Dear Fellow Investor,

The global economic slowdown -- and threat of a global recession -- has weighed heavily on nations around the world. And many countries and regions, in response, have taken bold measures to stay afloat and keep their economies growing.

For example, Japan has lowered borrowing costs for the first time in seven years, and has slashed interest rates twice in recent weeks. And Australia, India, Taiwan, China and South Korea have all cut rates, as well -- and still have room to continue slashing rates as necessary.

Despite these efforts, though, the aggressive loosening of monetary policy has had little effect on easing market concerns or buoying economic growth. This is mainly because it can take between six and 18 months before interest-rate reductions have a measurable effect on economic activity.

As a result, many nations around the world have watched their economic growth slow down substantially. China, in particular, saw its steamy 11.4% GDP growth rate from 2007 drop to 9% in 2008 and likely 7% to 8% in 2009.

But the Chinese government isn't taking this slowdown in economic growth sitting down. Chinese policymakers are doing something about it. And this week, they took a huge step towards stimulating economic growth within the country's borders.

China's New Economic Stimulus Plan

On November 9, Chinese government leaders announced a four trillion yuan, or $586 billion, infrastructure spending stimulus plan. This package equates to 80% of China's government spending in 2007, and almost a fifth of its gross domestic product last year.

While the U.S. and Japan – the two largest economies in the world – have both announced stimulus packages recently, China's plan is the biggest of its kind. Adjusted for purchasing power, China's $56 billion stimulus package is equal to nearly $2 trillion.

How can China spend such a large lump of funds? Well, the country has built up massive financial reserves during its boom years, including the world's largest foreign reserve – nearly $2 trillion – and saving pool. And after a major clean up in the past three years, the Chinese banking system now has a lower bad debt ratio than the U.S.

So government leaders are able to use the country's vast resources to shore up the Chinese economy. In fact, Beijing expects this stimulus package to support China's economic growth for the next two years with funds being spent by the end of 2010.

And China is already greasing the wheels on this plan, as in the last quarter of this year alone, China will deliver 120 billion yuan ($18 billion) of new spending in low-rent housing, infrastructure in rural areas, roads, railways and airports. Investment by local governments and companies in these projects may even boost that to 400 billion yuan ($60 billion)!

Overall, though, the $586 billion stimulus plan will fund the expansion and improvements to existing projects:

• 15% of the package will fund the construction of railways during 2009, which will create six million new jobs and generate 1.5% GDP growth.
• 50% of the plan will go towards building new highways, which will create 39 million jobs in the next two years.
• Boosting healthcare expenditures, especially in poor rural regions.
• The construction of more affordable and low-rent housing.
• Improving environmental protection and enhancing construction of sewage and water treatment facilities.
• Developing educational systems in rural China.

In the end, China's stimulus packaged should generate at least 4% GDP growth and over 50 million new jobs. And this combined with a conservative 3% GDP growth in domestic consumption, China should be able to achieve 7% GDP growth in 2009.

That's why China continues to be the best area for investment now. Not only will the country continue to post robust economic growth at a time when most nations will experience stagnant or negative growth, but also many Chinese companies will directly benefit from the new stimulus package.

Who Stands to Benefit?

Chinese companies in the healthcare, infrastructure and education sectors, in particular, will benefit from this influx of spending. And that's good news for a number of my China Strategy recommendations, including China's leading education services company, which is already up 127% for us. Learn more about why this company will benefit from China's new stimulus package.

In addition to the companies already on our buy list, I'm looking closely at other companies that will be the biggest beneficiaries of China's new stimulus package and continued economic growth. In fact, in the December China Strategy issue, I'll be recommending a company set to profit from China's increase in infrastructure spending.

This infrastructure company has made the list before and handed China Strategy readers a 285% gain when we sold it last November. And now, just a year later, the company is selling at a steep discount and should profit from China's robust demand – expected to grow at 15% this year -- for aluminum.

Don't miss out on the next round of double-digit -- possibly even triple-digit -- gains in this company. Join China Strategy today!

Robert Hsu