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Stock Strategist

What Every Would-Be Investor Should Know about China

We share our thoughts after an extended visit to the rapidly growing country.

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As I wrote in the April issue of StockInvestor, Morningstar has an office in mainland China in Shenzhen, a city just over the border from Hong Kong. I spent little over a month there earlier this year, ostensibly to help train some of the stock analysts we've hired here to cover Chinese stocks for us. But my main motivation for going was to gather as many insights as I could about the booming Chinese economy via an immersive learning experience. This article will focus on my insights, as well as those accumulated by my colleagues who have also made the journey.

First, some background information. Much of what you hear about the boom is absolutely true. Signs of the exploding economic activity are everywhere. While Shenzhen is a boom town in itself and growing faster than China as a whole, it is still quite shocking to see the literally hundreds of construction cranes that dot the skyline. You think Las Vegas is a boom town, roughly tripling in size and adding 1 million residents over the past 25 years? Consider Shenzhen, which has gone from 300,000 to more than 12 million (and still going strong) since it was set up as a "special economic zone" in 1980 meant to attract business from around the globe. Companies are migrating here, meeting a mass migration of people from China's rural areas to urban areas.

Paul Larson does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.