Dear Fellow Investor,

After losing incredible amounts of money in 2008, most investors entered 2009 wondering which market would offer the best opportunities to make back their losses from last year. Unfortunately, most global stock markets haven't cooperated so far this year, and many investors have lost even more money.

Just look at how global stock markets have performed year to date:

• S&P 500 has plunged 25%
• Japan's Nikkei index has plummeted 20%
• Europe's FTSE index has dropped 19%
• India's Sensex has declined 16%
• Russia's RTSI index has fallen 8%

In steep contrast to the massive declines this year, I have watched Chinese stocks perform better and better. In fact, the Chinese A-Share stock market in Shanghai has been one of the best performing stock markets in the world this year -- up a whopping 16% already!

There's no denying that Chinese stocks are the best investment right now.

What China Is Doing Right

There are three key areas that I have been watching that help my understand why the Chinese economy is turning around and why Shanghai-traded shares are performing so well right now. These areas include bank lending, unemployment and domestic consumption. Let's take a brief look at how each is aiding in China's economic recovery.

Bank Lending: The biggest difference between China and the rest of the world right now is liquidity. As you probably already know, liquidity is the bloodline of a nation's economy. And while nations around the world, including the U.S., are implementing stimulus packages to overcome the global economic crisis, China is the only major economy showing early positive signs from fiscal stimulus.

That's because China's $586 billion stimulus package was put into action early -- back in October -- and it is focusing on boosting spending and creating jobs. With money pumping back into the Chinese economy, Beijing's stimulus plan is very quickly taking effect in the country.

And since most of China's banks are largely controlled by the state, they have been direct beneficiaries of the increased cash flow from the stimulus plan. That means while banks around the world have tightened lending, Chinese banks have already started to increase lending. In the past three months, we have seen a sharp increase in lending, with Chinese banks lending out more money in January than in the entire first quarter of 2008 -- totaling more than 1.5 trillion yuan.

This flood of liquidity has already started to manifest throughout the Chinese economy, including the stock market. And that's one of the reasons why Chinese stocks are trading higher in Shanghai, and why I think Chinese stocks listed abroad will soon follow as well.

That's a move that you're not going to want to miss out on! Join China Strategy today and find out the best ways to take advantage of the strength of Chinese stocks right now.

Unemployment: If you recall, we discussed China's unemployment numbers in depth on February 19. Be sure to reread this Inside China Dispatch for my complete thoughts on China's unemployment numbers.

But to briefly review, China's unemployed 24 million migrant workers actually only accounts for less than 2% of the country's total population. And many of these migrant workers are finding jobs in the infrastructure sector, as the country's stimulus package is boosting infrastructure spending and creating more than 40 million jobs in the next two years. This fiscal expansion can offset a large percentage of the unemployment created by the decline in exports.

Domestic Consumption: I continue to believe that China's main consumption driving force will be the Chuppies -- 100 million Chinese under the age of 50 living in relatively affluent households that make more than $15,000 a year or have assets of more than $100,000. Currently, Chuppies are the second-largest group of consumers in the world after U.S. baby-boomers. And last year, Chuppies helped Chinese domestic consumption grow by 21% -- strong double-digit growth that I expect again this year.

Even though most of the world is suffering from a recession, the Chinese continue to spend. So far, I have not seen any sign of a major Chuppies' spending slowdown in cities like Shanghai and Beijing. The reason why Chuppies have been so strong as a consumer class is because most have only seen their standard of living improve steadily as they came of age. And as U.S. consumers retrench in the coming years, Chinese consumers will play an expanding role in global economic growth.

The strength of the Chinese consumer will be more and important than ever this year. And investors who are tuned in to what Chuppies are buying and avoiding will be able to profit nicely in 2009. Find out the best ways to profit from the strength of the Chinese consumer -- join China Strategy today!

The First to Recover

With the help of China's economic stimulus package, China will likely be the first country to overcome the current global slump. That's because all of these funds are helping loosen liquidity, boost domestic consumption and alleviate unemployment. All of which is aiding in the China's economic recovery and boosting Shanghai-traded shares right now.

Still not convinced?

Just look at how well some of my top China Strategy recommendations have performed so far this year:

• A Major Chinese ETF Profiting from the Strength of the Chinese Stock Market, up 39%
• The Google of China, up 24%
• China's Leading Medical Device Manufacturer, up 14%

And that's just a drop in the bucket of profits that I'm expecting in select Chinese companies in 2009. That's why, as a valued Inside China Dispatch reader, I'd like to ensure that your portfolio is perfectly aligned to profit from the best-performing market this year -- China. Join China Strategy today!

Sincerely,

Robert Hsu