Jim Rogers: Pick Up the Phone and Call China. Is This a Party Line?
Free-thinking financier Jim Rogers has professed his unwavering faith in China once again, eschewing dreary economic forecasts for renewed opportunities in a market that still has a long way to grow. According to Asian Investor, during the Asian Financial Forum in Hong Kong on Monday, Rogers generously heaped praise on the mainland amidst over 1,000 corporate executives, politicians, global investors, and other business leaders. “The 21st century is the century of China and the mainland is going to be the new political and financial center of the world,” he said. But what about the tumbling economy and rising unemployment in China? Rogers brushed these off as short-term setbacks. “Don’t think it is the end of the story,” he said. “You should pick up the phone and get involved in China.”
These are refreshing sentiments amidst the recent onslaught of China-centric doom and gloom: bird flu is ruining the Lunar New Year, college graduates may have to return to the farm, unemployed migrants are threatening public security, 2009 growth is only expected to reach 5.5 percent, Obama’s not a foreign policy miracle-maker after all, and now all the twenty-somethings are going to rehab for their web addictions. To summarize, the news has not been good. Despite this, I’m going to agree with Jim here, who has been making the right moves- both financially and in life, generally- far before he ever got on that that motorcyle. Here’s why:
China’s cities provide a new playing field in urban infrastructure and future investment. I happen to live in what is commonly known as the “greatest city in the world”- a city with crumbling avenues, ancient public transportation systems, aging and ill-conceived skyscrapers, and very little room for real estate. China’s cities, on the other hand, are either glittering or promising- it is still very much a clean slate. Sure, there are still a few kinks to work out- sick buildings and lack of water treatment systems, for instance. But, even though the country has 5,000 years behind it, the urban landscape is relatively new in comparison with the rest of the world. Additionally, Beijing has recently committed $600 billion to infrastructure, health, education and housing projects in 2009. That’s good news for everyone.
Strong Economic Growth. That’s right, I said it. Even if China were to see a mere 4% at the close of 2009, that’s still a lot better than predictions for most other countries. It would be impossible and financially unsound to expect continued GDP growth at upwards of 9%. In this economy, 4% isn’t too shabby and 5.5% would be pretty darn good. It is also important to consider that China has the world’s largest foreign reserve (approx. $2 trillion) and minimal bad debt, making them less vulnerable to deleveraging.
As Seeking Alpha pointed out, “Chinese stocks are cheap. Based on the MSCI China Index, the average Chinese stock trades for less than eight times earnings.” And from what I hear, commodity trading for long-term investors is the way to go. However, unlike Jim Rogers, oil would not be one of my hot picks but carbon may end up leading you to a pot of gold. As I warned in an earlier post, just be careful and don’t come looking for me if it doesn’t work out. Finally, if you are looking at real estate, prices have dropped significantly over the past four months and downpayments have been reduced from 30% to 20%. One added bonus- foreign “experts” will now be able to obtain permanent residency in Shanghai.
During an interview with Money Morning back in April, Jim had said that “China’s long-term prospects are so strong that even a civil war, an economic collapse or political assassinations would only temporarily delay its emergence as a world economic powerhouse.” It’s been nearly ten months since that interview and while the threat of those calamities may loom a little closer now, China’s future remains poised for unimaginable successes. The country is already a “world economic powerhouse” with a capacity to dominate the global market in future decades. My advice? Invest carefully. Learn Mandarin. And finally, play nice.