The Flinchum File
Thoughtful Economic Analysis and Existential Opinions

Final Thoughts on China

09/25/2010

All of my life, the U.S. has been the engine of growth for the world. That is no longer the case, as China has clearly taken our place. While that may be sad, I don’t think it is anything to be feared.

During my travels over the last two weeks or so, I’ve focused on China, but it is time to move on. For now, here are some concluding thoughts on “The Chinese Century”.

In the near term, China’s importance is clearly growing. Investing there is a smart thing for growth investors. However, the Shanghai stock exchange is not transparent and very volatile. If you have a weak stomach, stay out.

In the mid-term (5-8 years), I especially like consumer oriented stocks in China. However, don’t do this on your own. Find a good, specialized mutual fund for this targeted exposure.

In the long-term, China faces enormous problems, with the fastest aging population on the planet. Their centralized government has done an excellent job of guiding the economy so far but are only human. No centralized government can consistently allocate resources more efficiently than the market. They will screw this up! “Buy and Hold” is not the right strategy for China.

Now, back to the U.S.– my beloved America!

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