The U.S. trade deficit grew to a more-than-expected $36.5 billion in September, and 60.5% of the deficit was to China alone, writes Justin Fox for TIME. The U.S.-China economic relationship won’t be resolved anytime soon because of U.S.-based corporations selling products that were partly or entirely made in China. The more important fact, however, is that there is no way to ignore a rising political and military power like China. (Reasons to watch China).

The trade model between China and the United States remains unchanged, with China keeping the yuan artificially low and focusing on its export industries while the United States incurs a higher trade deficit and more debt, remarks Mark Trumbull for The Christian Science Monitor. (Is a strong Chinese yuan a good thing?)

Obama has not shown any pushback against China’s seemingly non-free market policies, despite promises on a tougher stance on China. However, economists are doubtful that any pushback would occur, citing several reasons:

• The tougher approach could result in higher-priced goods for U.S. consumers and the protectionism would rapidly spread to other nations, putting up trade barriers.
• China’s manufacturing power is not slowing one bit.
• An adjusted yuan won’t necessarily help U.S. manufacturers.
• The United States doesn’t have much leverage on China since China is the country’s main lender.

U.S. trade representative Ron Kirk stated that the United States wants trade and investment barriers removed to promote an open global trade system and Obama wants the United States to pursue “pragmatic cooperation” with Beijing, according to BBC News. Obama also urged Asian countries to break away from their dependence on exports and pursue “balanced,” sustainable growth.

For more information on China, visit our China category.

• iShares FTSE/Xinhua China 25 Index (NYSEArca: FXI): up 58.2% year-to-date

• SPDR S&P China (NYSEArca: GXC): up 66.8% year-to-date

• PowerShares Golden Dragon Halter USX China (NYSEArca: PGJ): up 65.9% year-to-date

• Claymore/AlphaShares China Small Cap (NYSEArca: HAO): up 96.5% year-to-date

• Claymore/AlphaShares China All-Cap ETF (NYSEArca: YAO): recently launched

Max Chen contributed to this article.

Many politicians and intellectuals feel that the balance of power is shifting from the United States to China and some believe that the co-operation of the near-equals could solve world’s woes, according to The Economist. (Reasons to watch China).

China is the world’s biggest holder of American debt, which gives the country a unique hold on the American economy and reserve-currency status. Nevertheless, China will continue to lend to America and talks about the Chinese yuan becoming a world reserve currency may be just that.

With the Occident in a less-than-satisfactory state, Chinese companies may push to lift the trade barriers on high-technologies imposed by the West and start to court America’s high-tech industries. Perhaps, China may soon have a more permanent presence in the United States in areas such as the car industry.

Some Chinese leaders have voiced caution over the stability of China’s recovery. Yu Yongding, former adviser to China’s Central Bank, argues that wasteful spending on unnecessary infrastructure projects could drain the country’s fiscal strength, which would leave China with “no more drivers for growth.” (Things China needs to grow).

China is still grappling with many issues that need attention inside the country including rising protests, corruption, surging crime and leaders who fear their own citizens. If you’re invested in China, be sure to have a strategy for both entry and exit. It’s a country with tremendous growth potential, but it’s not without its issues, either.

For more information on China, visit our China category.

• iShares FTSE/Xinhua China 25 Index (NYSEArca: FXI): up 57.3% year-to-date

• SPDR S&P China (NYSEArca: GXC): up 66.2% year-to-date

• PowerShares Golden Dragon Halter USX China (NYSEArca: PGJ): up 62.5% year-to-date

• Claymore/AlphaShares China Small Cap (NYSEArca: HAO): up 93.3% year-to-date

• Claymore/AlphaShares China All-Cap ETF (NYSEArca: YAO): up 7.1% in the last week; YAO launched on Oct. 19 (read about it here)

Max Chen contributed to this article.

The U.S. dollar has hit a 15-month low against a basket of major currencies today on positive economic news from Asia. The feeling that the Fed won’t raise rates anytime soon and the fact that central banks will continue to provide liquidity could continue to pressure the dollar, reports Bradley Davis for The Wall Street Journal. PowerShares DB U.S. Dollar Index Bearish (NYSEArca: UDN) is down slightly this morning.

Treasury Secretary Timothy Geithner said today that he’s encouraged by the efforts Japan and China have made to increase internal demand instead of relying on Americans. It’s a shift, he said, that could contribute to more stable growth. iShares FTSE/Xinhua China (NYSEArca: FXI) is up about 0.25% this morning.

Homebuilder exchange traded funds (ETFs) are trading as high as 4.5% this morning on news that Toll Brothers (NYSE: TOL) new contracts are up 42%. The luxury homebuilder also expects fourth-quarter revenue to top expectations. SPDR S&P Homebuilders (NYSEArca: XHB) is up 3.2% this morning. For more stories about real estate, click here.

UPS (NYSE: UPS), the world’s largest package delivery service, said this morning that it expects volume to grow next year amid economic recovery. The company also said it may raise shipping rates next year, and the size will be announced in December, reports Harry Suhartono for Reuters. iShares Dow Jones Transportation Average (NYSEArca: IYT) is up about 1.5% today; UPS is 8.2%. For more stories on the transportation sector, click here.

There are three reasons in particular to watch China as its economy continues to evolve into a global powerhouse:

• In October, Chinese manufacturing rose at its fastest pace in 18 months.  China’s PMI was at 55.4, marking the seventh straight month that the index has risen, reports Chris Oliver at MarketWatch.

• Export orders climbed to 55.6 from 54.4, the fifth straight month of gains, and the most robust pace seen since June 2007.

• The government has said that gross domestic product increased by 8.9% in the third quarter and 7.9% in the second. (Five things China needs).

• A sharp rebound in new housing construction starts in September boded well for the months ahead, reports Kathrine Hille for The Financial Times.

• China’s economy has been strengthening on improved domestic demand, a nice change for the export-driven country. (More about China’s economy).

• The nation’s contribution to global economic growth in 2008 amounted to 22%, surpassing the United States to be the world’s number one contributor, states Wang Zongkai and Xie Peng of China View. That figure is expected to reach 50% this year.

For more stories on China, visit our China category.

• SPDR S&P China (NYSEArca: GXC): 55.8% year-to-date

• iShares FTSE/Xinhua China 25 Index (NYSEArca: FXI): up 47.5% year-to-date

• Claymore/AlphaShares China All-Cap ETF (NYSEArca: YAO)

Kevin Grewal contributed to this article.

South Korea’s growth in the third quarter was at its quickest rate in more than seven years, accompanying China and Singapore in reporting faster growth during the September quarter, reports Gillian Murdoch for Reuters. (How to capture China’s growth).

• iShares MSCI South Korea Index (NYSEArca: EWY)
• iShares FTSE/Xinhua China 25 Index (NYSEArca: FXI)
• iShares MSCI Singapore Index (NYSEArca: EWS)

Japan, Singapore, Hong Kong, Thailand and Taiwan all officially exited a recession in the second quarter.

• iShares MSCI Japan Index (NYSEArca: EWJ)
• iShares MSCI Hong Kong Index (NYSEArca: EWH)
• iShares MSCI Thailand Invest Mkt Index (NYSEArca: THD)
• iShares MSCI Taiwan Index (NYSEArca: EWT)

Japan, however, grew 0.6% in the second quarter – less than expected. (Small-cap plays for Japan).

Singapore’s economy expanded in the second quarter at its fastest rate in almost six years, as a result of a surge in biomedical production and construction. (Sectors pushing Singapore’s growth)

Hong Kong pulled out in the second quarter after its economy grew at a faster-than-expected 3.3% from the previous quarter. (Is Hong Kong facing a correction?)

Thailand’s economy grew 2.3% in the second quarter from the first quarter on a recovering manufacturing sector. (Reasons to watch Thailand)

Taiwan’s economy saw growth for the first time in a year during the second quarter. Officials expect rising demand from China to support the island’s recovery. (Why Taiwan’s heating up).

• iShares S&P Asia 50 Index (NYSEArca: AIA)
• BLDRs Asia 50 ADR Index (NasdaqGM: ADRA)

For more information on Asia, visit our Asia category.

Max Chen contributed to this article.

The joblessness attributed to the weakened export-oriented industries has been supplemented by job opportunities in infrastructure-related employment, writes Ted Plafker for The New York Times. Exports dropped 22% in the first half of 2009 compared to the same period last year. (How to capture China’s growth).

How can China right itself?

• While many believe Chinese growth is poised to come out around 8% this year, the country needs to fix its dependency on exports and fixed-asset investment, and start increasing domestic consumption in the long run.
• Some argue that widespread change won’t occur until fundamental reforms like a liberalization of the labor market and financial services take place. (Play Russia and China’s gas deal).
• In an attempt to quickly fix the economy, the government overlooked the struggling small- and medium-sized companies, which number around 60 million and provide half of China’s tax revenues, two thirds of total exports and three quarters of new jobs. Only the well-connected larger companies were able to get the quick cash fix needed. (Is China in a bubble?)
• John Frisbee from the U.S.-China Business Council believes China is expanding its industry domain into other sectors not previously associated with “made in China.”
• According to Steve Henn for Marketplace, China Investment Corp. has been on a buying spree, picking up mines and energy companies around the world. Philip Levy, an economist at American Enterprise Institute, says China is worried about its lack of natural resources.

For more information on China, visit our China category.

• iShares FTSE/Xinhua China 25 Index (NYSEArca: FXI): up 52.4% year-to-date

• Claymore/AlphaShares China All-Cap ETF (NYSEArca: YAO): YAO launched on Oct. 19 (Read about it here)

Max Chen contributed to this article.

According to Gary Gordon for ETF Expert, there is a slight discernible difference between the five largest net exporters and net importers as shown in their respective ETF growths.

Net importers’ five-year total % change:

• Vanguard Total U.S. Market (NYSEArca: VTI): 12.8%
• iShares MSCI United Kingdom (NYSEArca: EWU): 10.7%
• iShares MSCI Spain (NYSEArca: EWP): 91.7%
• iShares MSCI France (NYSEArca: EWQ): 35.1%
• The India Fund (NYSE: IFN): 129.4%

Net exporters’ five-year total % change:

• iShares FTSE China 25 Index (NYSEArca: FXI): 173.9%
• iShares MSCI Germany (NYSEArca: EWG): 53.9%
• Central Europe/Russia Fund (NYSE: CEE): 91.3%
• iShares South Korea (NYSEArca: EWY): 90.5%
• iShares MSCI Netherlands (NYSEArca: EWN): 46.3%

The data shows that percentage gains are leaning toward exporters and developing countries, more export-dependent, are producing larger percentage returns.

Gordon makes the distinction that successful investing in seemingly export-type countries is more dependent on overall economic growth and less to do with the large “net exporter” moniker.

For more information on ETF trends, visit our trend following category. Read more of Gary Gordon’s ETF observations at ETF Expert.

Max Chen contributed to this article.

According to Patricia Oey at Morningstar, China’s Shanghai Composite Index is up 60% year-to-date, the nation is expecting to see GDP grow by 8% and price/earnings ratios for China ETFs are at year-to-date highs, around 18 times trailing 12-month earnings, but still below highs of around 28 times, reached in 2007. (How to play China).

When considering China it’s important to keep in mind both the political and economic risks involved in investing in an emerging market.  With the vast array of ETFs on the market, China is relatively easily accessible. (China in a bubble?)

For more stories on China, visit our China category.

• iShares FTSE/Xinhua China 25 Index (NYSEArca: FXI): up 52.5% year-to-date

• SPDR S&P China (NYSEArca: GXC): up 61% year-to-date; heavily weighted in financials, telecom and energy

• PowerShares Golden Dragon Halter USX China (NYSEArca: PGJ): up 60.7% year-to-date; enables investors to invest in companies listed in the United States

• Claymore/AlphaShares China Small Cap (NYSEArca: HAO): up 91% year-to-date and offers investors fairly balanced sector weightings

• Claymore/AlphaShares China All-Cap ETF (NYSEArca: YAO): YAO launched on Oct. 19 (read about it here)

Kevin Grewal contributed to this article.

Xiong Bilin, a top economic planner, said the growth rate for January-September would be more than 7%. September showed improving trade, housing sales, manufacturing and car sales, reports Elaine Kuternbach for Associated Press. The official numbers will be released tomorrow. China is also on pace to surpass its target growth rate for 2009. (Is China in a bubble?)

Such growth is helping offset falling trade and export numbers, reports Elyse Andrews for Cabot. Other facts continue to support the health of China’s economy, according to The CIA World Factbook:

• The opening of trade routes in the 1970s, and a market-oriented economy has taken China’s growth from a centrally-oriented system to a world power.
• The currency has been tightly linked to the U.S. dollar, however, re-valued currency has taken the renminbi up 2.1% against the dollar.
• In capital terms, the country is still lower-middle income dominated. The government faces challenges to sustain this and keep growth moving in the right direction.

How to play China with ETFs:

• Claymore/AlphaShares China All-Cap (NYSEArca: YAO): Began trading on Monday; the fund had trading volume of more than 1.3 million shares, making it the 11th largest first-day volume for a U.S.-listed ETF ever. (Read more about this ETF).

• Claymore/Alpha Shares China Small Cap (NYSEArca: HAO): up 88.7% year-to-date; small caps tend to do better in a recovery than large caps because they’re more nimble and quicker to react to changing economic conditions. (Read more about small-caps).

• iShares FTSE/Xinhua China 25 Index (NYSEArca: FXI): up 54.2% year-to-date

• SPDR S&P China (NYSEArca: GXC): up 62.5% year-to-date

• PowerShares Golden Dragon Halter USX China (NYSEArca: PGJ): up 64.6% year-to-date

For more stories about China, visit our China category.

Investment sage Jim Rogers has exhibited his perspicacious judgment in the marketplace and identified three prominent secular trends: America’s diminishing economic prowess, emerging Chinese power and increased emerging market demand for commodities, writes John Curran for Time Magazine.

Rogers believes that the current bullish commodity cycle started 11 years ago and says that commodity bull markets usually last 18 to 20 years. He is currently more interested in the potential of gold and particularly silver. (Go here for the rundown on  commodity ETFs).

• SPDR Gold Shares (NYSEArca: GLD): up 20.4% year-to-date
• iShares Silver Trust (NYSEArca: SLV): up 56.8% year-to-date

Heather Bell for IndexUniverse offers some noteworthy tidbits from Jim Rogers’ recent speech at ETF Securities‘ mini-conference and Q&A.

China. The Chinese want to live like us and they are eager to work for it. They save more and the U.S. owes them a lot of money. According to Rogers, the Chinese are “among the best capitalists in the world.” The only foreseeable problem is with the country’s water supply, which China is actively correcting. (Read more stories on China here).

• iShares FTSE/Xinhua China 25 Index (NYSEArca: FXI): up 48.3% year-to-date

Ben Bernanke? Rogers is appalled by current governmental policies and holds the Federal Reserve chairman accountable for the devaluing of the dollar. In the mid- or long-term, the United States will be suffering from the effects of the wanton monetary policy.

U.S. dollar. People are selling the dollar and a possibly unsustainable bubble will occur, and we all know what happens to bubbles. (How to play a weak dollar).

• PowerShares DB Dollar Bearish (NYSEArca: UDN): up 7.7% year-to-date

Commodities. An increasing population is using up a finite amount of available commodities. Basic supply and demand should dictate the obvious. Rogers goes on to point out that war can result in an attempt to compete for diminishing resources, although war tends to drive up commodities prices.

• iShares S&P GSCI Commodity-Indexed Trust (NYSEArca: GSG): up 8.6% for the year

U.S. government bonds. Rogers deems short-term bonds “okay,” but advises long-term bonds as unsound. (The issues of bond ETFs).

• iShares Lehman 7-10 Yr Treasury Bond Fund (NYSEArca: IEF): down 3.9% year-to-date; yields 3.7%

Max Chen contributed to this article.

For full disclosure, Tom Lydon’s clients own shares of GLD and SLV.