Mandarin will be the next global language
Probably the best advice I can give to anyone, anywhere in the world, is to have your children and grandchildren learn Mandarin. For their generation, Mandarin and English will be the most important languages in the world.
The reason that you are learning Mandarin is because China is gaining economic, political, and cultural strength, and will become an even more significant player internationally. You must be aware of such developments, not only as an investor but as a world citizen.
Pay attention to the major changes taking place in the world now
When we look back upon history, we know that Spain dominated the sixteenth century, while France was the more prosperous country two hundred years later. The nineteenth century was the century of Great Britain. In the twentieth century, the United States rose to prominence. Well, the twenty-first century belongs to China. This development is under way now, right before our eyes. China has had recurring periods of greatness. Egypt was great once, Rome was great once, Great Britain was great once.China has done it a few times and has weathered disasters a few times. Now it is on the rise again after three hundred years of decline.
The Chinese are generally considered Communists, not capitalists, but how accurate is this? Historically, the Chinese people have been among the best capitalists in the world.Many remember the form of capitalism that existed in China prior to Mao Tse-tung’s revolution in 1949, which culminated in the founding of the People’s Republic of China.Those who would not give up on capitalism during the revolution fled to Hong Kong, Taiwan, America, and elsewhere, and cultivated their own economic prosperity. These overseas ethnic Chinese have always been a valuable asset to China.
There is a remarkable difference between the China that I saw in my first four visits between 1984 and 1990 and the China that I saw when I traveled there in 1999. The effort that the country has put into increasing its productivity has paid off. China’s production levels in home electrical appliances, cellular phones, and motorcycles have surpassed those of the United States. In fact, China’s cell phone production is now tops in the world. These are developments that an investor cannot dismiss.
Buy Chinese stocks, and buy the future of this country!
I own a couple of dozen or so Chinese stocks, but I did not make my first purchase until 1988. This happened in a rundown building, then the home of the Shanghai Stock Exchange. The bank-stock certificate representing that initial purchase hangs framed on a wall in our house. I don’t know by how much its value has increased, but I have no intention of selling it because of its sentimental value.
When I revisited Shanghai in 1999, the shabby building had been replaced by a brandnew structure. I opened up an account and continued to invest more.
At present, China’s gross national product (GNP) is growing in excess of 9 percent, and there is plenty of potential for further growth.
Many famous American investors who rarely, if ever, invested abroad or invested in China have done so in this decade because of the enormous growth. But if you want to buy Chinese stocks, be prepared for the normal setbacks in the Chinese economy. The United States underwent many consolidations as it rose to power and glory, and China will too. When is the best time to sell? Probably not until after my lifetime, because the Chinese economy will continue to grow. So my shares in China may be my gift to you.
A hard landing cannot be avoided!
Both the Chinese economy and Chinese real estate are becoming overheated, with an inflation rate somewhere between 7 percent and 8 percent, according to independent banks. Perhaps Chinese banks have made too many loans. Excessive investment has resulted in a higher than normal default rate, which usually happens in periods like this. I think that a hard landing in some sectors, such as real estate, is inevitable.
The Chinese government and the International Monetary Fund (IMF) insist that a soft landing is possible, and the Chinese government restricted bank loans for awhile and restrained the money supply, rightly to cool things off. Low interest rates have led to overinvestment in real estate and certain manufacturing industries. These sectors are taking a nosedive. Other fields, however, will probably be naffected.
中国政府和国际货币基金（International Monetary Fund, IMF）坚称软着陆（soft landing）是有可能的，而中国政府正在想办法控制货币供给与银行贷款，但是我看不出这样做有什么用。过去因为利率低，中国在房地产和一些制造产业方面已经投资过度了，这些领域在未来可能会暴跌，不过其他的领域可能不会受到波及。
A Japanese investor once asked me when China was going to experience its hard landing. I explained that there is no telling exactly when that will be or how severe it will be. I am not a trader with a superior sense of timing. It could happen soon, or it may not happen at all. It is more likely to occur in specific sectors such as real estate, while some sectors will not be affected. But who knows? As soon as you hear in the news about a hard landing in the Chinese economy similar to those in 1989 and 1994, consider it the best opportunity to buy into Chinese stocks or commodities. I began buying Chinese shares again at the end of 2005 and into 2006, and again in 2008 for the first time since 1999.
China equals commodities
The rise of China brings with it a rise in demand for commodities. China, with its 1.3 billion people, consumes steel, iron ore, and soy; it is the largest consumer of copper in the world and the second leading consumer of energy, including oil. Furthermore, the demand is increasing yearly—monthly, even. It will take at least another ten years before supply meets demand; in the interim, this imbalance will continue to drive up the price of commodities despite the normal, periodic corrections to prices.
For more information, check out this book written by Jim Rogers.