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China Fireworks: How to Make Dramatic Wealth from the Fastest-Growing Economy in the World Hardcover – May 2, 2008
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"...top tips on investment strategy to exploit the "China miracle" of runaway growth..." Private Eye Thursday 7 August 2008
From the Inside Flap
China is on fire! In the course of barely a decade, China has become the world's fastest-growing economy and it is now the world's most important marketplace. China produces more steel, coal, clothing, and toys than any other country in the world, and exports to the U.S.alone have grown by more than 1,500% since the 1990s. These are the figures that everyone talks about. What they don't know is that the Chinese consumer is the real growth driver and has become singularly important to the global economy. Because of the incredible growth in China, there are 1.3 billion people who suddenly have the ability to create personal wealth. This new reality has created an unprecedented opportunity for global investors to grow their portfolios and build their fortunes.
As big investors scramble for their piece of theChina pie, however, individual investors are being fed misinformation and conflicting reports that could lead to disastrous investments. Investing in China is easier to navigate and much more profitable when you know what to look forand China Fireworks will show you the way.
Author Robert Hsu has been making money for years by watching China's growth and identifying trends that deliver the greatest return for investors. As one of the leading experts on investing in China's economy, he advises people every day on how a China strategy will truly take them to a new level of investing.
With this book, Hsu shows you how to build your fortune by participating in what he calls the "China Miracle." Hsu begins by explaining the key differences between China's major economic and geographic regions, as well as Hong Kong, providing insight into how consumer spending habits differ and what that means for you when building an investment strategy in China. He then shows investors how to take advantage of China's economic boom by identifying companies that are:
Providing the government of China with what it needs and the people of China with what they desire
Improving their bottom lines by effectively utilizing China's manufacturing capabilities
Excelling in the international marketplace thanks to the innovation of China's new class of entrepreneurs
Along the way, Hsu also details exactly how to find industries that are growing, pick industry leaders, make your buys, and sell for a profit.
With China Fireworks as your guidealong with some thoughtful research and common senseyou'll be well on your way to getting rich from the "China Miracle."
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Top Customer Reviews
First, some of the superlatives. China produces more steel, aluminum, cement, coal, clothing, and toys than any other nation. It has the most cell-phone users (average fees = $6/month). China already has the world's largest dam and airport, high-speed train network, and highest railroad. Now it is finishing a six-lane bridge connecting Shanghai with the island of Yang-shan (20 miles offshore) that will be the largest sea-span bridge and connect with the world's largest port. Shanghai alone has 40% of the world's construction cranes; the nation builds the equivalent of a new Philadelphia every six weeks, and a new nuclear power plant every year. China was also the world's largest manufacturing exporter in 2006, up from half the size of the U.S. in 2000. Renewable power sources are mandated to increase from 7% in 2008 to 15% in 2010.
Hsu sees Confucian values (social harmony via respect for authority, emphasis on education, strong interpersonal relationships, and personal integrity) as supportive of China's economic growth.
The author points out that China's major cities and provinces have different cultures, and sometimes different languages, and suggests those looking for real estate opportunities focus outside of Shanghai and Beijing - less competition, and larger overall population. Avoid investing in State-Owned Enterprises (SOE) - they generally are not well managed, and the government recently mandated they become self-sufficient or dissolve - about 2,000 of the remaining 100,000 went bankrupt in 2008. Hsu also points out that Chinese firm valuations are often severely distorted by the fact that the government may hold (without trading) a majority of shares in them. Hsu also suggests staying away from firms traded only on Chinese exchanges - their financial reporting requirements are not that stringent.
Chinese casinos can be very profitable (Macao's Sands Casino was built in 2004 and recouped that amount in less than one year), but differ from the U.S. - Chinese gamblers don't drink, consider fine shopping and dining a waste of time and money, and ignore slots. The focus is on table games.
Hsu sees education as a big business in China. It is estimated that a typical Chinese household with a child spends more on education than housing and health care. There are about 70,000 private school, serving 14 million students (200/). There is also a large market teaching English (especially to pass the TOEFL and GRE). English is now mandatory for high-school graduation. Recently the government mandated that rural schools accept pupils unable to pay tuition and books.
On average, less than 20% of the price a brand-name product commands in the U.S. goes to Chinese manufacturing. Per UBS AG, China earns only 0.35/Barbie doll retailing for $20 in the U.S. Because of these low margins, and the fact that other areas of China and Asia stand ready to take over, Hsu recommends staying away from investing in Chinese manufacturing. (China, however, is working to learn R&D in manufacturing and drug development - so watch out!)
Personal health care spending now averages $55/person/year, and Hsu sees this area as another good opportunity for investment.
Bottom Line: Very interesting and credible.
Hsu raises some good points about buying stocks sold on the Hong Kong exchange, namely that you have to buy minimum lot sizes, which means you can't buy three or 12 shares of something, but instead must make a minimum buy of 200 to 10,000 shares, depending on the security. (The good news is that 1 USD is equivalent to about 7.75 HKD, so it might not be as expensive as you think.) Fine so far. But then Hsu steers away from trading on the Hong Kong exchange and goes on to discuss only those stocks traded on American exchanges. Well, that's great, but everyone on earth and their grandmother has heard of most of these Chinese stocks, many of which are probably riding on CSNBC, SmartMoney, Forbes and Fortune hype.
Here's a few:
Home Inns & Hotels Management
Suntech Power Holdings
He then goes on to recommend a bunch of other stocks as good investments in the "China Miracle" (a phrase he tends to use overmuch, IMHO), but we've all heard of these, too:
Potash Corp. of Saskatchewan (of which I am a pround owner)
Motorola (of which I was the proud owner, later the disgusted seller)
While Hsu raises good points on why these are good investments with regard to China and its people, the book is overlong at 257 pages. I realize that a seven-page list of all the stocks Hsu mentions might not be sell as a book, but it might be all that YOU, the investor, need. Armed with that and a Morningstar or ValueLine membership, you can check them all out and see if they're overpriced or not. Save yourself some time.
Hsu does point out that investment in Chinese companies that manufacture goods is not the best idea, which rings true when you think about it. Many manufacturing companies in the world operate with razor-thin margins and a lot of competition. Also discusses "momentum investing" which, I would say, is not a bad way to go with some companies.
Bottom line: an informative yet overlong book that doesn't list enough strictly Hong Kong-traded stocks (Li Ning, anyone? [the Nike of China]) while discussing too many stocks every savvy investor already knows about.
If you haven't read A Bull in China: Investing Profitably in the World's Greatest Market (also reviewed by me), then "China Fireworks" might be a good introduction for you regarding certain aspects of China investment.
Note: On the book jacket of "China Fireworks," Hsu looks thin and young, but if you go to his website and look at pictures of him in China, he appears to be older and to have been packing on the pounds! What does the real Robert Hsu look like?