The NEXT Asian Miracle

A little more than a year ago I began to notice something a bit strange in my normally not-too-strange neighborhood.

It started just after Hurricane Frances, when my backyard screen enclosure was blown down.

Before I could even pick up the phone to call my insurance agent, a scavenger crew came by offering to clean up the mess for free. Their compensation: A not-so-small sum they could collect from the sale of the aluminum scrap.

Nowadays, theres a fellow who picks through my recycling bin every Saturday morning at curbside, taking just about anything that contains metal. But hes no ordinary scavenger. Hes a former real estate broker who actually makes a pretty decent living selling scrap aluminum, tin, and other metals.

The other day, I asked him where all that metal is going. To Asia, he said. They consume every ounce they can lay their hands on.

Indeed, the economies of Asia are growing faster than those of the U.S., the EU, Latin America, and even Australia. They recover from economic adversity quicker than any economy on the face of the planet. And their persistent breakneck growth is intensifying demand for just about every natural resource under the sun.

China has been growing at an average high-speed clip of 9.3% since 1979. That means Chinas already-huge economy is effectively doubling in size every 8 years.

India is close behind 6.8% growth for the last 12 years. Indonesia, over 5%. Malaysia, 4.4%.

Combined, the total production of these four countries alone has soared from $1.8 trillion in 2000 to $2.7 trillion at the end of 2005. Thats an astounding jump of nearly $1 trillion in, in just five years.

Then theres Singapore (12.5% annual growth), Thailand (5.4%), the Philippines (4.1%), plus Vietnam and Cambodia (both with growth of 7.7% last year). The action is in virtually every country every month of every year.

Despite all the so-called problems these countries face everything from corrupt governments to the avian flu each one of them is growing faster than the U.S., the EU, Japan or any country on the planet.

Per-capita income is soaring too. Chinas has increased over 58% in the last 5 years lifting hundreds of millions of Chinese above the poverty level.

Thats nearly four times faster than the equivalent growth in the U.S. (taking into consideration the purchasing power of the money in each country).

Malaysias was double ours. Ditto for Indonesias. Even poverty-stricken, backward Cambodia performed better than the U.S. on this measure. And the only important country in Asia which did not surpass the United States in growth was the Philippines.

Huge Demand for Raw Materials!
Surge in Competitive Exports!

Remember the economic miracle of postwar Japan?

Soon after World War II, it began to beat the pants off of Europe and North America with its exports of cameras, radios, TVs and motorcycles … and subsequently, autos, ships and high tech.

It imported large amounts of iron ore, crude oil and other raw materials, generating a surge in worldwide demand.

Suddenly, from a nation in ruins, and with less than one-tenth the land area as the continental U.S., Japan emerged as the worlds second largest economy, and has held that ranking ever since.

Imagine if you could have invested in Japan in those early days!

Well, that economic miracle is similar to the marvels seen all over Asia today (with the difference that some are also net exporters of raw materials) …

Indonesia is a big exporter of textiles, electronic goods, footwear, oil and gas, plywood, sawn timber …

Malaysia electronic and electric machinery, petroleum and natural gas, textiles, clothing and footwear, palm oil, sawn timber …

Thailand textiles, computer and components, integrated circuits and parts, gems and jewelry, footwear …

Cambodia garments, textile products, lumber, wood furniture, and rubber, plus …

Vietnam crude oil, coal, chromium, tin, cement, wool, jute, rice cinnamon, marine products.

Overall, when I look at Asia, I see …

The Largest Bundle of Untapped
Profit Opportunities on the Planet

In a few moments, Ill give you a recommendation for getting your feet wet with one solid investment.

But first, lets look closer at the Middle Kingdom, China.

It is China and its 1.3 billion people thats leading the giant leap forward for virtually all of Asia.

Most analysts generally credit Chinas rapid economic growth to two main forces: Huge capital investment and hair-raising advances in productivity. True. But beneath it all …

The most sustainable and powerful dynamic in China is the insatiable yearning of its 1.3 billion people for a better life.

Result: a modernized China, a China that President Nixon could only have dreamt about back in the 70s when he opened the door between our two countries.

This yearning was always there, buried and smothered. But in 1993, it was formally unleashed as former Premiere Deng Xiaoping declared that to get rich is glorious.

That single but pivotal change in philosophy marked the beginning of Chinas long march to achieve a higher standard of living. And along the way, we are seeing a whole series of largely untold economic miracles:

Domestic savings in China has soared from 32% of the nations GDP in 1979 to 42% today.

Consumer spending has jumped from virtually zero to nearly $1 trillion in 2005 and is now growing at 13% – 14% per year.

Hundreds of millions of rural citizens have flocked to eastern cities to establish new lives and pursue their dreams. So urbanization in China is occurring on a scale never before seen in the history of civilization. And already, there are now over 100 cities in China with a population of more than 1 million. In the U.S., there are only nine!

Shanghai, home to nearly 17 million, is now the second largest city in the world, second only to Mumbai (formerly Bombay), India.

Tens of thousands of privately owned businesses have been created in China, while thousands of state-owned enterprises (SOEs) have been shuttered.

Over 1 billion new customers have emerged.

The Effective Size Of Chinas Economy
Is Many Times Greater Than It Appears

In terms of U.S. dollars, Chinas economy produced a total of $1.8 trillion in goods and services last year. Respectable. But not huge.

This $1.8 trillion, however, greatly understates the impact on China, its neighbors and the entire world.

Reason: The price of most goods and services in China is so much lower those in the United States and other developed countries. So if you account for the huge pricing gap, Chinas economy is actually far, far larger.

Take cars, for example. If China makes and sells cars more cheaply, it may appear that their auto industry is still relatively small.

But if you measure Chinas auto industry by the number of cars produced, youll see its actually a lot larger.

The way to level the playing field is with purchasing power parity (PPP). This takes into account the fact that a dollar in China buys a heck of a lot more than a dollar in the U.S.

And by that measure, Chinas economy is already 76% as large as the giant economy of the U.S., making it the third largest in the world. Thats why …

China Is Already the Worlds Second
Largest Consumer Of Oil Products

China consumes a whopping 6.7 million barrels per day. And only one country on the planet guzzles more: The United States. In fact, according to the U.S. Energy Information Administration, over the past four years, about 40% of the growth in the worlds entire oil demand came from China.

Over the last 10 years, Chinas oil imports have risen 400%.

But it doesnt end there. By 2025, its projected to double, to 13.4 million barrels per day.

Thats why Chinese oil and gas companies are now scouring the world for joint-venture partners, oil and gas acquisitions, and alternative energy deals. Its on the hunt for energy. And theres no signs thats going to change anytime soon.

The Worlds LARGEST Consumer
Of Steel, Cement, and Copper

China consumes more steel than any other country in the world.

But guess what! Its still far behind in the amount of steel it uses per person. Heck, South Korea and Taiwan consume four to five times more per capita than China.

For Chinas use of steel to rise to the level of South Koreas, Chinas demand for steel would have to grow at a hefty 5% every year and keep growing at that pace for 25 years nonstop. And thats just to catch up to where Korea is today not to where Korea will be a quarter-century from now.

Its a similar story with cement, copper, rubber, iron ore, lead, and zinc. Chinas demand for these commodities is already driving up prices worldwide … and yet China has barely begun to catch up with developed countries in terms of its consumption per capita.

Thats the next Asian miracle. But its only half the story …

Reform for 800 Million
Rural Chinese Will
DOUBLE DEMAND

China has a problem: Most of its rural populations have been largely left out or shoved out of its economic boom.

This is triggering a rising tide of peasant protests … rising anxiety in Beijing … and an intense debate at this years National Peoples Congress regarding what precisely should be done about it.

Despite deep disagreement regarding the exact solution, the 2,927 delegates were in agreement on the goal: To uplift close to 800 million rural Chinese to a higher standard of living … and, by definition, much higher levels of consumption.

One of the likely results will be the mass privatization of hundreds of millions of acres, granting ownership to rural households. Thats almost 1/7th of the worlds population, moving quickly from public to private land ownership.

So if you think Chinas current level of demand for natural resources is large, just imagine the demand that will be created as this transfer of land occurs over the next decade … and as the size of Chinas consuming population doubles!

Spending will go through the roof. Demand for every natural resource under the sun from A to Z will skyrocket.

Despite its Huge Import Needs,
China Is Also loaded with
Untapped Natural Resources

China is no Saudi Arabia, Kuwait, or Venezuela. It doesnt have anywhere near those amounts of oil. But buried below most of its 9.6 million square miles (nearly twice the size of the U.S.) lies

Over 18 billion barrels of oil
2.5 trillion cubic meters of natural gas
12% of the worlds coal reserves (600 billion tons)
Some of the largest reserves in the world of tungsten, antimony, tin, mercury, salt, fluorspar … as well as bauxite, limestone, and copper

Theyre not sufficient to meet Chinas growing needs. But theyre also largely untapped.

And its not going to stay that way for long. The country will soon be spending like mad to gain access to all that underground booty.

My view: Chinas growth will continue to double its economy every decade … and will potentially triple the money of savvy investors in far shorter periods of time.

One good way to participate: The China Region Opportunity Fund (USCOX), offered by US Global Investors.

Its a no-load fund with 1- and 3-year performance of 35.58% and 33.9%, respectively. Check it out at http://www.usfunds.com/funds/china_doc.asp

Also, consider the recommendations in my Real Wealth Report, which, as the name implies, concentrates in real assets, real value, real wealth.

In the March issue, I name one Asian regional fund thats already up 49% just since I recommended it last October, and I show you how to jump on board. Plus, I introduce subscribers to a natural resource sector that few people know about, fewer understand, and virtually no one is cashing in on, despite huge profit potential.

If youre already a subscriber the issue will be ready for download tomorrow night. If not, for just $99 you can receive a full year of hard-hitting issues, flash alerts, and access to our password-protected website, 24/7. You can also download tomorrows issue. Use our secure server to join.

Meanwhile, think twice before you toss out all your scrap metal. It may be worth more than you think.

Best wishes,

Larry Edelson
Editor, Real Wealth Report

For more information and archived issues, visit http://legacy.weissinc.com.

About MONEY AND MARKETS

MONEY AND MARKETS (MAM) is published by Weiss Research, Inc. and written by Martin D. Weiss along with Larry Edelson, Tony Sagami and other contributors. To avoid conflicts of interest, Weiss Research and its staff do not hold positions in companies recommended in MAM. Nor do we accept any compensation for such recommendations. The comments, graphs, forecasts, and indices published in MAM are based upon data whose accuracy is deemed reliable but not guaranteed. Performance returns cited are derived from our best estimates but must be considered hypothetical inasmuch as we do not track the actual prices investors pay or receive. Contributors include Jennifer Moran, John Burke, Beth Cain, Amber Dakar, Michael Larson, Monica Lewman-Garcia, Julie Trudeau and others.

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