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China Watch: Beijing's 5-Year Plan May Stoke These Stocks

TAIPEI (TheStreet) -- China's current Five-Year Plan implores the people to go buy stuff - and that translates into a potential "buy" signal for many stocks as well.

The central planning blueprint aims to mute China's reliance on exports, and on foreign countries, by raising consumption.

Although it's just a plan, experience tells us that when it expires in 2015, the government will come out and say its goals have been met. The social security net is noticeably stronger and wages measurably higher, planners in Beijing will say, both ideal for more spending and less saving.

The Communist leadership won't be wholly off the mark even if it inflates some numbers in 2015 or if a visitor to Beijing still finds child beggars on the sidewalks and migrant workers living six to a tiny brick shack.

The idea is to create what KPMG China calls a "macro-environment that encourages domestic spending" rather than directly herd people into stores. Previous central planning has already nudged the environment in that direction for the sake of social as well as economic stability.

So markets will trust that consumption will have gone up and will start picking stocks among the Chinese firms that will have grown on the boost in spending.

An investor could wait for the celebratory proclamations in 2015 or start now by buying shares of companies that build shopping malls, book vacations or churn out hard-not-to-buy consumer products such as packaged food. Analysts surveyed in May suggested grabbing stocks of offshore-listed Chinese companies that are connected to the expected buying boom and show solid individual track records.

Shares of numerous large Chinese firms are selling relatively cheap, after falling since last August because of investor fears about economic problems in Europe and the United States.

Low share prices of otherwise stable firms have little or nothing to do with China itself. That means they may be artificially cheap today. If the Five-Year Plan spurs consumption, bottom lines should increase, and with them share prices. (Economic malaise in Europe could keep prices low, however, because traditional investors usually regard anything from China as a risky buy.)

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