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Jim Rogers: Buy China Now
As an investor in commodity stocks I like this article.
Posted by Mike Tirone - Tuesday, April 10th, 2012
If you thought that China was a threat in the global economic race, it's looking like the world's largest nation is reloading. And this time with a little motivation from one of the world's top international investors: Jim Rogers.
Roger's believes that the Chinese housing bubble has already burst.
"There has been a bubble in the Chinese property market which is now over," Rogers told China Daily.
"The Chinese government has been trying to burst the bubble. I think the government is doing the right thing to bring down the price of property. If you do not pop bubbles, lots of people get badly hurt. The bigger the bubble gets, the worse it is for everyone."
When it comes to plans for the future in China, they are as big as their country's landmass. The State Council of China released a document in February suggesting the country gets serious about technology to ensure long-term food supplies. China accounts for one fifth of the world's population with only 9% of its land cultivatable. The report from the State Council also included that the government would increase investment in (and subsidies for) the agricultural technology development in the hopes to stabilize grain production.
And Jim Rogers believes these are the right steps for the country.
“I do no have any land in China,” said Rogers, who lives in Singapore with his family and traveled extensively throughout China by motorcycle and breaking world records while at it.
“I do not farm in China but I believe there are lots of opportunities in China's agriculture sector.”
Along with serious plan to revamp the agriculture of China, the government according to a report released in 2011, indicates that 4 trillion yuan ($634 billion) will go toward water conservation projects by 2020.
“It's always right to follow what the government does, so look at the Five-Year Plan (2011-2015) to see where the government's sympathy lies,” Rogers said, also mentioning to that quote that the country's water infrastructure and biotechnology offer many opportunities to make profits. Rogers' endorsement of the Chinese economy has held water for many years, as recently as January he spoke about China's growth prospects, while early last year he spoke of China's large currency surplus, saying “The renmibi is my favourite currency. China has a gigantic balance of trade surplus, and it is the largest creditor nation in the world.”
But aside from the water conservation within China, the main focus of Rogers' (and several other investors) is the country's agriculture.
“I will buy reserves of wheat, oil – things you might need someday – because they are useful,” said Rogers.
From China Daily,
Since 2006, global private-equity investment firms, including KKR & Co., Carlyle Group and Blackstone Group, have invested in the Chinese agriculture sector. Blackstone-led investors put about $600 million in China Shouguang Agricultural Product Logistic Park, located in Shandong province. Domestic investments and Hony Capital, have also made investments in farming.
Normally, just the fact that China's agricultural sector has plans to take off would keep Rogers interested, but he feels the investment opportunities in the country go beyond just the farmland.
“Investment opportunities in travel are going to be huge. Over the past 30 year, many Chinese were not able to go abroad because of expensive fees and limits. Now the Chinese have become richer and it is easier to get passports to go abroad.”
Rogers has hit what many in the global community have been keeping an eye of for years now, China's massive exports of expats and imports of foreign tourists. According to the World Tourism Organization, the number of Chinese tourists going abroad is estimated to become the fourth largest in the world by 2020 and the largest by 2035. This is just 50 years after opening up it's borders in 1974 for travel within the mainland of the country again.
Lastly, Rogers commented on China's potential in the coming years. He believes that with a strong economy, China could make the yuan convertible and everything would be cheaper.
Once the yuan is strong enough to be competitive with the dollar, people will begin to leave the U.S. dollar and change to the yuan, which has been China's intention for a long time. The yuan has been fighting to become the world's main reserve currency for years.
“As an investor, I will not put money in European bonds because those countries are bankrupt. If China gives them money, just gives them money to spend, the debt will get bigger and bigger. The crisis will return and you could lose all your money.”