On Monday, electronic commerce provider First Data
When looking for ways to profit from China's growth, names such as PetroChina
How to invest, if at all, depends on your tolerance for risk. Companies with primarily Chinese operations offer a greater potential reward than more diversified companies, but at a cost. China may be the most capitalistic Communist society on Earth, but there's still significant risk in owning assets located in countries experiencing massive transitions. Transitions by nature are bumpy. Ask shareholders of PetroKazakhstan
The most probable scenario is that China will continue down its current path. But in the unlikely event that China suddenly reverts to its Communist ways, investors in Chinese companies will be left hanging. Investors in First Data, on the other hand, would be buffered from such an event. First Data would have to write off its Chinese operations, but the event wouldn't threaten the company's survival. So, for the risk-adverse, First Data and other multinationals offer a great way to profit from China's growth without taking on the risk of more focused companies.
This press release illustrates how dominant companies remain dominant. First Data is making billions of dollars each year by preserving its market-leading position. Consequently, when the Chinese market opened up, First Data had the resources to build a data-processing center in Shanghai, the knowledge of how to roll out these services, and the credibility to make deals with most of the major players.
Now, three years later, First Data leads the Chinese market in payments processing. That's how competitive advantage is supposed to work -- the dominant become even more dominant -- and that's why First Data remains a Motley Fool Inside Value pick.
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