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Saturday, April 16, 2011

China is not a great inestment

For the last decade, China has been the world's economic powerhouse. The Chinese economy has grown at rates that make the rest of the world envious. Last year, China overtook Japan to become the second largest economy in the world. Many of the Chinese companies are now trading on American excahnges, making it easy to buy stock in them. So is China a good place to park one's money? My answer is No!

I chose not to invest in China because I do not trust the government there. It is not a question of ideology. Rather, there is no way to guarantee that the Chinese government will keep its present policies. We could allwake up tomorrow to a major expropriation of foreign asets or just a major shift in the way that corporations are treated. I simply will not invest in places where the risk of loss due to governement action is real. for example, I will also not invest in Russian companies; Putin and the Russian government make the Chinese look positively steadfast in their policies. I also rule out companies with heavy investment in other countries with iffy governments.

Over the last few years, many folks have made nice profits investing in chinese companies. that does not change my view. After all, many folks have also made nice profits by gambling in Vegas or Atlantic City during the same time. Not me.

Now, however, we may be approaching a new problem for the Chinese. I read a very interesting analysis this morning about the direction of the Chinese economy. The prognosis is not for an end to growth, but rather for a marked slowing in the rate of growth. You can read this piece by clicking on the title to this post. I strongly recommend that you take the time to do so.

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