China – Is China A Truly Free Economy?

| June 5, 2009 | 0 Comments

American soldiers put their lives on the line every day.  They’re protecting our country.  They ensure our safety and guarantee the freedom America cherishes so deeply.  These are brave men and women are selflessly fighting for freedom.

My cousin and her husband are both in the military.  They’re serving their third tour in Iraq.

It’s been years since I’ve seen them… but I often think of them and pray for their safety.

Most Americans have no idea how difficult the struggle for freedom is.  Our fight for freedom took place back in the 1700s.  We waged our war for independence and freedom more than 200 years ago.  Since then, our country’s grown significantly in size.

The fight for freedom isn’t over however.  Around the world, others are taking up arms trying to establish their rights.  Now I know what you’re thinking… how does this relate to investing?

Just give me a moment and I’ll explain.

Yesterday, June 4th is an important date in the fight for freedom.

On that day twenty years ago, Chinese military troops crushed peaceful demonstrators in Tiananmen Square.  I’m old enough to remember the event.  The news of the protests started days earlier.  The demonstrators were peaceful.  Then the crackdown started.  Thousands were killed.

I still remember the picture of a lone man standing in the middle of the street.  He wore a flowing white shirt and was holding a plastic bag.  He alone stood in front of a line of tanks.

Those images will be with me forever.

This was the start of an underground Chinese revolution.  In the aftermath of the massacre, the hard line communist government started softening their stance.  They opened up economic freedoms.  It was like a falling snowflake.  As it fell it gathered speed and built into a snowball.  That snowball built into the avalanche that is the Chinese economy.

Just 20 years ago, China was a poor nation.

University students received coupons for meals.  They were allowed one meal a day with meat.  Now KFC and McDonald’s are opening up restaurants all over the place.  The ideal of economic freedom and consumer choice is running rampant.

The economic giant sleeping within China has been awakened.

Does that mean their society is free?

Not by a long shot.  Personal freedoms are always at risk.  But the economic freedoms now available in China are creating growth and prosperity never seen before.  And it’s an economic trend that can’t be stopped.

Within the next 20 years, China and the US will share global economic power.  Twenty years after that, China will be a new global economic giant.

The statistics on China are absolutely amazing.

I won’t bore you with details about the size of the economy.  I won’t talk about imports, exports, or GDP growth rates.  It’s all interesting.  But here’s the point.

We can profit from this economic growth… without moving to China.

The iShares FTSE/Xinhua China 25 Index (FXI) trades right on the US exchanges.  It’s an ETF holding 25 of the largest and most liquid Chinese companies.  This ETF alone is investing $7 billion dollars in these companies.  It’s just the start.

I look at this Xinhua index like the Dow Jones Industrial Average.  The Dow was started more than 100 years ago and is now widely used to represent the US markets and the strength of the economy.  The Xinhua China 25 Index is just like the Dow.  Over time, it will become the standard to measure the Chinese market and economy.

These are the companies best positioned to take advantage of the growth in the Chinese economy.

As the economy grows, so will these companies.

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Category: Foreign Markets

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The Dynamic Wealth Report works with a number of staff writers and guest experts who specialize in everything from penny stocks to ETFs to options trading. These guest analysts post under the 'staff writer' moniker for ease of use.

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