Sheer Entrepreneurship the Best Stimulus in the World, Not Central Bank Policy

chinese economic growthThe World Bank just raised its 2010 growth outlook for China’s economy to 10% from 9.5%. In 2011, the Washington-based institution is predicting that China’s economic growth will slow to 8.7%, but inflation will be kept under control.

Chinese equities have been experiencing the same equity rally that’s occurred in U.S. equities over the last couple of months, and I think there’s a solid foundation for a new bull market in Asia. The World Bank is calling on China to do more to stimulate domestic consumption, so that it can rely less on global exports for growth. This would also go a long way to begin easing China’s large trade surplus with the rest of the world, which is becoming a thorny issue for the major reserve currency countries.

I’d be a buyer of Chinese equities right now. Readers know that I like smaller-cap, U.S.-listed Chinese equities due to their attractive valuation at this time. But, I’d also be a buyer of a large-cap Chinese fund or ETF as a way of expressing a bullish view on Asia’s economic growth.

In a world that’s desperate for growth, global investors are increasingly looking at Asian economies that are outperforming at this time. In China’s case, the systemic wealth creation among urbanites is fostering a new era of personal consumption that’s changing the kind of opportunities available to investors. No longer is the big growth in industries related to plants and equipment. Selling jewelry to consumers is now a better proposition for a businessperson or an investor.

The prices of gold, silver, copper and other precious metals are being positively impacted by China’s economic growth, not just a weakening U.S. dollar. Really, if you only wanted to own one asset that was a play on all of China’s positive economic fundamentals, you might as well just buy gold.

We’re at a point now where most Western economies are only expected to generate moderate to lackluster economic growth over the next several years. China and India are the world’s only two big countries that are keeping things afloat for a lot of international corporations.

I’d be a buyer of Chinese equities right now. For individual positions, I’d stick to the speculative end of the market. For large-caps, some sort of basket makes sense. Equity markets around the world have been going up lately, because there’s very little in returns available from other capital markets. There’s nowhere else for investors to put their money with the expectation of a decent return. Within the equity landscape itself, China’s equity market is ripe for a move