The China Credit Rating Change Is Completely Overblown

The China credit rating downgrade by Moody's Investors Service last week (May 24) has been viewed by some as a signal that China's economy is slowing down.

But that's not the case. In fact, investors should act quickly to gain exposure to China ahead of its $5 trillion economic initiative...

china credit ratingMoney Morning Chief Investment Strategist Keith Fitz-Gerald says Moody's credit downgrade "makes me want to roll my eyeballs."

"They missed the last [credit crisis], what makes them think they'll be right about this one?"

Today, we'll show you why Moody's has it wrong and how investing in China could mean life-changing profits for you. Plus, we'll show you one China stock ready for near 50% growth this year alone...

Don't Worry About Moody's China Credit Rating

Moody's downgraded China's credit rating from Aa to A last week, explaining that it expects China's economic growth to slow in the coming years while the government's debt grows.

"The downgrade reflects Moody's expectation that China's financial strength will erode somewhat over the coming years," wrote Moody's in its statement.

But there are two reasons we're not worried about China's credit rating downgrade.

First, ratings agencies like Fitch, Moody's, and Standard & Poor's have been wildly inaccurate in the past.

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The 2008 financial crisis in the United States is a good example of how poorly credit rating agencies performed. During the run up to the crisis, agencies like Moody's often rated mortgage-backed securities made up of risky subprime loans with their top Aaa rating.

High credit ratings like these played a major part in turning the subprime mortgage crisis into the full-blown financial crisis. You see, banks bought and sold these risky securities on the basis of their sterling Aaa ratings, and when these mortgages eventually foreclosed, Wall Street banks hemorrhaged money.

That's what led the Financial Crisis Inquiry Commission (FCIC) to write in its 2011 report on the crisis that the three major credit rating agencies - Fitch, Moody's, and Standard & Poor's - were "essential cogs in the wheel of financial destruction" unleashed in 2008.

Past failures by the credit rating agencies don't mean they'll always be wrong in the future, but we should be skeptical of their decisions.

And what's going on in China right now is a major reason to discount Moody's decision on China's credit rating...

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Second, China's about to undertake a massive new economic initiative that could reposition it as the world's economic leader.

"China's ambitions are extraordinary and unprecedented," Fitz-Gerald said.

In fact, China's ambitions are so huge Fitz-Gerald thinks they could "make you a millionaire in the next five years."

china's credit ratingThat's because China is pouring $5 trillion into an economic agenda designed to remake half the world in China's image. The "One Belt, One Road" initiative will see China expand trade with up to 68 countries across Asia, Europe, and Africa. Because China will be the country supplying the cash and infrastructure to make it work, China's economy will be the major winner.

The plan will open more than a third of global GDP to Chinese businesses, and will boost the economies along the new Silk Road so they can afford to purchase even more from China. This is a strategy that will ensure Chinese economic growth for years to come, and it's one big reason why Moody's forecast of slow economic growth misses the mark.

The new Silk Road plan is likely why Chinese investors brushed off Moody's credit downgrade last week. But it also means American investors have little time to wait to invest in China before they are left behind.

The "One Belt, One Road" initiative is already underway. Construction projects are beginning, and China just held its first forum of global leaders involved in the project. That forum sent 28 leaders to Beijing, the most since China hosted the Olympics in 2008.

Fortunately, Fitz-Gerald is bringing us one of his top China stock picks to take advantage of the coming Chinese economic boom.

Here's Fitz-Gerald's China stock play, one that's poised for nearly 50% gains this year alone...

How to Invest in China for Double-Digit Gains in 2017

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Alibaba Group Holding Ltd. (NYSE: BABA) is one of Fitz-Gerald's top China stocks. It's a great play for American investors because you get access to China's economic growth without having to worry about currency exchange rates by buying stocks in China's markets.

Alibaba is primed to take off with the new Silk Road initiative because the economic plan will open up new markets and customers to Alibaba's dominant web platform. BABA already dominates China's e-commerce industry, just like Inc. (Nasdaq: AMZN) does here, and the new Silk Road could spread its reach even further.

But Alibaba is also innovating in a way that will help it capture more global customers.

"Alibaba is working on advanced artificial intelligence, autonomous vehicles, and next-generation technologies that will bolster China's economy for decades to come," Fitz-Gerald said.

But one of its biggest areas of innovation is mobile payments. BABA's financial affiliate, Ant Financial, just bought MoneyGram International Inc. (Nasdaq: MGI). MGI is the world's biggest money transfer service.

BABA's moves into mobile payments will help it tap into new markets in the new Silk Road countries too. That's not to mention what a growing Chinese economy will do for Alibaba's profits.

BABA's already up 31% since its IPO in 2014 (when Keith recommended it), and it's going to grow even more along with China's economy. And Keith isn't the only one bullish on BABA stock. Analysts are projecting it could hit a price target of $180 this year, a 47% gain from its current price of $122.61.

Editor's Note: "Must-have" companies backed by Unstoppable Trends are a cornerstone of Keith's wealth-building strategy. But there's another type of investment he wants Money Morning Members to know about. It's one of his favorites, a kind of "desert island fund" he'd buy if he had to park his money in one place, "retire" from civilization for 20 years, and come back to a pile of money. Click here to learn more...

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