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American investors have been in love with the China story and Chinese stocks for more than a decade.
And, there's a lot to like if you know what you're doing and where to look.
But there's an even greater opportunity when you look in the places no one else is looking…except for the Chinese.
China faces a labor crisis. It's not what you think.
They have lots of workers. Some are very skilled, others highly educated. But the ones working in the factories by the millions possess little but what they can do with their hands.
Their wages are not enough to buy the very purses they sew or bicycles they assemble. That is changing, slowly. The change is becoming painful for Chinese factories.
You see, China does not have factories that have huge margins for profit.
The country has succeeded by being the lowest-cost producer in the world, selling its wares at razor-thin margins to quash any competition.
The resulting success has made China a global powerhouse…but it has also resulted in an unintended consequence: inflation.
China is one of the few emerging countries that I have been to where the government offers few subsidies. Take gasoline, for example. It costs over US$5 per gallon for gas today in China.
That's more than the U.S., and it's a lot more than India, which subsidizes fuel.
The price for everything is going up for the local population, so now they're demanding higher wages.
And they're getting higher wages, which means even lower profits for factories already stressed by a global economic contraction that has end customers unwilling to pay more.
There is a fix. And that fix is going to make you money. It's where the Chinese are putting their money — lots of it.