China’s Economy and ETFs at a Crossroads

November 22, 2009 at 1:00 am by Tom Lydon

China’s economy appears to have pulled itself out of the global recession at a steady clip, but will related shares and exchange traded funds (ETFs) be able to maintain the gains?

The Year of the Ox may be the Year of the Bull instead. Among the reasons to like China as an investment opportunity include:

On an annualized, quarter-over-quarter basis, fourth-quarter growth was around 4%, indicating a growth pattern.
Industrial production and imports are growing relative to exports and their trade surplus, which has begun to shrink dramatically.
About 6.7 million jobs have been created, and the job market remains strong and supportive.

In the long run, China is at a fork in the road.

Chris McMahon for SFO Magazine reports that if China’s recovery and strengthening are based on less reliance on low-cost exports, that shift would obviously increase the cost of goods for consumers in the United States and elsewhere. (Issues that could hinder a recovery).

On the other hand, a stronger domestic Chinese economy could put upward pressure on commodity prices and choke off a recovery in the rest of the world’s economies. (Other reasons China’s economy is faring well).

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