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TheStreet Open House

China Stocks to Bet on Consumers - Part 1

Stocks in this article: CTRPUTASVNHMIN

The company's corporate governance is a complicated story, so I will do more research into this stock before buying any shares. Also, shares have doubled since their lows in September, so I clearly missed the bottom on this China stock.

Although I'm bullish on China's travel industry, I'm avoiding China stocks in the hotel sector such as Home Inns (HMIN) and 7 Days Group (SVN).

My concern is that there's excess hotel capacity, which is related to the country's real estate boom.

Whenever I travel I see many brand new hotels under construction, and in Beijing new high-rise hotels seem to pop up every week.

With all this construction, the hotel business in China is getting very competitive. Just by shopping around a bit haggling, I am often able to get 50% discounts.

The competition isn't just from Chinese companies either. International chains like Holiday Inn continue to expand their presence here.

Please look for Part 2 of this article on Wednesday. I'll reveal my favorite China stock in the food and beverage sector.

At the time of publication, Pearson had no positions in stocks mentioned.

This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.

Rick Pearson is a Beijing-based private investor focusing on U.S.-listed China small-cap stocks. Until 2005, Pearson was a director at Deutsche Bank, spending nine years in equity capital markets in New York, Hong Kong and London. Previously, he spent time working in venture capital in Beijing. Mr. Pearson graduated magna cum laude with a degree in finance from the University of Southern California and studied Mandarin for six years. He has frequently lived, worked and traveled in China since 1992.

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