Investing in China

In March China's Premier Wen Jiabao told the National People’s Congress
that his government was still trying to effect a slowdown that will bring
the growth rate down to 8% this year.

Why does China want to do that? Isn't such a blockbuster growth a great
thing for a country’s economy? The answer is somewhat complex. China’s
infrastructure simply doesn’t have the capability to withstand such
explosive growth. The Government needs to be fast in developing those
infrastructures.

Despite government efforts to rein in spending, fixed-asset investment
roared down the tracks like a train with no brakes. In 2003 and 2004,
the growth rate ballooned by 27% and 26%, respectively. And many
Chinese provinces still have trillions of dollars worth of projects underway.

The Chinese government says and many economists believe that the
current "Happy Year Story" is set to continue, projecting 8% GDP growth
for the next five years as the labor market expands and the country
maintains its strong position in the technology and materials industries.

Want to be a rider of this fast train? Our recommendations, as usual, are
two Exchange Traded Funds (ETF): FTSE/Xinhua China 25 Index Fund
(FXI) whose closing price yesterday was $54.49 (yield 0%, expense ratio
0.74%) and MSCI Hong Kong Index Fund (EWH) whose closing price
yesterday was $11.79 (yield 2.3%, expense ratio 0.59%).

These funds are focussed specifically on China and their expense ratios
are high as compared to other more diversified funds in which Chinese
companies are just a part. We always recommend diversification and so
you may also consider investing in the Exchange Traded Funds
mentioned in our postings on [Click on their names to read our past
postings] BLDRS Family, Vanguard or Barclays Global Investors.