Is Investing in China a Good Idea for Americans?

Introduction to Investing in China as a US Citizen

You've probably heard about China's recent economic growth and the innovation in tech that's happening on the other side of the Pacific Ocean. For many US investors, investment opportunities in China have captured their imagination. This is driven primarily by the fact that since the 2008 financial crisis it has been China who has been the largest contributor to global economic growth according to the World Bank.

​In this short article we'll cover the basics that you should be aware of and probably want to know about investing in China as an American citizen.

China's Consumer & Business Market

With almost 20% of the world's population, China represents a large consumer market, and on the economic side they are a global powerhouse. According to chinafund.com, the following stats are true (at time of writing) about the Chinese Economy:
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• 2.48 Trillion Dollars in Exports
• 2.13 Trillion Dollars in Imports
• 3.16 Trillion Dollars in Foreign Reserves
• 14.2 Trillion Dollars Nominal GDP (#2 World Rank)
• 27,3 Trillion Dollars PPP GDP (#1 World Rank)

With a population of 1.42 billion people and a labor force of 804 million, the Chinese economy is booming and poised for continued growth, making it a solid option for US investors seeking to diversify their portfolio with international stocks, bonds, and funds.

Key Factors to Weigh Before Investing in China

Before making any investment it is important to carefully consider the risk and potential reward so that you can get the best return on your money at a risk level that's comfortable for you.
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• Chinese Urbanization is expected to continue beyond 2030. This urbanization has been a major contributor to China's economic growth, so this is a good sign for investors.
• Chinese Politics represents a potential risk to investors. The country's communist structure, differences in regulations and how they are enforced, and the potential for insider trading all pose a risk when investing in the Chinese market, so do your homework.
• The Best Investment Opportunities may be represented by US corporations that have a strong foothold in China. Many of these businesses offer mutual funds and ETFs as a way to gain entry into the Chinese market with lower risk. 

Your Choices When Investing in China

One of your best choices when looking to add investments in China to your portfolio may be one of the more than 50 China ETFs that trade in the United States. 

If you're looking to invest directly in blue-chip Chinese companies, this is also pretty easy to do as many of these companies are also listed directly on the US stock exchanges.

Lately, most of these blue-chip stocks of Chinese corporations have sagged in popularity for American investors. This is mostly due to the feeling that the earnings and financial statements they release to shareholders are not as accurate or transparent as those of American companies.

Diversifying your portfolio with a collection of stocks, bonds, and funds from foreign economies is generally considered to be a good idea, and with the anticipated growth of the Chinese economy, China represents a great opportunity for many US investors who want to diversify their portfolio with international funds.