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How to Profit from China’s Failed Communist Experiment

Jeff Siegel

Written By Jeff Siegel

Posted January 29, 2024

Last week, China announced that it would cut the reserve requirement ratio for its banks.

This basically means banks in China will now be required to hold smaller reserves than what was previously required, thereby creating more long-term liquidity for the market.

Some folks were angered by this news, claiming that this will enable more dangerous risk-taking by the banks.  But in China, if you screw up in the world of banking, you disappear.  In the U.S., you get a fat bonus and a slap on the wrist. 

But that’s not really the point.

The point is that this move underscores the argument that China is NOT some kind of indestructible economic giant.  

Make no mistake: China is struggling with everything from record high youth unemployment, a real estate crisis that’s gutting multi-billion-dollar developers, and a stock market that has lost more than $6 trillion in value over the past three years. 

To put that into perspective, that’s more than the GDP of Russia, Mexico, and South Korea combined. 

Now add dangerously low birth rates and record levels of debt, and you have a recipe for more political control over the economy.  Which, of course, will only exacerbate China’s economic woes.  

This isn’t to say China will go gently into that good night.  But its days of being the second largest economy in the world could be coming to an end. 

India Rising

While China continues to deny basic freedoms to its citizens and exert more political control over its economy, India is embracing more of the western economic and political ideologies that create the foundation for strong, long-term economic growth. 

In fact, according to S&P Global Ratings, India’s GDP growth rate is expected to grow to 7% by 2026 while China’s GDP growth rate is expected to grow 4.6%.

Dr. Rumki Majumdar opined on India’s growth in Deloitte’s most recent India economic outlook, writing …

“Extrapolating from Professor Ricardo Hausmann’s ‘Scrabble’ theory of economic development, India took determined and focused actions to convert know-how and capabilities into unique products and solutions. 

India’s emphasis on using technology to accumulate and diffuse tacit knowledge, building high-end manufacturing capacity, and improving competitiveness through exports formed the three necessary catalysts that boosted its growth trajectory and improved its economic fundamentals over the years.

We are optimistic about India’s near-term growth outlook as it reaps the benefits of the steps it has taken so far.” 

India’s impressive growth actually reminds me a bit of what we saw back in the early 2000s in China, when the Middle Kingdom’s economy was roaring.  There were a lot of opportunities back then to ride China’s wave of economic growth, and we took full advantage of that here at Energy & Capital.  

We’re now going to do the same thing again with India.

In the coming weeks and months, I’ll provide more detail on India’s rise to economic superpower status, and of course how we can profit from it.

One thing to consider today is India’s effect on oil markets

According to analysts at Bernstein Research, India is expected to be the most important single region driving demand growth over the next 20 years making it a key country to watch for future demand.

This actually aligns with some of the predictions recently made by our resident oil & gas analyst Keith Kohl regarding one of three triggers for the next big oil bull market that’s expected to send oil prices back up over $100 per barrel — and actually stay there for at least two years. 

The data are quite convincing as you can see for yourself in this short piece of intel here.

Bottom line: China’s economy is not as strong as it once was, and India is rapidly catching up.  And you better believe we’re going to milk this for everything it’s worth.  You should, too.  Starting with these stocks.

To a new way of life and a new generation of wealth…

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Jeff Siegel

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Jeff is the founder and managing editor of Green Chip Stocks. For more on Jeff, go to his editor’s page.

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