom took place back in the 1700s. We waged our war for
independence and freedom more than 200 years ago. Since then, our
country’s grown significantly in size.
The fight for freedom isn’t over however. Around the world, others are
taking up arms trying to establish their rights. Now I know what you’re
thinking… how does this relate to investing?
Just give me a moment and I’ll explain.
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Yesterday, June 4th is an important date in the fight for freedom.
On that day twenty years ago, Chinese military troops crushed peaceful
demonstrators in Tiananmen Square. I’m old enough to remember the event. The news of the protests started days earlier. The demonstrators were
peaceful. Then the crackdown started. Thousands were killed.
I still remember the picture of a lone man standing in the middle of the
street. He wore a flowing white shirt and was holding a plastic bag. He
alone stood in front of a line of tanks.
Those images will be with me forever.
This was the start of an underground Chinese revolution. In the
aftermath of the massacre, the hard line communist government started
softening their stance. They opened up economic freedoms. It was like a
falling snowflake. As it fell it gathered speed and built into a
snowball. That snowball built into the avalanche that is the Chinese
economy.
Just 20 years ago, China was a poor nation.
University students received coupons for meals. They were allowed one
meal a day with meat. Now KFC and McDonald’s are opening up restaurants
all over the place. The ideal of economic freedom and consumer choice is
running rampant.
The economic giant sleeping within China has been awakened.
Does that mean their society is free?
Not by a long shot. Personal freedoms are always at risk. But the
economic freedoms now available in China are creating growth and
prosperity never seen before. And it’s an economic trend that can’t be
stopped.
Within the next 20 years, China and the US will share global economic
power. Twenty years after that, China will be a new global economic giant.
The statistics on China are absolutely amazing.
I won’t bore you with details about the size of the economy. I won’t
talk about imports, exports, or GDP growth rates. It’s all interesting. But here’s the point.
We can profit from this economic growth… without moving to China.
The iShares FTSE/Xinhua China 25 Index (FXI) trades
right on the US exchanges. It’s an ETF holding 25 of the largest and
most liquid Chinese companies. This ETF alone is investing $7 billion
dollars in these companies. It’s just the start.
I look at this Xinhua index like the Dow Jones Industrial Average. The
Dow was started more than 100 years ago and is now widely used to
represent the US markets and the strength of the economy. The Xinhua
China 25 Index is just like the Dow. Over time, it will become the
standard to measure the Chinese market and economy.
These are the companies best positioned to take advantage of the growth
in the Chinese economy.
As the economy grows, so will these companies.
Add some now to your portfolio. I envision buying this ETF and holding
for years… or decades. Look at it as a long term investment. It has the
potential for some incredible gains.
• Pulte Homes (PHM) was upgraded by Credit Suisse from
an “Underperform” to a “Neutral” rating. Might Home sales be bottoming? Are we in a recovery? I’m looking at it further.
• Thomas Weisel (TWPG) was downgraded from a "Outperform" to
a "Market Perform" rating by Keefe Bruyette. Strange to downgrade an
investment bank as the IPO market is finally starting to thaw.
• Credit Suisse recently initiated coverage on
Netflix
(NFLX). They gave the company an “Underperform” rating. Why cover
a company if you don’t like it?
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