Keeping Economic Growth Robust

Despite its surplus of funds, though, China isn't completely isolated from the financial crisis storm. The world is experiencing an economic slowdown, and China's economic fundamentals are slowing down like the rest of the world's.

But what sets it apart is that its economic growth is still robust. In fact, most economists believe that the Chinese economy will grow by 8% in 2009 — an impressive rate, considering that only a few countries will post a positive GDP rate in 2009.

I'm expecting 7% to 8% growth, which is below the consensus forecast of 8%. To keep China's economic growth humming along, policymakers are focusing on boosting domestic investments and consumption. These two components are becoming the primary drivers of growth within China, as demand for the country's exports have declined in the past year.

So to support these components, China issued one of the biggest economic stimulus packages in its country's history. As part of the plan, there will be vast amounts of money put towards building and improving railways, roads, highways, bridges and other infrastructure.

In addition, the plan will fund the improvement of healthcare, education, and environmental protection projects. Many of these projects have already been set in motion in recent weeks, and as more are started throughout the year, China's economy will continue to improve.

As China's economy improves, so will domestic consumption. Like consumers in the U.S. and Europe, Chinese consumers are more mindful on unnecessary expenditures. But remember that while consumers in the other countries have no extra money to spend, most Chinese consumers have savings to live on, since China's average savings rate is over 30%. So while consumers in the U.S. and Europe are cutting back, the Chinese will continue to spend in 2009 and improve China's economy.

As you can see, there are many strong, positive fundamentals supporting China's economy. And in the coming months and years, China will offer a relative economic safe harbor for investors who are wary of the banking crisis in U.S. and Europe.

A Safe Harbor

Many investors are hesitant about investing in China, especially because of the sharp sell-off in Chinese stocks last year. Of course, Chinese stocks have not been spared from this global stock bear market, but remember that the root cause of the stock market sell-off in China and the U.S. is largely different.

While U.S. stocks declined in 2008 due to the fundamental deterioration in the U.S. economy and financial system…