Observers are noting the rise of China while other countries are languishing. Still, China’s economy and related exchange traded funds (ETFs) could be hindered if the country’s domestic issues are not addressed.
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.