Not surprising, the topic of investing in China is a relatively popular one, particularlly when billionaire investors like Warren Buffett and Investment Fund Guru Anthony Bolton are so publicly bullish on the country. But what does this mean for regular investors? Are there safer alternatives out there, like India where there is also a tremendous growth rate in terms of the population, business services and the like? Let’s first look at the differences in these countries’ growth rates.
China compared to India – GDP Growth Rates: Without question, both countries exhibit sharp upward growth rates. Even in a period of slowing growth, China just recently reported that growth has slowed to 9.6% in the third quarter of 2010… compare that to the actual growth rate of the United States at 1.7% and it is easy to see why so many investors are bullish on China as an alternative investment to domestic equities.
Like the United States, India’s GDP growth rates are muted compared to China’s. They always have been with the exception of three times in the past 30 years. Does this point to a slower potential for growth? Not completely; it simply showed that growth rates were slower in India compared to China.
China vs. India – Opportunities: Without question, this is one region where many investors will disagree. While both countries offer tremendous opportunities for growth, there has been some debate over whether China’s currency control mechanisms are supporting economic data, whether its government’s engage in public business can sustain the growth, and whether the country’s quality standards can be tolerated by the rest of the world that is seemingly more than willing to invest at the moment. The presence of so many questions and uncertainties point to the fact that there is some risk associated with investing in China and investors need to know this before parting with their money.
Similarly, the increasing population of India (it will surpass China in the next decade in terms of work-eligible adults), economic problems and political tensions with some of its neighboring countries also pose risks for investors interested in India.In either case, there are certainly risks, which investors need to weigh with the potential for contrary profits. When weighing these risks, investors might find that growth rates are really the best thing against which to base a mid- to long-term investment decision.
Growth rates alone should not determine whether an investor should place his or her resources in one country over another. If that were the case, China would make more sense. Nor should opportunity risks be allowed to betray one’s investment decisions; if that were the case, why might one invest in China at all?