rayloke2009blogspot: Investing in China’s ugly growth - Craig Stephen's This Week in China

Monday, February 18, 2013

Investing in China’s ugly growth - Craig Stephen's This Week in China - MarketWatch

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RAYLOKEFebruary 18, 2013 at 4:49 AM
HONG KONG (MarketWatch) — They say China will grow old before it grows wealthy. You might have to add that it will choke to a standstill if it grows any faster.

Last week came the news China had displaced the U.S. as the world’s largest trading power by sum of exports and imports. Another first perhaps for the world’s factory workshop, although it is likely to be somewhat bittersweet as the costs of this growth mount.

This past month, pollution in Beijing has reached such proportions that it has been dubbed “airpocalypse” or “airmageddon” by Internet users. Roads have been closed and flights cancelled, amid thick-smog-generated pollution readings as bad as 30 times the maximum level deemed safe by the World Health Organization.

This pollution crisis underscores that China’s export-investment model of development is fast approaching its sell-by date, giving Xi Jinping’s new government another reason to push the agenda of reform.

But as well as potential policy reform, investors should look at areas where China’s ugly or uneven growth is reshaping consumer behavior.

Click to Play China struggles to curb Tibetan unrestBeijing tightens its grip on Tibetan regions in China at a time when activists say the number of self-immolations in protest of Chinese rule has reached a grim milestone.

Granted, China’s unique brand of state capitalism has created an economic juggernaut. But it is also throwing up a range of distortions, from pollution to fake products to media controls, all of which can produce investable themes.

One way of playing pollution has been renewable energy, although a glut of supply in China’s solar energy has made this sector problematic.

That said, the share prices of various China-based solar stocks have picked up strongly in recent months. Various Japanese companies have also reported big increases in sales of air purifiers in the past weeks, which are fast becoming an indispensable household item.

Another consequence of pollution is that, apart from cleaning up, more people just want to clear out, at least temporarily.
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