Mining stocks best way to latch onto Chinese boom

CHINA is by a large margin the fastest-growing major international economy. Its economic success has translated into a decent stock market performance in its own exchanges but finding a “play” on that can be problematic. Irish investors are naturally reluctant to invest their money in the Shenzen or Shanghai stock exchanges, as these territories are wholly unfamiliar.

Perhaps the best way of gaining exposure to the Chinese growth story is via companies who have trading links with China. The most obvious examples are within the Basic Materials sector, in stocks such as Rio Tinto. Commodity prices have risen dramatically in response to a huge rise in infra-structural investment across China and companies like Rio Tinto benefit from this. But before going any further it is worthwhile analysing the background to China’s growth. Economists are forecasting GDP growth in the region of 8.5% this year and 9.5% next year. This sort of growth is what one might expect from a small open economy, such as Ireland, not from a country whose population comfortably exceeds one billion. By comparison, Germany would do well to grow at even 2% in 2003.

China’s growth is all the more surprising given the hurdles that its economy has faced recently. In much the same way that foot and mouth brought Ireland to a standstill three years ago, SARS had a dramatic effect on travel numbers into China. Nearly two-thirds of all SARS cases were recorded in China with the result that the WHO issued an advisory against travel into Hong Kong, Guangzhou and other key economic zones.