China Still Looks Like the Best Global Bet

The long-term goal for Beijing is to boost growth in inland areas that missed out on the last boom. An analogy to the U.S.' decision to build an interstate highway system is apt. That major spending initiative boosted national productivity and also led to far higher rural incomes. If you think about places such as Dallas, Denver, Houston, Phoenix and Atlanta today (along with their suburbs and exurbs), you can see where much of our economic development has taken place over the last 40 years. China appears poised for a similar second-stage growth spurt.

From an investor's perspective, the plunge in Chinese equities has surely been scary, but the factors for long-term growth remain firmly in place.

As a final thought, China's $2 trillion in foreign reserves should provide considerable comfort to foreign investors in terms of currency swings. At a minimum, the strong cash cushion means the odds of a major currency devaluation are virtually nil. More than likely, much of that cash hoard will eventually find its way back home as government policy shifts away from export growth to domestic and regional growth. It's not clear when that will happen, but when it does, U.S. investments are likely to gain a direct boost from that currency effect.

You can play the Chinese markets through ETFs such as the IShares Trust FTSE-Xinhua China 25 Index Fund (FXI - commentary - Cramer's Take) or mutual funds such as the Matthews China Fund (MCHFX). You can also invest in ADRs of some of the largest Chinese firms, such as Baidu.com (BIDU - commentary - Cramer's Take), China Mobile (CHL - commentary - Cramer's Take), China Southern Airlines (ZNH - commentary - Cramer's Take), LDK Solar (LDK - commentary - Cramer's Take), Sina (SINA - commentary - Cramer's Take) and Focus Media (FMCN - commentary - Cramer's Take).

---

David Sterman has been an equity analyst and financial journalist for 15 years, most recently serving as Director of Research at Jesup & Lamont Securities.