China’s stock market got off to a rocky start in 2016 that caused some panic around the world. Many people thought that China’s economy was taking a turn for the worst and should thus be avoided for investments. However, investing in Chinais actually a wise decision, granted you understand what you’re doing. Here are four reasons investing in China this year is a good choice:
#1 China’s Economy is Still Growing
There’s a lot of hype in western media about China’s economy slowing, but the truth is China is still growing, just at a slower pace. Some have misunderstood this as no growth. In 2015, China’s economy advanced 6.9%, which is healthy economic growth according to typical standards.
#2 The Rule of Buy Low, Sell High
One of the fundamentals of investment is to buy low, sell high. Currently, many Chinese shares have low prices partially due to market panic over the circuit breakers suspending trading. Since then, China has turned off the circuit breakers because of how negatively it was affecting trading. When emotions are the reason behind a low price, it’s usually a good opportunity for you to implement the buy low, sell high strategy.
#3 Stocks are Long-Term Investments
The stock market is a long-term game. Moreover, it is predicted that China’s economy will grow over the next few years, so buying now can pay off later. Every time there is a major fall in the stock market, doubts arise. Many forget that stocks are a great form of long-term investment. The challenging part is the role emotions play in benefiting from stocks.
#4 China’s Middle Class is Expanding
As China transforms into a consumer economy, its middle class becomes larger too. This middle class has an increasing interest in buying luxury goods and products that are common in the western world. According to Pew Research Center, China’s middle class increased from 3% of the population in 2001 to 18% in 2011 while the poverty rate fell from 41% to 12%. It is also worth pointing out that many Chinese citizens are willing to pay a high price for quality products as indicated by the daigou phenomenon. All of this means more opportunities for businesses and investors alike.
Conclusion
Ignoring China as an investment opportunity in 2016 would be a mistake. Although some articles instigate more panic over China’s economy, the country is actually still growing but at a slower pace. It’s normal for this to happen. China is evolving into a consumer-based economy, rather than relying on the manufacturing industries. There are bound to be growth pains along the way.
China consumers have shown high demand for many foreign goods, such as baby formula, vitamins, fresh food, and clothing. Contact us to learn more about business opportunities in China and the state of the Chinese economy.
If you are interested in knowing more about China, download the first free chapters of my book here.
