Amid inflation and rising food prices, China’s government is steady at the helm. Now is a good time to buy Chinese stocks.

— Yiannis Mostrous, Global Investment Strategist

China’s annual growth rate in gross domestic product (GDP) is 9.7%, higher than any other major economy. It also has the highest short-term interest rate at 6.31% and the second-highest inflation rate at 5.5%. In fact, May’s annualized inflation rate of 5.5% is China’s highest in almost three years (since July 2008) and economists expect Chinese inflation to peak in June at over 6%. 

Despite China’s high interest rates and inflation, its economy keeps chugging along with May industrial production up a better-than-expected 13.3%. In response, the S&P 500 index today is experiencing its largest gain in almost two months. More and more, the fate of the U.S. stock market depends upon what happens 7,000 miles away in China. Fortunately for the U.S. market, things are looking up for China. Yiannis Mostrous, lead advisor of Global Investment Strategist, the market-beating emerging market investment service, recently told his subscribers:

We maintain our forecast for a mild slowdown in Chinese economic growth this year and lower inflation in the second half of the year. Once inflation moderates, the Chinese government will ease off its measures to tighten its monetary policy, providing a lift to the markets.

When most investors think of China, they think of an economy full of low-grade manufacturing plants staffed by cheap labor that pumps out goods destined for the United States. It’s true that many products we buy here in the U.S. have a “made in China” marking on them somewhere. But investors who focus only on those Chinese companies that export to the Western world are missing out on much of China’s true growth potential. 

BCG Report on the Boom in Chinese Domestic Consumerism

A new report published in the Harvard Business Review by members of the consulting firm Boston Consulting Group (BCG), presents persuasive evidence that the real money to be made in China will come from investing in companies focused on consumer demand in China and the rest of Asia, not in export-driven companies. Consider the following facts:

• In 2009, trade within Asia amounted to 44 million shipping units, whereas the trade between Asia and North American and Europe combined equaled only 35 million units.

• China is already the world’s number-one consumer of: 
  • Automobiles (22% compound annual growth 2005-09)
  • Bikes and motorcycles (7%)
  • Luxury good (19%)
  • Mobile phone (22%)
  • Shoes (12%)

• China is the second-largest consumer of: 
  • Consumer electronics (15%)
  • Home appliances (12%)
  • Internet services (63%)
  • Jewelry (13%)

• China has 90 cities with a middle-class population of at least 250,000 whereas the U.S. and Canada combined have fewer than 70.
• By 2020, 800 Chinese cities are forecast to have per-capita real disposable incomes greater than that  of Shanghai today.

The BCG report urges U.S. multinational corporations that want to sell to the growing Chinese middle class to establish a foothold NOW in China because waiting will result in domestic Chinese companies obtaining an insurmountable lead that U.S. companies will never be able to surpass.

U.S. Companies Doing Business in China

Most U.S. companies just don’t understand the urgency, but BCG names a few that have successfully established a defensible foothold in the domestic Chinese market and which may be worthy of your investment dollars:

The best investment plays on growing Chinese consumerism, however, are probably Chinese companies themselves. But which ones?

Find the Best Chinese Stocks Focused on Domestic Consumer Demand with the Help of Global Investment Strategist

Yiannis Mostrous scours the globe for the foreign stocks with the highest return potential. They could be in Europe, the Far East, Latin America, or Africa.

Right now, Yiannis recommends several Chinese stocks in his long-term growth portfolio. To find out the names of these Chinese plays on domestic consumer demand – along with all the foreign markets and individual foreign stocks Yiannis likes best right now — give Global Investment Strategist a try today!