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How to Cash in on China's $200 Billion Development CheckBy Graham SummersMonday, November 12, 2007 Have you ever heard of Chongqing?
In the 1930s, you couldn't walk into the lobby of a decent Manhattan hotel without seeing lobby clocks displaying the time zone for Chongqing (or Chungking, as it was known in the States at the time), alongside London and Paris.
In the second Sino-Japanese war, Chongqing was designated China's wartime capital. Situated 1,500 miles inland, the city perches on a 750-foot high rock between the Yangtze and Jialing rivers (which can rise as much as 40 feet in a single night). Chongqing is unassailable by land or water, and fog blankets the area eight months out of the year.
Unfortunately for the city, Japan had plenty of airplanes. And as soon as the fog cleared in May 1939, the land of the rising sun set about bombing Chongqing back to the Stone Age. Despite evacuations, 750,000 citizens were running for cover on the first day the bombs fell. Fewer than one in four made it to bomb shelters.
The Japanese staged a total of 268 air raids on the city, making Chongqing the most bombed city of World War II. Residents who didn't flee the bombs could no longer live in the city, as food prices skyrocketed. At one point, eggs jumped from $0.29 to $9.60 a dozen. People began to starve.
By the time the war ended, Chongqing had gone from international capital to industrial wasteland. Mining and trade stopped dead. The city's economy came to a virtual standstill. Eventually, even native mainland Chinese had all but forgotten it...
Today, rebuilding and modernizing Chongqing as rapidly as possible has become China's top priority. The leadership in Beijing sent party officials responsible for Shanghai's economic boom to Chongqing, along with a virtual blank check ($200 billion) and an official mandate to "spend whatever it takes."
"We're spending more than $1 billion – every month. We'll spend like this for another 10 years," says one of Chongqing's senior urban planners.
Altogether, 207 projects are expected to come on line in the next 15 years. Manufacturing to construction is exploding there. The municipality plans to build more than 4,000 miles of highways alone. Last year, some 300,000 cars were manufactured in Chongqing. That number is expected to double in the next three years and triple by 2010.
Investors who get in early have a veritable smorgasbord of opportunities. Every infrastructure sector you can think of – power generation, construction, water treatment, road paving – is booming in Chongqing. So are the commodities businesses: cement producers, steel producers, even mining companies that supply raw materials.
Investing in Chongqing today is like investing in Chicago in 1850. You're able to get in on what will soon be China's hub city between its east and its west. There are two safe ways we can profit:
1. Invest in U.S. businesses that already have a presence in the region.
2. Invest with the Chinese entrepreneurs with government connections.
I'm headed to China in early December with stops in Chongqing, Beijing, and Shanghai. I'll let you know what I find.
Good trading,
Graham
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