Investors Beware Of China's Rapid Growth, Conference Board Says

While China's economy will grow faster than expected (it will register in the 10% to 12% range, up from 9.1% in 2003), investors need to proceed cautiously, according to a report from The Conference Board, a New York-based business research and membership organization. "China has become a magnet for global investment because it is a major global growth driver," says Gail D. Fosler, executive vice president and chief economist of The Conference Board. "But it must be understood that it is an emerging market, experiencing many of the usual growing pains." According to Fosler, the region's rapid growth rate likely will be reduced by either the Chinese government's own efforts or external pressure from higher interest rates and increased global competition for capital, or both. With that in mind, Fosler says business investors should extend the time horizon for investment paybacks and raise the discount rate for unforeseen risks. "China is still a very attractive market, but caution in near-term expectations will help to prevent disappointments later, when, if history repeats itself, the Central Bank will raise interest rates."

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