Foreign multinationals are jockeying for a piece of the action in China. Investment capital is continuing to flow into Chinese enterprises, ranging from auto manufacturers to textile plants to Internet and technology companies. This trend has been emerging over the course of the past few years and by all indications, the equity markets are now firmly convinced about the validity of China as a major global economic powerhouse. For investors looking for growth, look no further than China. st century. The government may rule with an iron fist under a communist political party system, but it has a clear agenda to establish a super economy and business climate that encourages entrepreneurship and material wealth. st century will see China become a dominant economic superpower.

 

Where to Look for Growth

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Numerous industries are experiencing stellar growth. Real estate is booming on inexpensive credit, and increased prosperity has fueled an increase in private consumption that is helping to drive the economy forward. There is definitely much growth potential and money to be made in China in the coming decades.

This growth is not without cost. China is consuming the world?s commodities a torrid pace - turning oil, coal, plastics, and steel into the world?s consumer goods. To fuel the industrial growth, factories will continue to require more energy resources in the coming years. But due to limited resources within its own borders, China is looking to buy foreign oil companies as well as forming key strategic alliances with oil rich countries in places such as Africa and the Middle East. The sheer size of the population and the growth of the middle class will drive demand for energy including the massive shift from bicycles and public transportation to private vehicles.

By 2010, China could have 90 times more automobiles than it did in 1990. The annual growth rate for automobiles is 19% and could surpass the number of automobiles in the U.S. by 2030, according to The Institute for the Analysis of Global Security. China will also see a rise in demand for the heating and powering of homes as more people buy real estate and move to cities where there are building booms to try to keep pace with the mass migration of people from rural to urban areas.

China is currently the world?s second biggest user of oil at around 6.4 million barrels per day or about 32% the consumption of the U.S., according to the CIA World Factbook. In an attempt to alleviate the growing dependence on fossil fuels and promote a cleaner environment, the country has adopted a "Clean Energy Policy." For instance, China is encouraging the use of compressed natural gas (CNG) to power vehicles and natural gas for homes. Natural gas is one of the cleanest energy sources and one of China?s most abundant natural resources. The country?s annual consumption of natural gas is estimated to rise to 100 billion cubic meters by 2010 and 200 billion cubic meters by 2020 from the current 40 billion cubic meters, according to China?s 11th Five-Year Plan period (2006-2010). The consumption of liquefied natural gas (LNG) is also expected to be strong.

In the technology area, there is exceptional growth. From consumer electronic goods to IT infrastructure development, China is a fertile market for companies. A key focus is strengthening the country?s technology infrastructure to world standards including the area of e-government services, which is predicted to be significant as the country industrializes and further develops into a major world economic power. Given that China only ranks 74th out of 191 countries in e-government spending, according to the United Nations, we believe there is ample room for growth. Growth Report, we are extremely bullish on numerous facets of the Chinese economy and believe growth opportunities for investors will be broadly based. But investors shouldn?t count on China?s growth alone to create fat profits. The secret is to ignore the hype, and pick the right industry at the right time, and for the right reasons. Too many investors fall into the trap of paying top dollar for companies that have enjoyed rapid and unsustainable growth, only to later realize that they are the in the last car of a roller coaster that is about to take the plunge. China should be near the top of every investor?s watch list and increasing exposure to investments in China should be a clear goal in the near term.

 

Another area of superlative growth is mobile phones. There are currently more mobile phone users in China than there are people in the U.S. The size of the Chinese mobile phone market was an astounding 461 million subscribers in 2006, up 578% or 378 million users from 2005. Sales of mobile phones increased 40% to 120 million units in 2006 compared to a 25% global growth rate, according to the China Mobile Communications Association. In 2007, growth is expected to slow to 25% with 150 million units but it will remain ahead of the estimated global growth rate of 20%. Add in the upcoming launch of 3G mobile phones expected by the 2008 Beijing Olympics and you have tremendous growth opportunities in the area of mobile phones.

The Chinese healthcare sector is also on the verge of extraordinary growth. With 1.3 billion people, the costs for healthcare could be staggering. That is why the country is focused on improving its healthcare system in an effort to make people healthier. From promoting the benefits of dairy products to traditional Chinese medicine and a growing market for medical devices and services, healthcare should play out as a major area of growth.

The most impressive area of growth could prove to be the retail sector. Driven by rising income levels, a burgeoning middle class, and adopting a "shop until you drop" mentality, consumer spending is expected to accelerate in China. The Chinese government is encouraging wealth and spending. The retail sector in China has been on a significant uptrend. In 2006, the government lifted its tight regulatory hurdles on the ability of foreign retailers to enter into the Chinese market. With the relaxed policies, any foreign retailer wanting to expand into China will no longer be required to form a joint venture with local companies. On this note, over 1,000 applications submitted by foreign retailers have been approved, according to The Shanghai Foreign Investment Commission.