A lot has been said recently about China. There’s a China bubble, they are fraudulently valuing their currency. Inflation there is going to be ridiculous.
In recent years (before the recent recession) a lotwas said about the BRIC countries. BRIC stands for Brazil, Russia, India and China. The general consensus among investment professionals was that these countries had huge growth potential and would be where the best value for your investment dollar could be gained. The Chinese economy was (and still is) going “gangbusters” as some put it. Massive growth, large growth of millionaires and billionaires.
Russia was beginning to show signs of economic strength following the Soviet-age. Brazil was developing industrially and was a maturing economy. And the Indian story is no less spectacular. Huge growth in the last decade and with over a billion talented people, the sky is the limit.
Recently pundits have been discussing the collapse of the China “bubble”. So, is there a China “bubble”? The jury is still out. China has a strong balance sheet, which continues to strengthen as time passes. However, with their interests in United States debt, they are becoming more and more intertwined with our economy. And not always in a good way.
There are a majority of people who dismiss the China bubble, but I would caution against this. Very few people saw the real estate bubble. I can remember in 2005 and 2006 telling people that I wouldn’t be so keen to invest in something that was showing an annualized return of 25% for six years in a row. Be careful. I had one guy call me a crook for saying that I didn’t think he should buy real estate in Phoenix, AZ (that area took a dive for sure).
No one has a crystal ball, but some signs were there. The China situation is no different. There will be a correction in China. However, it comes down to a timing issue. Depending on your situation, you may want to reduce your exposure in China. Discuss it with a financial advisor before you make any decisions of course, but it is usually not a matter of if, just a matter of when. This year? Next year? The next five? We don’t know. As always be careful, do your research, and make informed decisions.