From what I can tell, I have been a lone voice in the wilderness this year about China: one of the very few analysts in the business who is steadfastly bullish on China’s economy.
Practically everyone else on Wall Street is bearish right now: China’s stock market is crashing … China’s debt bubble is about to burst … China’s economy is collapsing.
It’s all baloney! Nothing could be further from the truth, and they’re all dead wrong about China!
I travel to China frequently, and what I see on the ground doesn’t square with what you’re hearing from Wall Street analysts who have probably never ventured to the country. I’m here to tell you, rumors of its demise have been GREATLY exaggerated.
In fact, based on what I’ve seen recently, there’s no doubt in my mind that China’s economy is not only for real, it’s poised to accelerate by the end of this year and for many years to come. Plus, China’s stock market looks poised to surge higher again, too. Here’s why …
First, China’s economy IS slowing, granted. It’s just the law of large numbers at work. China’s GDP growth rate has averaged a blistering 9.7% annual pace over the past decade. However, GDP “slowed” to 6.7% last quarter, but that’s no reason to hit the panic button.
Look, China has grown into a $10.3 trillion economy today — the world’s second-largest — so naturally it can no longer grow at double-digit rates. It’s just simple math.
Second, China’s economy is still forecast to expand by 6.5% to 7% this year. That compares to average growth of just 1.7% for the world’s major developed economies including the U.S., Europe and Japan. If 6.5 to 7% growth equals a collapsing economy, I’ll take it any day of the week.
|China’s growth is still the envy of practically every
other nation on Earth in today’s slow-growth world.
The truth is, China’s growth is still the envy of practically every other nation on Earth in today’s slow-growth world.
Third, China’s economy is in the midst of a massive transition from an export-led growth machine over the last several decades, to an internal consumption-based economy today. Of course it’s not always going to be a smooth transition. There will be bumps in the road along the way, as we’ve seen.
Just like a giant supertanker, it will take time for China to turn its ship around and embark on a new course, but recent data shows Beijing is succeeding in this transition.
China’s new consumption-led economy is on course, just look at the results for yourself.
* Last year, rural incomes exploded higher, rising 8.9%, and quickly catching up with urban income levels in the country.
That means over 600 million upwardly mobile Chinese consumers are opening up their wallets.
* Sure enough, retail sales in China averaged a scorching 10% growth rate so far in 2016. That’s miles ahead of U.S. retail sales, which flatlined at 2.7% year to date.
And it’s not just big-city folks in Beijing and Shanghai buying the latest, greatest smartphone, either.
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* China’s fast-growing rural countryside is where the real story is, as consumption jumped nearly 12% at year-end 2015 over the year before.
And owning a home isn’t only an American Dream anymore either … it’s a dream that’s coming true for millions of Chinese consumers also …
* Compared with U.S. housing starts, China’s housing market is expanding almost twice as fast as the U.S. New home prices surged higher last month in 60 out of 70 of China’s main urban centers, and prices are soaring even more in rural areas.
This is just the opening act of China’s new consumption-led economic growth story.
The World Economic Forum forecasts that Chinese consumption is about to explode an estimated 50% higher over just the next four years. Soaring to $6.5 trillion, up from the $4.2 trillion Chinese consumers spent last year. Is it any surprise that China is now the world’s largest automobile market?
It won’t be long before China will be the world’s biggest spender on all kinds of consumer goods and services. And sooner than you think.
Yet China’s Shanghai stock market is down nearly 44% since it peaked last year, in June 2015. That’s because most global investors, who have never set foot inside China, believe the gloomy headlines and steer clear of China’s stock market.
That’s a major missed opportunity that you and I can capitalize on.
China’s stock market has already bottomed. A major indicator for me: It’s always lonely at the bottom, when the blood is running in the streets. No one wants to touch Chinese stocks with a ten-foot pole — and in my book — that is precisely the time to buy with both hands.
Mark my words: All of my economic and cyclical models tell me that China’s economy will not only keep growing, but also soon surpass the U.S. economy in size. And its stock market will more than DOUBLE over the next three years!
Now is the time to buy China, but a word of caution is warranted: Don’t get suckered into the faded glory of China’s stodgy, old, state-owned enterprises. These blue-chip stocks may have led the charge higher during China’s export-led boom last time, but now the game has changed.
China’s new consumption-led economic machine means a whole new crop of smaller, nimbler stocks could be the big winners this time around. And these are precisely the stocks I’ll be recommending to readers of my Real Wealth Report as China’s economy and financial markets continue to boom in the years ahead.
Best wishes, as always …
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