Investing in China?
Do I have good insider information about the next Chinese version of such companies as Apple, Microsoft, Starbucks, or Wal-Mart? Have I spotted any young brilliant entrepreneurs here in China yet? Since Bill Gates and Steve Jobs didn’t graduate from college, I don’t think their Chinese counterparts are among the 240 students in my classes now. But I can tell you what I’ve observed in my six weeks here. A week ago I would have said definitely not to invest in real estate in China, but now I’m not quite as sure. At least in Zhejiang Province, there are miles and miles of empty newly constructed apartments. You can see the two pictures of the same building that is on the river and a ten-minute walk from the center of Lin’an. It is a prime real estate property from my perspective, and the buildings look good. But the picture at about 7:30 at night shows that not a single unit is occupied. Barry and I thought the apartments might be a part of a stimulus package to keep people working here, but my students say that the developers are waiting for people to pay the high prices set on each unit. We’ve heard that guys are expected to buy an apartment before they can get married. So there is a big demand for housing. However in the US, the developers would have to lower the prices until all the units were sold; they could not wait for years until enough people could buy the units. Does this mean that the Chinese developers have the money to wait? Do the banks and the developers and perhaps the government have some kind of arrangement going on? We’ve also noticed that often the materials are shoddy, and many of the buildings are falling apart, some even before they are completed. What I see are rows and rows of empty apartments although I’ve heard that many Chinese have been speculating in real estate and bank credit is now available. So for now, I’d advise you not to buy any Chinese real estate until you inspect the property closely and get a lot more information than I have.
As for the Chinese products, many Chinese are leery about some of their own goods. When we said we’d like to buy an electric blanket for the winter, we were cautioned to buy it only at the expensive department store in town. Here electric blankets are put under your sheets and turned on only to heat the bed; Chinese people don’t usually sleep with an electric blanket turned on while they are sleeping. Hmmmm. Another product, our replacement computer for the stolen one is a Lenovo, a Chinese brand, but we were only able to buy an older model and for more money than a Chinese-made computer bought in the States. The Chinese would like the many options we have. They are hungry for well-made, luxury items. In Hangzhou, along the front of West Lake, their tourist destination, are Lamborghini, Ferrari, and Austin Martin dealerships. Block after block of designer fashion boutiques are in Shanghai and Hangzhou. Even Lin’an, considered a rural place, has many boutiques. As for American companies, they are everywhere. I’ve never seen such big Kentucky Fried Chickens, Pizza Huts, McDonalds, or Starbucks as I have here. Amway has huge stores. We also saw what looked like a stampede to buy good knives in a Shanghai store.
Many Chinese have much better incomes than they did 10 years ago, and their children are likely to have an even brighter economic future. My students say they want big houses and BMWs, even pools. The middle-class and rich are growing in numbers. China is the place to watch and perhaps invest in to diversify your holdings.
In A Bull in China: Investing Profitably in the World’s Greatest Market, published in 2008, Jim Rodgers says, “For nearly three decades, China has been the fastest-growing country in the world. With a rate of savings and investment exceeding 35 percent among its 1.3 billion people, and foreign reserves that already top the planet, it is set to become the most important country in mankind’s future. . . (l80-187 Kindle). As for investing, he says, “Be skeptical and stay with what you know.” If you know automobiles, for instance, look at the products here and choose what you see is excellent.
Rogers also says, “The very best advice of any kind that I can give you is to teach your children or your grandchildren [or yourselves] Chinese. It is going to be the most important language of their lifetimes” (80-87 & 171-178 Kindle). So get to know more about China, perhaps study the language, and visit. You’re likely to find investment opportunities as well as great food, beautiful sights, and friendly people.