Where's China Going in Such a Hurry?

By Kris Eddy | More Articles
December 23, 2009 | Comments (5)

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Like other countries, China is pumping government money into its economy. Many investors believe their companies will benefit from the surging economy in the world's most populous country, even if the U.S. continues to struggle.

But is China doing it right? An article yesterday by Bloomberg News explores whether a high-speed passenger rail project indicates misplaced priorities:

Some economists say the high-speed network is symbolic of a stimulus program that places too much emphasis on infrastructure spending and not enough on raising living standards in a Communist country where the average urban worker made 28,898 yuan last year, a tenth of the $39,653 average wage in the U.S., according to data from the U.S. and Chinese governments.

In April, Fool Jennifer Schonberger picked out China-based companies focused on providing materials or services that could aid in China's infrastructure build-out. Her list included Aluminum Corp. of China (NYSE: ACH ) , China Petroleum & Chemical (NYSE: SNP ) , China Precision Steel (Nasdaq: CPSL ) , and ShengdaTech (Nasdaq: SDTH ) . Meanwhile, Bombardier and Siemens (NYSE: SI ) have contracts to help build the high-speed rail.

How much brain-time should investors in these and similar companies give to how China's government might shift the flow of money?

Sound off in the comments box below. For each post, the Fool will donate $0.10 to the Thurgood Marshall Academy in Washington, D.C., in furtherance of financial literacy.

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Fool online editor Kris Eddy owns no shares of any stocks mentioned in this article. Try any of our investing newsletters free for 30 days. The Fool's disclosure policy isn't scared of snow.

Read/Post Comments (5) | Recommend This Article (3)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment icon found on every comment.

Report this Comment On December 23, 2009, at 6:28 PM, DDHv wrote:

High speed rail makes more sense than airlines, except in the context of a war. Speed is almost as high when all factors are included (including time to the terminal), and costs/ passenger mile are much lower.
Infrastructure is what enables the future to be less expensive, provided it is done well.
Report this Comment On December 23, 2009, at 10:28 PM, shanghaid wrote:

Infrastructure investment in China just makes good sense. You need to live there a few years to understand that. There is also a strong rising wealthy class Nevertheless, there are bound to be a few bad investments. Does that make China a poor economic manager? Probably not.
Report this Comment On December 23, 2009, at 10:28 PM, shanghaid wrote:

Infrastructure investment in China just makes good sense. You need to live there a few years to understand that. There is also a strong rising wealthy class Nevertheless, there are bound to be a few bad investments. Does that make China a poor economic manager? Probably not.
Report this Comment On December 24, 2009, at 10:25 AM, fyweb wrote:

28,898 yuan, a tenth of the $39,653? You simply don't know what you are talking about. This kind of comment always makes me laugh. No wonder people in this country are so idiotic and the whole country is going down. Listen up. Let me give you a little education here. Let's say an American collects $3304 a month tax free and lives in China, that's what I am going to do after I retire, he/she will live like a king because of the exchange rate. But the fact is Americans' wage is highly inflated. With $3304 gross pay, he/she will be lucky to get about $2k net income. You don't need me to go through all the expenses, right? I have seen so many people around me with that kind of income, which probably makes about 95% of the people here, can barely afford an apartment. A lot of them have to share with others. They basically live from paycheck to paycheck. You talk about real struggling.
Ok, now let's talk about a Chinese makes 2408 yuan a month. That's net income. 95% of the people there don't need to pay income taxes. Most Chinese own their house free and clear. No PROPERTY TAX. People in China don't need a car because public transportation is dirt cheap. Most people over there own cars just to show off. Besides durable goods which are more expensive in China, food and daily necessities are much cheaper over there.
In conclusion, a Chinese makes 2408 yuan a month in China VS an American $3304 living here. Which one is living more comfortably? Go figure.
Report this Comment On December 24, 2009, at 10:57 AM, fyweb wrote:

Hey Kris,
Next time if you want to write anything about China, ask me first. Don't make American people dumber. Spread the words among your media friends as well.
One more tip. China's GDP has passed the US. REMEMBER DON'T USE THE EXCHANGE RATE.

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