Morningstar Advisor - December/January 2012 - (Page 54)

Morningstar Conversation The Keys to China’s Fortune By Peng Chen Thirty years of constant growth is making it difficult for China to transform an economy too reliant on investment and exports. Maybe a crisis will help. China’s economy has grown on average by around 10% per year for the past 30 years, and it is predicted to surpass United States as the world’s largest economy within the next two decades. This impressive growth has not gone unnoticed by investors. However, China is facing many challenges; currency valuations, an overreliance on fixed-asset investments, and a real estate bubble all have investors wondering if China’s long streak of growth is coming to an end. To get a sense of the state of the Chinese economy, where it’s headed, and what it will mean to investors, we invited Zhiwu Chen, a Yale professor of finance, to participate in this issue’s Morningstar Conversation. Chen, the author of nine books on China, is one of the world’s foremost scholars on the Chinese economy and investment markets. Our discussion took place on Oct. 24 and has been edited for clarity and length. Peng Chen: Let’s talk about the long term. We’re seeing a number of organizations predicting that China economically will soon overtake the United States as the world leader. What do you see? Do you agree with these predictions? Zhiwu Chen: For the most part, all these predic- tions and analyses assume that some steady growth rate will go on forever without any setbacks. Clearly, such an assumption 54 Morningstar Advisor December/January 2012

Table of Contents for the Digital Edition of Morningstar Advisor - December/January 2012

Morningstar Advisor - December/January 2012
Letter From the Editor
Seduced by Complexity
Is China Exposure Important for a Portfolio?
A Niche Built on Trust
How to Find Your Client’s Investment Style
Taking the Long View
Consensus on Europe Elusive
Four Picks for the Present
Investment Briefs
Is Perception Reality for Active Managers?
Be Alert for Basic-Materials Bargains
Investment Boom Unsustainable
Digging Moats in China
Where China’s Domestic Companies Stand to Benefit
Arising Opportunities
China Strong Long Term
From Currency Manipulation to International Acceptance
The Keys to China’s Fortune
Wedgewood’s Lessons Pay Off
Reading the Evidence on Indexing
Scouting for Investments Abroad
Yield, Please (Hold the Europe)
Mutual Fund Analyst Picks
50 Most Popular ETFs
Undervalued Stocks With Wide Moats
China Fund Managers Eat Elsewhere

Morningstar Advisor - December/January 2012