Invest in China Now for the Years Ahead

05/17/2011 2:00 pm EST

Focus: GLOBAL

Jim Rogers

Author, Street Smarts: Adventures on the Road and in the Markets

This article was excerpted from Jim Rogers’ presentation at the inaugural World MoneyShow Shanghai in April. It is part of a special series featuring Rogers’ unique insights into China’s economic growth, how you can profit, and where you should invest.

If you’re going to invest going forward, I would urge you not to invest in bonds in China—or anywhere else.

Interest rates are going to be going much higher over the next ten to 20 years, because we’re going to continue to have inflation. It’s going to get much worse, certainly in the West and China, I’m afraid.

We’re going to have more problems going forward with inflation, and therefore, higher interest rates. Prepare yourself, because rates are going to go much higher all over the world.

If you own bonds—and I know there are not that many bonds in China—but if you own bonds, I would urge you to go home and sell them. If you happen to be bond-portfolio managers, I would get another job, because you’re at the wrong place in the wrong time.

Bull Market in Commodities
I’m not terribly optimistic about stocks in the West. I own very few stocks there. My main portfolio these days, other than China, is in commodities, because that’s where the bull market is.

The bull market started about 12 years ago. It continues because supply and demand are terribly out of balance. Many of you know we have shortages developing of everything—whether it’s oil, or whatever it happens to be. Tin, rubber, cotton, we have shortages of everything developing. It’s going to get much worse.

There’s been very little investment in productive capacity for the past 25 or 30 years. The world is running out of known oil reserves. The world is running out of many things. It’s not going to last forever, don’t worry. It will end in ten, 20 years, I don’t know when. Hopefully, we will not permanently run out of things.

These kinds of periods have happened before in history. They’ve happened often in history.

You need to understand this: You can either invest in raw materials, as I have done, or companies that produce raw materials.

The Chinese government is very wisely, in my view, going around the world and going all over Africa, buying plantations, mines, and oil fields. They’re doing the same thing in South America, Central Africa, Central Europe, and Central Asia.

They see what I think I see, serious shortages of all raw materials are going to develop, partly because Asia is on the rise again.

NEXT: Protect Yourself from the US Dollar

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Protect Yourself from the US Dollar
So, if the world economy gets better, I expect to make a lot of money in my raw materials, my commodities. If the world economy does not get better, I still expect to make a lot of money—or be better off in commodities than in stocks—because governments, in the West anyway, are going to print a lot of money.

It’s the wrong thing to do, but that’s all they know to do, unfortunately. They think that printing money is the way to solve the world’s problems.

Now, the Chinese government is worried about the US dollar. I’m worried about the US dollar, but in America they’re not worried about the US dollar. They’re just going to print, and print, and print as many US dollars as they can.

You’ve got to understand the mentality that exists in the US, in Washington. They want to debase the currency, and they’re happy to do so. So, you must learn to protect yourself.

Your government is now allowing you to buy silver, gold, and other commodities. They’re even encouraging you to do so. Yesterday, here in Shanghai, I went and bought some more silver and gold for my little girls, because we know what’s happening in the West to currencies.

So, my portfolio is mainly commodities. I own some currencies. I own Renminbi. Whenever I can buy Renminbi, I can.

It’s not that easy for me to buy Renminbi because, you know, it’s a locked currency. The government is opening the currency more and more every year, every quarter, and I hope they continue to do so. I would do it faster, but I’m not your government, so I cannot tell them what to do.

But, I own currencies, including the Renminbi. I’m very worried about what’s going to happen to paper money around the world—but in the meantime, I’m trying to own what I hope are sound currencies.

Sell Short Emerging Markets
I have sold short emerging markets. For those of you who don’t know what selling short is, because it’s not easy to do in China, that’s something you can do—if things are too high and you think they’re going down, you can make money by selling short.

I have sold short emerging markets, such as India, because I think they’re too over-exploited and too high.

As far as China is concerned, I bought my first Chinese shares here in 1999, May 1999 to be exact. I have never sold any of the Chinese companies I own. I still own shares in every one of them. My approach to China is that I want my children to own my Chinese shares someday.

You know, if you were in America in 1911, and you had sold your American shares, you might have looked smart for a year, or two, or three. But over the next 80 years, you did not look very smart at all. That’s my view of China.

I hope that someday, 75 or 80 years from now, my granddaughter is going to look and say, “That old man was really smart. He really did a good thing buying us all of these Chinese shares.”

Profit from Collapses
Now, I know that most of you will not use that approach, because you want to buy things—and when they go up you want to sell them, and when they go down, buy some more.

That’s a perfectly good way to invest, and that’s the way I invest in nearly all countries in the world and in nearly every asset class in the world—except China, because I am so optimistic about the future of China that I don’t ever want to sell them.

I will buy more whenever China has a collapse. My plan is to wait until there’s another collapse. I don’t know if there will be, and I do not know when, but nearly every stock market in history has had ups and downs.

So my plan and my approach in China is that whenever there’s a serious problem such as there was in the fall of 2008, I want to buy more Chinese shares.

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