Getting rich by any means necessary has become the Chinese dream supported by the government’s obsession with a prospering economy.

The XXIX Olympics were designed as a “coming-out party” to showcase all that China has to offer. Not only is 08-08-08 a catchy date it also has a deep symbolic meaning; the number “ 8” is considered a lucky number in Chinese culture because it sounds like the word “prosper” or “wealth”. 
 

The Shanghai Stock Exchange (SSE) truly has prospered. The SSE topped out at near 6000 last October. This is remarkable as it traded just over 1000 in 2005. This 500% move is twice NASDAQ’s 1998-2000 run and took a quarter of the time of NASDAQ’s 1990-1998 500% move.

This new prosperity is reflected in ETFs such as the iShares FTSE/Xinhua China (Ticker: FXI) which was up 83% and 55% for 2006 and 2007. The PowerShares Golden Dragon Halter USX China ETF (Ticker: PGJ) was up 54% and 63% for 2006 and 2007.

China ETFs:  

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The above list of China ETFs would not be complete without mentioning the ProShares Ultrashort FTSE/Xinhua ETF (TIcker: FXP). This leveraged, inverse ETF aims to replicate twice the opposite, daily performance of the Xinhua index. YTD, the ProShares Ultrashort is showing a slightly better performance than iShares FTSE/Xinhua (Ticker: FXI).

This short ETF might come in handy as the Olympic torch relay, intended to build excitement leading up to the games was a public relations disaster, the Shanghai Stock Exchange has suffered a steep 50% correction and admiration of the Chinese economy is starting to turn into agitation with Chinese politics.

The casualties of their reckless pursuit of wealth are starting to gather more attention. Since spending money on green endeavors is antithetical to the Chinese business ethic, environmental issues are surfacing:

- Air-pollution:
The World Bank reports that 16 of the 20 most air-polluted cities in the world are in China. 39.7% of Chinese cities are either moderately or severely polluted.

- Water-pollution and scarcity:
More than 300 of China’s 640 major cities face moderate to severe water scarcity. China has the second lowest per capita water resources in the world (less than one third the world average).

Watching world news from our La-Z- Boy, we might be aware of issues such as slave and child labor, China’s occupation of Tibet and the involvement in the Darfur genocide as military-ally of Sudan (Claymore’s KLD Sudan Free Large-Cap Core ETF addressed the Darfur/Sudan issue before it closed in 02/2008).

However those facts, which are part of daily life China have not affected us, yet. Red flags indicating that such issues will be spilling over into our living rooms soon are starting to pop up all over.

Last month I had the opportunity to visit an ancient Hawaiian crafts fair in Lahaina / Maui. The gift store next door had some real neat “original” Hawaiian souvenirs. By accident I stumbled on a “made in China” tag on a small, carved wood box. It turns out this was not the only piece made in China, in fact, eight out of ten items where made in China! Once again, this wasn’t a WalMart, it was a city-owned gift shop, right next to an ancient crafts fair intended to educate about Hawaiian culture. WOW!