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Famously Volatile, Richly Rewarding
Investors monitor stock prices in Shanghai. The Chinese stock market has skyrocketed in recent years, so much so that the government is trying to temper its rapid growth.
(By Wenhao Yu -- Corbis)
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U.S. investors also can invest in a growing number of Chinese companies listed on the stock exchanges in New York. Some are traded through a security known as an American Depositary Receipt, or ADR. ADRs, like stocks, must meet U.S. listing requirements, including regular filings with the Securities and Exchange Commission.
Today, 45 Chinese companies are represented on the Nasdaq Stock Market, up from 34 at the end of last year and 16 in 2004. The New York Stock Exchange has 26 Chinese listings.
Another way to play China is through large, multinational companies that do big business there. Many companies have been using China as a cheap manufacturing base for exports. But some have started looking inward to China's domestic market.
With a savings rate higher than practically anywhere else, China's consumers have cash to burn. Over the past year, the U.S. government has been pushing Beijing to encourage Chinese consumers to buy American. Any increase in Chinese sales could help the stocks of the U.S. suppliers.
But capturing the Chinese market can prove tricky. Chinese consumers' tastes are not necessarily the same as Americans'. Shirts and dresses with bows and ruffles are all the rage among grown Chinese women. Chicken feet remains a popular dish (the United States already sends a lot of its leftover chicken feet to China). And tasteful home decorating among the Chinese nouveau riche can mean in-house fountains glowing with neon lights.
The Chinese government is the biggest consumer of all, so suppliers of raw materials used to build up the country could grow, said Gao Shanwen, chief economist at Anxin Securities in Shenzhen. Companies in the concrete, steel and timber business stand to benefit.
Another growth area is in energy and the environment. The government is making a major push to clean polluted air and water and is looking for cleaner sources of energy.
Analysts say investors should be cautious about mature industries such as consumer electronics. For instance, you can already get a new computer in China for about $300. "Personally, I think investing in televisions or in the mobile area is not that safe," said Ji Shupeng, a researcher at Hollyhigh Investment Consulting.
Cha reported from Shanghai.
