Much of what we think we know isn’t necessarily so. The invention of the printing press with movable type ? Traditionally credited to fifteenth-century Germany and Johannes Gutenberg, it was actually invented in eleventh-century China. Paper also originated in China long before it was used in the West. As did paper money and toilet paper (albeit today, these are pretty much interchangeable). English agriculturalist Jethro Tull is widely credited with the discovery of the seed drill in 1701. It was in fact invented by the Chinese 2,000 years beforehand. The first blast furnace for iron smelting is associated with Coalbrookdale – tragically close to schools in the West Midlands. It was actually introduced by the Chinese before 200 BC. The Chinese were also first to use the fishing reel, matches, the magnetic compass, playing cards, the toothbrush and the wheelbarrow. Perhaps even golf. So how did a society apparently so dynamic and innovative by comparison with the West then enter a centuries’ long decline?

David Fuller's view

Those among you with an interest in China and its history will have an understanding of the problems but this country’s remarkable recovery clearly began with the end of Chairman Mao’s era in 1976.   Today, China is once again a superpower, currently second only to the USA in economic and military strength, but with a vastly greater population.

China’s meteoric economic recovery in less than four decades is both remarkable and somewhat frightening.  Investors have also been wary in recent years, not least because of China’s stock market underperformance, authoritarian rule, pollution problems, corruption, and property bubble. 

Here is Tim Price's Letter.

However, the current government has been more candid than its predecessors in addressing economic problems, and apparently with some success.  Interestingly and much more recently, it has also begun to encourage a stock market recovery.  Subscribers will be familiar with this and given China’s current valuations for the Shanghai A-Shares Index (weekly & daily) (P/E 10.94 & Yield 2.97%) this market merits interest.  Additionally, the Hong Kong Hang Seng Index (weekly & daily) (P/E 10.72 & Yield 3.64%) currently has marginally more favourable valuations.

Currently, both indices are consolidating earlier gains.  I regard this as a buying opportunity at a time when many other stock markets are trading at considerably higher valuations but are unlikely to match China’s GDP growth rates.  I also think that China will now be less susceptible to political and economic concerns that are troubling some other regions.