The Real China Miracle

Want to see my "China credentials"? Fair enough. How's this?

I might be the only American you meet all year who learned to use chopsticks in China. Of course, I was 42 years old at the time.

I'm just saying …
Don't write me off as some expat poseur trying to spook you with the horrors of a "post-American world." Heck, no. I love the old U.S. of A., both as a citizen and investor. But my trip to China opened my eyes to a few things.

This time last year, I accompanied my friend and colleague Bill Mann to China. From Beijing to Shanghai, from Hong Kong to Taipei to Macau, we took it all in, pausing to pick the brains of local business leaders and relay our findings to readers back home.

I'd never seen anything like it. These magnificent cities are exploding with people. And that spells opportunity for you.

You can look in four directions as far as the eye can see, and you see nothing but spectacular high-rises. At night it looks like Las Vegas: All the buildings are lit up; they look like rocket ships going off. It looks like the Fourth of July.

Our fortunes lie elsewhere
In case you think I exaggerate, that's how a top U.S. real estate developer described Shanghai to business students at Wharton. Of everything I've heard, it comes closest to capturing the feeling of being there. What it doesn't convey is the sense that this is only the beginning.

While we were in town, Oracle (Nasdaq: ORCL  ) unveiled a state-of-the-art research center, its third in China. Intel (Nasdaq: INTC  ) already had full-scale manufacturing, research and development, and sales operations in Shanghai, and Microsoft (Nasdaq: MSFT  ) and Cisco (Nasdaq: CSCO  ) had been there since 2005.

That's small potatoes
Even without big tech, China's economy has been growing at 10% per year for three decades, lifting more people out of poverty than any country in history. National Geographic dubbed it "the largest urbanization in human history" -- with 150 million people and counting migrating to major cities.

One in four current residents of Beijing is a migrant from the countryside. You can hardly blame them -- urban workers earn more than three times as much money as those living in rural areas. Buying a home, once beyond the dreams of the average Chinese family, is the latest craze in Beijing, where 1,000 new cars hit the roadways daily -- and 96% are bought for cash.

Shanghai, once called "the Paris of the East," accounts for 5% of the country's GDP. One-fifth of the country's total exports pass through its ports, now the busiest in the world. A top chef in Beijing or Shanghai earns as much as he or she would in New York or Los Angeles.

Living the good life
The Great Wall is the most awesome structure I've ever laid eyes on, but when I close those eyes and think of Beijing, what pops to mind is Rolex (22% of affluent Chinese men own one) or Rolls Royce. The affluence of the new luxury class in Shanghai and Beijing is simply a sight to behold.

In a mall in Beijing, you can browse three or four storefronts featuring Apple (Nasdaq: AAPL  ) products, and the company is aiming to open its first direct-run store by the time the Olympics begin later this summer. Lacoste, Valentino, Cartier, and Chanel are everywhere. Armani plans to open seven new stores in China in 2008, where young shoppers dig McDonald's (NYSE: MCD  ) and pop into Starbucks (Nasdaq: SBUX  ) for an afternoon jolt.

No wonder 60% of the Fortune 500 has a presence in Shanghai, a number that grows by the day. You can't help but wonder what the remaining 200 could possibly be thinking. China is already the planet's largest consumer, for Pete's sake, and the third-largest consumer of luxury goods in the world.

"The investment opportunity of a lifetime"
Nine times out of 10, you can dismiss statements like that as pure hype. But this is the rare case when the shoe fits. China may have hurdles to overcome, but the mass migration, urbanization, and rise of its middle class may be the investment story of our century.

But there's a catch. This transformation will be measured in years, not decades. The smart money, as I discovered on my last trip to China, is already restless. Investors are looking beyond the skylines of Shanghai and Beijing to what I call The Real China Miracle. And I'd suggest that you and I should look there, too.

Morgan Stanley's chief economist calls it, "The biggest economic story to come out of China in 25 years." As far as I'm concerned, any company that doesn't have a defined focus and strategy to exploit this demographic tsunami isn't worth your time, energy, or money.

Get it straight from the source
Meanwhile, Bill Mann and I will return to Asia next week to confirm that this opportunity is everything I say it is. In addition to China, we'll stop in Vietnam, Indonesia, and Singapore. On our last trip, we uncovered specific investment opportunities that earned our readers 40% or more in less than a year.

If you'd like receive our dispatches from Asia, relaying what we discover -- straight from the ground and in as close to real time as possible -- we've love to send them to you. Best of all, The Motley Fool is covering 100% the cost. Simply enter your email address in the box below, and tell us where to send our first dispatch. 

Fool writer Paul Elliott really will write you from Asia and tell you what he's found, but only if you ask. He doesn't own any stocks mentioned. Intel, Microsoft, and Starbucks are Motley Fool Inside Value recommendations. Starbucks and Apple are Stock Advisor recommendations. The Motley Fool owns shares of Starbucks and has a disclosure policy.


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  • Report this Comment On September 05, 2008, at 12:57 AM, sb101cu wrote:

    Why don't you publish it, instead of writing teaser statements like "Get it straight from the source" and " The Real China Miracle"

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