With Chinese New Year’s coming up on Monday, I have been focusing on China. The country has rapidly become one of the top tourism markets in the world for both domestic and international travelers. The country has been steadily building its road, rail, and air infrastructure aimed at make traveling in the country much easier.

China is predicted to see major growth in its domestic travel from now until 2013, according to research report, China Tourism Industry Forecast to 2012, by traveldailynews.com.

As income levels rise in this country, we are seeing a corresponding increase in domestic travel. The country’s domestic travel market could be worth approximately RMB 3.9 trillion or about US$590 billion by 2020, according to a report published by The Boston Consulting Group (Taking Off: Travel and Tourism in China and Beyond). The country will see strong growth in its inbound travel industry from 2011 to 2013 that will be driven by overseas investment and the influx of foreign companies, according to traveldailynews.com report China Tourism Industry Forecast to 2012. But, while higher-end hotels like the Hilton are desirable, the cost is often out of reach for the majority of domestic and foreign visitors. I like the budget end of the hotel side similar to the Days Inn, Super 8 Motels, Howard Johnston, and Holiday Inns in the United States.

China has a population of about 1.34 billion people; over four times the size of the United States. The size of the middle class is over 300 million and this is expected to grow exponentially. The World Bank estimates that, within five years, there will be 542 million middle-class consumers in China. I have heard estimates of up to 700 million! And as wages increase so will the spending on non-essential items such as travel and recreation.

The Chinese economy saw its GDP slowed to 9.1% in the third quarter, down from 9.5% in the second quarter and over 10% in 2010. The Chinese economy may be slowing, but the growth is still staggering given the muted growth in the United States and Europe.

The reality is that the Chinese consumer is continuing to spend money. In September, retail sales in China grew a staggering 17% versus a muted 1.1% in the U.S.

To handle the expected increase in travel, there is a push to build more hotels and motels across the vast country.

I like Chinese travel stocks, including China Lodging Group, Limited (NASDAQ/HTHT), Home Inns & Hotels Management Inc. (NASDAQ/HMIN), and 7 Days Group Holdings Limited (NYSE/SVN). Note that these are not recommendations to buy; just an example of stocks to look at.

All three companies have above-average long-term share appreciation potential, but 7 Days Group is more interesting due to its better valuation versus the other two rivals.

7 Days Group is the third largest national economy hotel chain in China. The company offers limited services under the “7 Days Inn” brand, similar to budget hotels and motels in the U.S. In the third quarter of 2011, the company added 116 net hotels. As of September 30, 2011, 7 Days Group operated 838 hotels spread across 127 cities and 83,487 rooms. In addition, growth is expected to be strong, with 251 hotels in the pipeline.

7 Days Group may or may not have the greatest potential of the three stocks. Only time will tell, but what is for sure is that the travel sector in China is a key growth area.

I truly feel China continues to be the place to make money going forward, which you can read more on in China: On the Offensive Again.

China is growing exponentially in many areas. An area that is growing at an incredible rate is the mobile phone sector, where growth is enormous and there are currently more than 842 million users. Think about it. There are more mobile users in China than the population of the U.S., the European Union, and Canada combined!

Based on my economic analysis, these are exciting times for China’s mobile market, as the regulators, in an effort to increase competitive powers, are allowing three major carriers in China. The adoption of the next generation third-generational (3G) and fourth-generational (4G) networks will also help to drive additional growth in China’s mobile phone market, as there will be a need for new phones.

China will spend $40.0 billion over the next two years on its new 3G mobile communications networks, according to the Ministry of Industry and Information Technology.

The income demographics support the spending. In a recent research finding, Credit Suisse predicted that the household wealth in China will double to $35.0 trillion by around 2015 based on achieving sustainable GDP growth at or near the current levels. This will allow consumers to spend on more non-essential goods and services such as mobile phones.

A top mobile company in China is China Mobile Limited (NYSE/CHL). With a current market capitalization of around $180 billion, the company is massive. For instance, by comparison, AT&T Inc. (NYSE/T) is the largest mobile provider in the U.S. with a market cap of $182 million and Verizon Communications Inc. (NYSE/VZ) has a market cap of $101 billion.

China Mobile is one of the largest companies in China and would rank high in the U.S. market. It is the market leader and can be considered a “widow” stock for long-term buy-and-hold investors. China Mobile is ranked the top brand in BusinessWeek’s “20 Best China Brands.” The stock pays an annual dividend of $1.85, for a current yield of 4.1%, based on the prevailing stock price of $44.80.

The company has about 600 million subscribers—71% of all mobile users in China. The company is the world’s largest provider of cellular services based on subscribers and has set its sights on expansion outside of China.

Expansion outside of China has been a focus. China Mobile owns Bertrange-Luxembourg-based Millicom International Cellular S.A. (Pink Sheets/MIICF), a telecom operator with about 8.4 million subscribers and 17 mobile operations in 16 countries, including: El Salvador, Guatemala, and Honduras in Central America; Bolivia and Paraguay in South America; Chad, the Democratic Republic of Congo, Ghana, Mauritius, Senegal, Sierra Leone, and Tanzania in Africa; Pakistan and Sri Lanka in South Asia; and Cambodia and Laos in Southeast Asia.

Going forward, China Mobile will benefit from its 3G and 4G telecommunications technology license in China.

You can also look at the makers of mobile accessories and builders of telecommunication networks in China. As you can see, the Chinese mobile market is massive and worth a look.

China is the second-largest economy in the world and is continuing to roll along at a nice pace. The International Monetary Fund (IMF) recently downgraded U.S. GDP growth to 2.3% this year from the previous 2.9% but concurrently raised China’s GDP growth to 9.9% this year—up from the previous 9.7%. This is why you need money in China.

The results reflect the significant growth difference between China and the U.S. and Europe. China is continuing to roll along at high speeds, but it must be controlled.

And while the growth is impressive, my economic analysis is simple: the superlative GDP growth is great, but the problem is the associated inflation that often surfaces as consumers spend more, and we know that spending is spreading like wildfire in China.

In April, the country’s consumer price index (CPI) was 5.3%—slightly lower than its March 32-month high of 5.4%, but still high by any standard. The CPI acts as a good way to gauge inflation. The average inflation rate in China from 1994 to 2010 was 4.3%, so there needs to be some work done here to relieve the inflationary pressures.

The reality is that prices continue to rise as consumers continue to spend, so we expect more tightening via either higher interest rates or higher bank-reserve requirements in China (or both).

Moreover a report that was just released indicates that real-estate values in China continue to rise in many of the tier-one and tier-two cities. This will force the government to look at further tightening, as some of the rise is due to speculative buying.

Interest rates continue to ratchet higher, and I expect the upward move to continue. The Chinese government has placed a cap on certain food products and subsidizing some of the poorer rural workers.

Traders in Asia are probably encouraged by the Chinese government’s battle against inflation and to control the rate of growth. China needs to make sure to keep its course and tackle inflation, since rising prices will hurt the majority of the 1.3 billion people living in China who are just trying to get by on a daily basis.

Chinese inflation is a real potential threat to growth and stability—not only in China, but globally with its trading partners. We could see higher-cost Chinese-made goods as prices rise, and this will drive up the prices of Chinese-made goods that are sold in the U.S.

Overall, China is on the right path toward developing into a rising world economic power, as well as a basin for incredible and sustained growth across many sectors, including industrial, mining, energy, services and technology. The reality is that if it is saleable and in demand, then you know that China will likely have a consumer market for it. China knows that, and so do many of the top multinational companies, including many in the U.S.

Historically, countries have pulled themselves out of most recessions through exports. The way this works is, as the value of currency falls, goods and services become cheaper, while the rest of the world left unscathed by the crisis sweeps the cheaper stuff and pushes the weaker economy’s exports up. As more stuff is sold and bought, more people find jobs and the recovery starts. Sadly, this recession does not fit into this model.

The recession that hit after the crash of 2008 was not centered on any single country. The recession of 2009 was the first one since the Great Depression, when GDPs worldwide have declined. In addition, countries that are currently growing, like China, for example, are not in the mood to share the pain and boost their own imports so that other countries’ exports could grow. To make matters worse, China is keeping its currency artificially depressed, despite the insistence of the rest of the world to let it float freely. China simply has one goal in mind, considered by many to be rather selfish one, which is to keep or grab a better share of the weak global demand.

But the “currency war,” as Brazilian Finance Minister Guido Mantega has called it, is only a manifestation of the real problem. Simply, it is a mathematical improbability for the entire world’s exports to grow and imports to decline at the same time. I mean, who is going to import everyone else’s exports? Martians?

So, the $14.5-trillion question is: how is the U.S., as the world’s biggest economy, going to revitalize its economic output if it is not going to be through exports? Well, there is not much buzz out there in the form of optimistic, yet plausible answers. There is, however, plenty of very realistic pessimism, estimating that the U.S. economy could remain stuck in an L-shape “recovery” for years, or worse, revert into recession.

To make matters worse, the hole into which the U.S. has dug itself in is really a monster of a hole. The unemployment rate is still dismally high, remaining 5.6% lower in September compared to its December 2007 peak. To put things into perspective, since 1970, after four out of five recessions, the unemployment had hit new highs relatively quickly, and certainly much sooner than at the stage that we are at now. The only exception was the recession that hit after the tech bubble burst in 2001, when the unemployment remained below its pre-recession peak, albeit by a much narrower margin of 1.8%.

What is really keeping economists awake at night? This gnawing feeling that the U.S. economy could be stuck in neutral for a while. People are not back at work because the companies are not hiring. Companies are not hiring because the demand is very weak. The demand is weak because everyone is conserving cash and not spending. This is what the aftermath of a financial crisis looks like: it is as ugly as heck and it just doesn’t know when it has outstayed its welcome.

When wallowing in grim thoughts, Japan’s lost decade is often invoked. But, compared to the U.S., Japan was actually better off than the U.S. is now. What we are going through today is much worse: there is more unemployment, the demand is weaker, and the policy response appears to have done more damage in the long term when weighted against the short-term benefits.

But I’m describing the water to the drowning man. By now you may have gathered that I am not a fan of Alan Greenspan, but he may be onto something. At the recent Bloomberg FX10 Conference, he said, “It’s useless to try to stimulate business executives’ animal spirits as long as they’re still fearful of another financial calamity. What’s required is an extended period of calm — long enough for executives to regain their confidence and start thinking about new opportunities again.”