An unfortunate truth which you should bear in mind if you plan on investing in China.
If you were to talk to anyone about investment it wouldn’t be long before the conversation turned to China. People wax lyrical about China’s seemingly unstoppable growth figures and how China will ultimately become the largest economy in the world. Upon leaving such a conversation you would be forgiven for thinking that China is a one way bet and that you would be a fool to miss out. But while I have no doubt that the China story has a lot of fundamental truths don’t get swept along with the herd. That is how bubbles form and ultimately burst. China like any other economy is having to take measures to try and guide their economy through the global recession and, again like everyone else, they going to have to tread the fine line between inflation and economic growth
There are a few people who are cautious of the China story but they are outnumbered by the bulls. Yes there are immense opportunities for businesses to exploit and given the size of the pie on offer even a small slice is valuable. But China is not like western economies. There is a lack of transparency and a Communist regime to overcome (look at Goggle’s problems). But perhaps one of the large problems which gives me cause for concern is the level of corruption in China. While admittedly developed economies face their own share of corruption these incidences are limited to rogue traders and the like. Wide spread corruption simply does not exist. While in China corruption is rife and ultimately this could affect the country’s political and economic stability. This in turn could deter foreign investment and hinder the country’s predicted meteoric rise.
So before you bet your mortgage on China maybe think again and read today’s Headline of the Day: Murky world of corruption in China