Buying Stocks In China

By Mike Swanson

China is a rapidly expanding economy that has weathered the current economic recession reasonably well. Options for investing in China are numerous but as a foreigner the markets and the culture are likely to be completely unknown. So where to start to find stocks to invest in?

It is difficult to start operations in China or even to buy out existing Chinese operations as a foreigner. Instead in most instances a joint venture with a local company needs to be entered into. These deals help get around cultural traps but are not risk free as a number of foreign firms have found. Last year a number of large milk companies with ties to local milk joint venture lost millions when a chemical scandal hit.

Purchasing stocks in Chinese companies is another option. However it pays to be aware that there are a number of government regulations about what types of company stocks foreigners can buy. Many companies have tier A and Tier B shares with only one tier being available to foreigners, the other for the locals.

Private Equity funding works but some private equity firms have chosen to avoid China. They have found that having to rely on local partners has meant they have not had the information they require or in the time frames they would like.

Property is booming in China. Growth rates simply have not stopped and construction can be seen everywhere. Many investors have focused on Beijing and Shanghai, the two main cities, but when there are other cities in China with populations of over 20 million each there are no shortage of opportunities. A continuing trend of rural drift to the cities is supporting the need to accommodation.

However you decide to invest in China it must be remembered it is not an entirely free market. While growth and consumer demand are increasing the level of power the Chinese government has not disappeared. - 23211

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