Why Investors Should Keep China in Their Sights

China has not been foremost in investors’ minds of late given the turbulence in Europe.

But data released on Tuesday shows a torrid pace of economic growth in the country. Property prices are up 12.8 percent, retail sales are up 18.5 percent, industrial production is up 17.8 percent and fixed asset investment is up 26.1 percent.

Those figures may concentrate investors, once again, on the question of whether China’s economy is in a bubble or simply a cyclical upswing.

I will leave it to others to debate the merits of either argument. But there seems little doubt, given China’s very strong growth, that the government will likely try to apply the brakes a bit and stem inflation through higher interest rates, perhaps even more restrictions on bank lending andthe possibility of allowing the Chinese currency to trade in a higher band.

The fear of one or both of those moves has helped send the major Chinese stock market down sharply since November.

China may not be the top story today, but investors would do well to keep it in their sights given that some would say the Shanghai Composite Index (SSE Composite Index), now in bear territory, could be a forerunner of what we could expect here in our markets.

Related Links:

• China Stocks Enter Bear Market on Inflation, Property Concerns
• Asian Shares End Mostly Down; china Tightening Fears Return
• China Inflation Rises as Housing, Food Costs Jump
• Is China's Housing Bubble About to Burst?

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• The Dow 30 in Real Time
• The CNBC Stock Blog

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