The falling Chinese stock market is a frightening spectacle, given that China has been a driving force behind global growth for decades.
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- Chinese Stock Market Is a Long-Term Play Despite Soft Growth Numbers
- Profit from This 2,000-Year Economic Pattern
- Dow Jones Today Falls 95 Points as Greek Debt Woes Continue
- Profit from China's Currency Move
- The Hottest Investment Market on Earth
- The Golden Yuan Is Coming – Here's How to Play It
- How China's One-Child Policy Will Transform the Future Global Economy
- How to Digest China's Credit Crunch Cereal
- Is This the End of Cheap Chinese Labor?
- China's Pyramid of Power
- Why China's "Blindside" Could Be A Great Buying Opportunity
The Chinese economy – the largest on the planet – faces a $5 trillion threat. And if China’s economy collapses, global markets will go with it.
The Shanghai Composite Index soared by 8% last week to its highest level since 2008 and is up about 130% over the last year.
The Shenzhen Composite Index jumped by 12% last week and is up 166% over the same period and is now trading at 66x earnings according to Bloomberg, three times the level of the Shanghai Index.
How do you spell "bubble" in Chinese?
If all you've been hearing regarding China recently is noise about its economic slowdown, you need to find a better news source.
Investors need to stop worrying over China's long-expected gradual slowdown.
Do so and you likely will see, as my guest today does, the long-term growth ahead for key tech sectors in the world's most populous nation.
The Chinese stock market bears are going to seize on the collapse in Chinese exports this month to no doubt embolden the case against investing in China.
But this just means it's an even better time to put some money in the Chinese stock market. Investors can't ignore the growth potential of China, and while everyone else is looking the other way, now is a good time to start buying.
An ancient economic pattern is about to repeat itself - one that can make you money.
Wall Street denies that there is profitability potential here. So why are the investing elite piling in?
The Dow Jones today slipped 95 points. The cause? Concerns over Greek debt and the Chinese economy offset optimism about an improving energy sector.
China's export levels slipped 3.3% from a year ago, while its imports dropped a staggering 19.9%. The announcement was far worse than economists expected and raised new concerns about the world's second-largest economy.
China's ambitions for superpower prominence are no secret.
But that requires recognition on the world stage.
Inevitably, that also means a greater role for China's currency, the yuan, in the global finance arena.
There are clear and visible signs that China's currency is on the march to that global position, yet until now they've been underreported.
China has been dominating the headlines in recent days... And not in a good way.
Since late last week, worries about slowing growth, financial-system shenanigans, and the potential for an "Asian Contagion" type spillover have whacked global stocks - and have left folks wondering if the Chinese Miracle is over.
But China's kind of like a still-young tech venture: There are going to be reversals, it's going to be volatile, and it's normal to expect this kind of whipsaw market action.
And let me tell you something else: While it's true that Beijing has some big problems to solve, investors who just write China off are going to miss out on one of the biggest profit opportunities in global technology.
Even as the broader economy there slows (meaning it's still growing - just at a slower rate than before), there's a tech-focused slice of that country's market that continues to advance at a scorching pace.
In fact, if you look at the numbers, I bet you'll agree with my assessment that we're looking at the hottest investable market on earth.
Today I'm going to tell you all about this market... and I'm going to show you exactly how to play this for maximum gain. Full Story
The U.S. dollar has been the world's de facto reserve currency for almost 90 years.
But this financial dominance may be nearing its end.
In recent years, China's been floating the idea the yuan should take on the dollar's role as the world's reserve currency.
In fact, the Chinese have already negotiated numerous bilateral trade deals that completely bypass it.
And they've even called for efforts to "de-Americanize" the global economy.
Whatever happens, China's economic rise foreshadows increased influence.
It's a trend that not only has serious implications, but also great profit opportunities, if you know what to expect...
In 1979, China implemented a one-child policy in an effort to alleviate social, economic, and environmental problems in the country.
Government officials indicate that the policy prevented over 250 million births between 1980 and 2000, and 400 million births between 1979 and 2011.
"China was a very different place back then," recalls Money Morning Global Investing & Income Strategist Robert Hsu. "It was very poor and there was overpopulation; they had to do something about it. I'm not saying that it's the best policy, but that's what they did to fix these problems. Nowadays though, the economic situation in China has vastly changed."
And changed it has - China is currently the world's second-largest economy, which is precisely why investors worry about how demographic issues there will play out globally. How will China's shrinking birthrate affect global economic growth?
Here is a simple breakdown on what China's credit crunch is, and why it's important to your wallet:
Let's begin with some shocking numbers.
China is the world's 2nd largest economy.
The Chinese stock market fell as much as 1.7% on Wednesday, and it had already reached lows unseen since the 2009 global financial crisis.
Short-term inter-bank interest rates last week reached as high as 25%.
It is an understatement to say that investors around the globe are extremely nervous as to what this all means for China's growth.
These dismal numbers all stem from the Chinese credit crunch.
China's government-controlled central bank, the People's Bank of China (PBOC), has been pulling back on feeding the banks yuan to meet the demand for money in order to combat excessive lending that was causing concerns it might overheat the economy and lead to bad investments.
Issues like creating a real estate bubble.
Sound intimately familiar? It definitely should.
It's been the lament of everyone for years now: Cheap Chinese labor is killing the job market.
With lower wages and lax regulation, the giant sucking sound we heard was manufacturing jobs headed from Sheboygan to Shenzhen.
But now China's new found riches are starting to turn in on themselves in the form of much higher wages.
In fact, The Wall Street Journal has found that over the past decade - while no one was watching - manufacturing wages in China have gone up - conservatively - by 20% annually.
And as those workers pocket ever-fatter paychecks, they're demanding more in the way of decent working conditions and better hours. And that costs money.
It's not that much different than what happened in the United States in the early 20th century. It's just that China is doing it much faster.
The selection of Mo was praised by a Chinese nationalist tabloid as a sign that mainstream China could "no longer be refused by the West for long."
Mo grew up in Shandong province in northeastern China, and during the Cultural Revolution, he left school to work in the fields, finishing his education in the army, according to The Guardian. The author draws upon his rural upbringing in his novels, mixing historical perspective with mythical elements.
His real name is Guan Moye, but he chose "Mo Yan" as a pen name meaning "don't speak," to reflect the culture in which he grew up.
The new Nobel laureate is of the same generation as the new leaders set to take over the Politburo Standing Committee next month after the convening of the 18th National Congress of the Communist Party of China.
This group of men (and one female contender) are "old enough to remember the suffering of the Cultural Revolution, but also young enough to fully experience how China has grown through Deng [Xiaoping]'s opening of the economy to market forces," says CLSA China Strategy research.
They've seen vast political reforms take place, transforming China "from a country ruled by the contradictory personal whims of Mao to one ruled through institutions and rules," says William H. Overholt in The Washington Quarterly.
During these decades, "freedoms blossomed, affecting everything from clothing to haircuts to job or marital choices to social and political speech," says Overholt.
As a result of these policies, they've been able to witness China's incredible growth, with GDP averaging 10 percent per year and more than 500 million people moving out of poverty over the past 30 years.
This is like saying the U.S. markets were in for a hard landing in March of 2009 after they had fallen more than 50%. Folks who bit into this argument and bailed not only sold out at the worst possible moment, but then added agony to injury by sitting on the sidelines as the markets tore 95.68% higher over the next two years.
People forget that the U.S. stock market - as measured by the Dow Jones Industrial Average using weekly data - fell more than 89% from 1929 to 1932, more than 52% from 1937 to 1942, and more recently experienced a decline of more than 53% from 2008 to 2009 - and that doesn't even account for four 40+% declines beginning in 1901, 1906, 1916, and 1973.
Each was a great buying opportunity, and following those meltdowns, our markets rose more than 371% from 1929 to 1932, more than 222% from 1949 to 1956, more than 128% from 1937 to 1942, and more than 95.68% in just over two years starting in March 2009 - one of the fastest "melt-ups" in market history.
People forget that world markets dropped 40%-80% in 1987. And as legendary investor Jim Rogers noted earlier this month, that was not the end of the secular bull market in stocks, either.
People forget that our nation endured two world wars, a depression, multiple recessions, presidential assassinations, the near complete failure of our food belt, not to mention the deadliest terrorist attacks the world has ever seen, and more.
And guess what? It's still been the best place to invest for the last 100 years.
So what if China backs off or slows down?
The Asian currency markets blew up in 1997. Mexico's market fabulously went up in smoke during the great tequila crisis of 1994. And Argentina failed to the tune of a 76.9% crash starting in 1997 only to give way to a 1,724.56% rally from 2001 to 2011.
Gold rose by more than 600% in the 1970s, then fell by 50%, which terrified investors at the time. It subsequently rose by more than 850%, something else Mr. Rogers noted in recent interviews, as have I.
China is undoubtedly going to have several hard landings in our lifetime. Despite the fact that China is thousands of years old, modern China is a mere 40 years old, if you consider its opening following the historic Nixon-Kissinger visit in 1972.
And today's China has 1.3 billion people -- all of whom want to live the way you do.
It's growing by an average of 9% a year or more and has done so every year for the last 41 years straight. We've just poured an estimated $7.7 trillion into our economy and the best we can do is 2.5%. The European Union (EU) is on track for 0.2% growth in 2012 after trillions in euro backing there.