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China Fears Much Ado About Nothing

Markets in Hong Kong, Vietnam, Taiwan and Korea were closed last week as people across Asia celebrated Moon Festival, one of the culture's most beloved holidays along with Chinese New Year. Moon Festival's origins center around a husband (Houyi) and wife (Chang'e), who were sentenced to live eternally separated on the sun and the moon.

Chang'e, representing "Yin," lives on the moon and Houyi, representing "Yang," lives on the sun. Once a year, on the night of the Mid-Autumn Festival, Houyi visits his wife and that is the reason why the full moon burns brightly on this night.

For many, the yin and the yang illustrate the importance of having balance in life. Investors must find the right risk/reward balance. Businesses must find the right capital spending/revenues balance. And, we all must strive to find the right work/life balance.

China's Economy Finds Balance

Balance is also a crucial goal for China's economy - the economy must not grow too quickly or risk a sharp correction. Just this year, China has weathered an epic battle with inflation, drought and floods, poor global macroeconomic conditions, massive accounting/corruption scandals and a tragic accident on one of its marquee achievements-the country's high speed rail system.

We've discussed the tremendous build-out of China's high-speed rail system before. And earlier this month, I was lucky enough to see what traveling at the speed of China feels like firsthand. I was on a train that averaged 185 miles per hour during the 923-mile trip from Shanghai to Beijing. I've traveled to all corners of the world and have seen many things during my travels, but viewing China's explosive growth as it flies by you is something I will never forget.

China remains the beacon of hope for the global economy, the largest and, many times, the "sole engine of the world economy," BCA Research says. China's real gross domestic product (GDP) is forecasted to grow 8.9% in 2011 and 7.8% in 2012, according to ISI Group. This is a slower rate of growth compared to recent years but "doesn't look like an economy struggling under tighter credit conditions," GaveKal research says.

The key to China's economic growth isn't "how fast?" or "how much?" The most critical question is "what's driving it?"

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Chinese Homebuyers Throw a Life Raft to the U.S. Housing Market

From New York to Honolulu, Chinese homebuyers are swooping in to help salvage the U.S. housing market.

Indeed, California, Florida, New York, and even Hawaii have seen a marked up-tick in home sales to Chinese buyers who are exporting their country's real estate boom to the United States, according to Bloomberg News.

Increased regulation at home and education and investment opportunities are chief among the reasons real estate in the United States - as well as the United Kingdom, Australia, and Canada - has piqued Chinese interest.

According to a survey by the National Association of Realtors, Chinese buyers accounted for 9% of foreign home purchases in the 12 months ended in March of both 2010 and 2011. That's up from 5% in 2009.

"The purchase restrictions in China drove them overseas, while they look for investments to counter the inflation," Mo Tianquan, founder and chairman of Beijing-based SouFun Holdings Ltd. - a company that runs China's biggest real estate Website and organizes buying excursions abroad - told Bloomberg. "Some of them will buy homes considering better education opportunities for their kids, while others look for immigration options."

Take Cupertino, Calif., for example. Sales of existing single-family homes in Cupertino rose 21% in the first quarter from a year earlier, largely due to an influx of Chinese shoppers who are making huge cash purchases.

"We're seeing a huge number of all-cash transactions, and most of those are from mainland China," Nina Yamaguchi, managing broker at Coldwell Banker's residential office in Cupertino, told Bloomberg. "The thing that draws the Asians here is the schools are so highly touted. Cupertino is certainly not beautiful. It doesn't have wonderful architecture."

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The Japanese Economy: How Its Post-Earthquake Weakness and Scuffles With China Contribute to a Global-Market Reversal

In our ongoing search for possible "inflection-point" catalysts - financial stimulants that could help turn global markets upside down - the Japanese economy has to be a prime candidate.

In the last part of the 1980s, Japan was the world power - so much so that investors on the U.S. trading floors of New York each day watched the Tokyo markets with a mixture of awe and fear. An oft-cited investing aphorism of the day explained this very clearly by holding that "when Tokyo sneezes, Wall Street catches a cold."

Not long after, the Japanese miracle ended, the stock-and-real-estate markets crashed, and that Asian country fell into a funk known as the "Lost Decade" - a misnomer, since the economic malaise that's lasted virtually ever since is actually more than 20 years long.

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Latin America Looks to Strengthen U.S. Trade Relations and Step Back From China

The United States has long referred to Latin America as its "backyard", and held a strong economic influence on its southern neighbors.

But someone else is moving in.

China's trade with Latin American countries has surged over the past few years, weakening the region's economic relationship with the United States. Now some of those nations - especially Brazil - want to strengthen U.S. ties to reduce their dependence on the world's second-largest economy.

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China's Five-Year Economic Plan Calls For Slower Growth

China will take steps to cool off its red-hot economy in the next five years largely by increasing domestic consumption and de-emphasizing exports, Premier Wen Jiabao announced in an online chat with the country's citizens on Sunday.

Wen, China's leading economic official, said the government's official target for average gross domestic product (GDP) growth over the next five years will be reduced to 7% annually, down from a target of 7.5% in the past half decade.

China needs to slow economic growth to curb soaring food and housing prices and to restructure its economy, even as most developed economies around the globe struggle to sustain expansion.

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Global Investing Strategies: A "Lightning-Round" Look at U.S. Stocks, the Dollar, Inflation and China

If you're a regular Money Morning reader, then you know that, d uring my appearances on national television or when I'm doing media interviews around the world, I frequently participate in something called a "lightning round " - a rapid-fire interview technique in which the announcer (and sometimes even audience members) run through a list of questions in rapid-fire order.

It's a technique that really puts you on the proverbial "hot seat." But I actually enjoy it: It forces you to think on your feet - which appeals to the former trader in me - and allows you to run through a bunch of topics in a very short stretch. In one way or another, each of these topics deals with global investing strategies.

I thought you might enjoy - and perhaps even find useful - a "highlight reel" of some of the best lightning-round questions that I've received in recent weeks, both in front of the camera and during the informal discussions that follow the presentations and broadcasts.

And we'll start with the topic that seems to be one of the most popular global investing strategies topics right now - gold.

To see what Money Morning's Fitz-Gerald sees for stocks, the U.S. dollar and inflation, please read on...

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China's Trade Surplus Goal Signals It's Time To Dance With the Dragon

China's economic model has long been dependent on exports. Over the past several decades, the country has been the world's manufacturing floor, turning the "Made in China" stamp into a common fixture of goods sold in the United States and Europe.

But now China has made a new goal: It will double its imports by 2015, reducing the trade surplus to zero and releasing itself from an export-reliant economy. Beijing this year made this goal a key part of China's 12th Five Year Plan.

This bold new target represents a major shift in the balance of global trade and a new paradigm for which the United States is not prepared, according to Money Morning Chief Investment Strategist Keith Fitz-Gerald.

"The West needs to realize that the United States is dangerously close to being completely irrelevant to the Chinese growth model," Fitz-Gerald said in an interview. "China will not live and die by U.S. demand."

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GE China Deals to Bring in $4 Billion

General Electric Co. (NYSE: GE) this week announced it would sign a series of deals with Chinese partners in energy, rail, and aviation as it strives to increase its presence in the burgeoning Chinese market. The announcement coincided with a four-day state visit to the United States by Chinese President Hu Jintao. The deals could […]

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China's Yuan Policy will be the Source of Much Discussion, but Little Change During President Hu's Visit

It's unlikely U.S. President Barack Obama will make much headway in his efforts to influence China's yuan policy when he meets with Chinese President Hu Jintao in Washington this week. President Hu made that abundantly clear on Sunday when he rejected U.S. arguments that allowing the yuan to appreciate against the dollar would help the government in Beijing tame inflation.

In response to written questions from The Wall Street Journal and the Washington Post, Hu said he favors greater cooperation with the United States on economic issues but he called the present U.S. dollar-dominated currency system a "product of the past," the newspapers reported on their Web sites.

The Chinese president said his government is fighting inflation with a package of policies, including interest rate increases, and that rising prices can "hardly be the main factor in determining the exchange rate policy," according to a transcript of the answers.

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China Monetary Policy in Focus as Reserves and Lending Surge

China's foreign-exchange reserves climbed to a world record $2.85 trillion last quarter as bank lending continued to exceed the government's annual target, putting more pressure on the central bank to increase borrowing costs to dampen down liquidity and tame inflation.

China's foreign reserves jumped by $199 billion in the fourth quarter, a much larger increase than economists expected. The People's Bank of China (PBOC) may need to raise benchmark interest rates, boost reserve requirements for lenders and allow faster yuan appreciation, as a result, according to economists from Standard Chartered Plc and Credit Agricole CIB.

"All eyes are going to be on what new policies the central bank can bring to the table,"Jinny Yan, a Shanghai-based economist at Standard Chartered told Bloomberg News. "But there's still going to be a lot of excess liquidity in the market in the first half of the year."

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2011 China Outlook: The Red Dragon Takes Its Next Step Forward

If the United States has a growth problem, China has just the opposite. The world's second-largest economy is set to grow 9-10% this year, building on its strong rebound from the global financial crisis.

Furthermore, Beijing is determined to accelerate China's transition toward a more domestically based economy, while stabilizing prices and cutting government waste.

So in addition to strong growth numbers, investors can expect more disciplined and responsible economic development.

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Progress Made on U.S.-China Trade, but Currency Roadblock Remains

The United States and China this week wrapped up a two-day meeting on trade that was aimed at cooling rising tensions between the two nations. Still, despite the progress, currency valuations and trade tariffs will continue to be a fixture of both countries' foreign policies.

The U.S. trade deficit with China this year could top $270 billion, surpassing the 2008 record of $268 billion. U.S. policymakers blame China's undervalued currency and government subsidies for the imbalance. China's disregard for intellectual property rights and bias towards its own domestic companies are also major points of contention.

In a rare show of conciliation, China during Wednesday's trade talks agreed to loosen some of its trade restrictions and better enforce intellectual-property rights on the Mainland -especially to curtail rampant software piracy that costs software makers an estimated $7.9 billion a year in lost revenue.

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Chinese IPOs Making Waves in the Market, but Beware of Bubbles

Record fundraising activity in the market for initial public offerings (IPOs) is pushing valuations for Chinese companies to sky-high levels, raising concerns about a possible bubble.

IPOs are likely to raise more than $300 billion for issuers worldwide in 2010, exceeding the previous record of $295 billion in 2007, despite the sluggish economic recovery in Western markets.

In the first 11 months of 2010, IPOs worldwide already raised $255.3 billion in 1,199 deals, according to a "Year-end Global IPO Update" report from Ernst & Young.

And the red-hot Asian markets, led by China, continued to lead the recovery, raising the most capital ever. Asian issuers have raised $164.5 billion so far this year - already surpassing the $98.2 billion raised in the peak fundraising year of 2006 and accounting for 64% of total global IPO value so far in 2010.

That's more than four times the $40 billion in IPOs completed by the second-ranked North American market. Europe was third, raising $32.8 billion, far outdistancing the Middle East and Africa's $5 billion.

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Uranium Prices Surge on China's $511 Billion Investment in Nukes

China's push for energy security is igniting a boom in the country's nuclear power plant construction, rekindling demand for uranium and leading its price higher.

China held its first International Nuclear Symposium on November 24-25 in Beijing. The meeting was packed with nuclear industry heavyweights scrambling for new contracts after the Red Dragon announced its intentions to spend $511 billion to build as many as 245 reactors in the next two decades - nearly doubling previous plans.

"Money is not an issue, which is different from the rest of the world. The Chinese have the capacity to deliver and they are deadly serious about achieving it," Steve Kidd, director of strategy and research at the London-based World Nuclear Association (WNA), told Bloomberg News.

President Hu Jintao said China aims to generate at least 15% of its energy from non-fossil fuels by 2020. Although the Chinese have invested heavily in wind farms and solar arrays, nuclear power is the only source of energy that could reach his goal.

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Chinese Investors Drive Gold Imports Five Times Higher on Inflation Fears

The gold rush in China accelerated during the first 10 months of 2010 as investors seeking protection from looming inflation drove imports of the yellow metal up nearly five times more than the amount brought in all of last year.

Gold imports rose to 209 metric tons compared with 45 tons for all of 2009, Shen Xiangrong, chairman of the Shanghai Gold Exchange told a conference held in Shanghai yesterday (Thursday).

"The government hasn't officially said that China is encouraging private gold investments, but we in the industry suspect it. And you can see the big jump in the delivered gold imports through the exchange has to be approved by them," Albert Cheng, managing director of the World Gold Council's Far East department, told Bloomberg News in an interview.

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