Recently I was entertaining a visiting professor from China and her son.  Would you believe how hard it was for me to think of authentic Canadian things that I could gift them - of course, they've had the maple syrup bottles given to them ten times over, so I didn't really want to go there, and everything else seems to be made in China!

The real value of meeting these people was the discussion that was sparked in my sitting room every night with other well informed friends about the direction of the great nation of China in terms of being an economic and political power.

The conclusion I have reached is that THE DAYS OF CHINA ARE NUMBERED.  I would even go as far as to say that in ten years we may very well see some form of deomocracy raise it's head.

As long as China was a segregated country with it's people protected from the influences of the rest of the world the masses had nothing to compare their lifestyle with.  Over the past 15 years, two things have happened: Hong Kong as returned to China, and Western cultural influence in China has increased.  Chinese people are travelling overseas and through media, especially the internet are able to scope out what is happening in other countries.  They are feeling their poverty.  They are also feeling the corruption that is making it impossible for many of them to achieve their goals.  There is much unhappiness among the masses.  In addition, due to lack of control over industrial waste and pollution, the living conditions for the Chinese people are becoming intolerable.

On the other hand, the industrial revolution that has the whole world in it's grip is changing the way manufacturing is taking place and will take place in the factories of the future.  Systems such as 3D printing and robotics are reducing raw material cost and cutting down on wastage.  The wider use of these processes in manufacturing and even in the service industry has the potential of bringing back production to North America.

Historically, Chinese manufacturing industry has been a copy cat industry - making things cheaper.  Two things are missing: innovation and quality.  3D manufacturing has the potential of evening out the playing field on these fronts - it is not a matter of "if" just a matter of "when" this change will occur.  I give it ten years on the outside.  I think we will start seeing the impact in as little as the next five years.

Inflationary pressure, combined with unemployment, a sagging housing industry, all peppered with corruption are going to slow China down and soon the impact of pollution will effect manufacturing and health.

The bottom line: if you are heavily invested in China, use the next wave to even out your losses and sell.  On a selective basis some companies may have growth potential over the next little while, but I would much rather invest in companies on the leading edge of technology in Canada, the US, and some European countries. 

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