The debate is over. China wins!
Today's Financial News - Posted July 9, 2009
China is pouring hundreds of billions of dollars into its economy trying to permanently displace its reliance on American money. With more than a trillion dollars up for grabs, are you ready to get your share?
By Andrew Snyder, TodaysFinancialNews.com
Baltimore – (TFN): Forget about a quickly inflating bubble that could lead to devastation in just a few years, China wants growth and it wants it now.
Thanks to Beijing’s recent $586 billion stimulus attempt, the country is growing at a pace that is stomping the rest of the economically depressed world.
Instead of following Bernanke and Geithner’s plans to revive the economy through monetary policy, China is following a purely fiscal strategy. With a fixed currency and a slew of massive state-owned corporations, spending easy money is about all the country can do.
The recovery plan starts with the country’s lenders, Instead of sending money to the banks, giving them the decision to loan it out or pad their balance sheets, China is getting rid of any choice.
A bubble in the making
After loaning $97 billion in May, the banks doubled the figure in June, handing out another $220 billion in loans. So far this year, the nation’s banks have lent over $1 trillion dollars to its companies and citizens.
Is it working? So far, so good.
Currently, China’s main bank expects to record annualized growth for the current quarter of 7.5%, with the year’s official goal of 8% well within striking range.
But we all know China’s growth figures are anything but reliable. For a better measurement, we need to look at something a bit more tangible… like car sales.
This is where things get interesting.
Last month turned out to be a banner month to sell new cars in China, with sales surging more than 36% over the same period last year. Overall, 1.14 million vehicles were sold within the country, with 872,900 of them classified as passenger cars.
During the same period, American dealers managed to unload just 859,847 vehicles last month.
On a six-month basis, China’s sales superiority is obvious. American’s bought just 4.8 million vehicles as we closely awaited Detroit bankruptcies. Meanwhile, our Chinese trade partners bought 6.1 million cars, up 17% from last year.
Make money wherever you can
This is an important trend for investors to be aware of.
As Beijing pours more and more money into its economy, it is building a wider and wider economic moat around its borders.
The wider its moat, the less dependent it will become on exporting widgets to American buyers. With 1.3 billion people calling the country home, China will have plenty of buyers within its own borders.
For American investors, this means a change in investment theory. With a lending-induced bubble quickly growing to North American proportions, investors have an opportunity to take advantage of the quick, but likely unsustainable, growth.
If you have read my work lately, you know the commodities market is one way to play the action.
Another way is through any of the publicly traded major infrastructure players like China Architectural Engineering (NYSE:CAEI) or if you are into the smaller players, Qiao Xing Mobile Communication (NYSE:QXM).
Whether the current spending level and economic growth is sustainable is not the question. What is important is that China gives investors a shot at one of the quickest growing economies on the planet.
While the U.S. is treading water politically and economically, China is moving forward. It will do it whether you are onboard or not.
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