ontent, build a sound market-based financial system, privatize dominant state-owned enterprises and move towards openness and democracy? This is a tall order and you can put me in the skeptic column.

Neve

Are you worried that the Chinese stocks have moved too far too fast? Or maybe you have missed the story and fret that it is too late to get a piece of the action. The China ETF (FXI) was one of the star performers in 2006 but this year is up only 3.44%. All the headlines about the hot China market have been about the Shanghai Composite index which includes the Shanghai and Shenzhen and their “A” shares available only to Chinese investors. Still, it is likely that a sharp pullback in the Shanghai Composite would have a spillover affect on FXI.

China has been the largest economy in the world for eighteen of the past twenty centuries and it is clearly determined to regain its role as the hegemonic power in Asia and then challenge U.S. global leadership. Will it be able to sustain its 10% economic growth rate, quell rural discontent, build a sound market-based financial system, privatize dominant state-owned enterprises and move towards openness and democracy? This is a tall order and you can put me in the skeptic column.

Never

ers in 2006 but this year is up only 3.44%. All the headlines about the hot China market have been about the Shanghai Composite index which includes the Shanghai and Shenzhen and their “A” shares available only to Chinese investors. Still, it is likely that a sharp pullback in the Shanghai Composite would have a spillover affect on FXI.

China has been the largest economy in the world for eighteen of the past twenty centuries and it is clearly determined to regain its role as the hegemonic power in Asia and then challenge U.S. global leadership. Will it be able to sustain its 10% economic growth rate, quell rural discontent, build a sound market-based financial system, privatize dominant state-owned enterprises and move towards openness and democracy? This is a tall order and you can put me in the skeptic column.

Neve

to Chinese investors. Still, it is likely that a sharp pullback in the Shanghai Composite would have a spillover affect on FXI.

China has been the largest economy in the world for eighteen of the past twenty centuries and it is clearly determined to regain its role as the hegemonic power in Asia and then challenge U.S. global leadership. Will it be able to sustain its 10% economic growth rate, quell rural discontent, build a sound market-based financial system, privatize dominant state-owned enterprises and move towards openness and democracy? This is a tall order and you can put me in the skeptic column.

Neve

enty centuries and it is clearly determined to regain its role as the hegemonic power in Asia and then challenge U.S. global leadership. Will it be able to sustain its 10% economic growth rate, quell rural discontent, build a sound market-based financial system, privatize dominant state-owned enterprises and move towards openness and democracy? This is a tall order and you can put me in the skeptic column.

Neve

ontent, build a sound market-based financial system, privatize dominant state-owned enterprises and move towards openness and democracy? This is a tall order and you can put me in the skeptic column.

Nevertheless, China’s raw industrial power, momentum and the palpable ambition of the Chinese people could realistically yield a huge return. I advise my clients to go ahead and invest in China but emphasize that this is a speculative investment. It is smart to protect against the considerable downside risk.

Here is a simple plan you might want to execute to capture the upside while cutting your losses if the Chinese economy hits a speed bump.

First, take a broad stake in China through investing in the China iShare exchange-traded fund (FXI) that is comprised of 25 of the largest and most liquid China names. All of the 25 stocks included in the China iShare are listed on the Hong Kong Stock Exchange. Some of them are incorporated in mainland China (H shares) and some of them are incorporated in Hong Kong (red chips).