Time to Buy Chinese Stocks

China's domestic consumers are willing to spend, giving the economy a sounder footing.

China’s astounding economic growth is slowing. Since 2000, with the 2008–09 recession barely a speed bump, the country’s gross domestic product has zoomed from $1 trillion to $10 trillion. Over the next 14 years, however, GDP will more likely just double or triple. That’s an annual growth rate of 5% to 7% rather than the 10% China achieved as recently as 2010.

Even though no country’s economy can grow at 10% forever, the prospect of a Chinese slowdown has investors worried. Over the past five years, SPDR S&P China ETF (symbol GXC), an exchange-traded fund that tracks Standard & Poor’s China BMI index, returned just 3.5% annualized, compared with 15.7% a year for SPDR S&P 500 ETF (SPY), which tracks the popular U.S. benchmark. In fact, the U.S. fund has beaten the China fund in four of the past five calendar years (including the first 11 months of 2014). The bloom is off the Chinese rose.

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James K. Glassman
Contributing Columnist, Kiplinger's Personal Finance
James K. Glassman is a visiting fellow at the American Enterprise Institute. His most recent book is Safety Net: The Strategy for De-Risking Your Investments in a Time of Turbulence.