Dear Fellow Investor,

What was the big news this week? That's easy: Yesterday's U.S. Federal Reserve decision.

It appears that Fed Chairman Ben Bernanke is finally understanding the severity of the U.S. economic situation and is willing to take necessary action. As a result, he's living up to his nickname "Helicopter Ben."

In yesterday's Federal Open Market Committee Meeting, the Fed announced that it would spend another $1.1 trillion to purchase debt securities, specifically Treasury notes, in open market operations. This is an extremely aggressive attempt to re-inflate the economy, and it should encourage bank lending.

And this is the closest thing to churning the printing press and throwing money out of helicopters…

Overall, I think the Fed's action will provide a necessary jolt to the U.S. economy and stock markets in the short term. But the long-term effects from this action may cause even more problems.

Steve Forbes once said: "If printing money alone can create wealth, then poverty stricken Zimbabwe (a country plagued by hyperinflation) would be the richest country in the world." So in the short run, Bernanke's actions will help stimulate the economy and the stock market, but the long-term picture isn't bright.

Here's what I mean: The massive printing of money will only lead to depreciation in the U.S. dollar -- which could lead to higher inflation in the U.S.

While that's not great news for U.S.-traded companies, it is great news for foreign investors, as the debasing of the U.S. dollar will make foreign stocks more attractive. That's one of the reasons why I recommend that my China Strategy subscribers continue to focus their investments on Chinese companies. Learn which companies we're investing in now.

Global Stock Markets Rally

In addition to the depreciation of the U.S. dollar, Chinese companies make good investments right now for a number of reasons. We covered this in last week's Inside China Dispatch, when I discussed how the Chinese government is focused on increasing bank lending, boosting domestic consumption and minimizing unemployment.

China's policymakers continued action to overcome the financial crisis and stimulate economic growth is making it most likely the first country to recover this year. On the other hand, other nations' lack of immediate action will likely weigh on their economies this year -- and many probably won't recover until 2010.

Still, we have seen some bright spots in recent weeks, which have led to a nice rally in the global stock markets over the past two weeks. Last week's announcement that the U.S.'s three largest banks, Citigroup, JPMorgan Chase and Bank of America, were profitable coupled with the possibility of a change in mark-to-market accounting helped push stock markets higher.

In fact, since March 9 the S&P 500 has rallied 17%, while Hong Kong's Hang Seng index gained 16%. But what's more remarkable is that Shanghai's stock market continues to show strength. With a 7% gain over the past two weeks, the index has jumped 24% for the year -- outshining all global stock markets this year. And its strength should continue, as China's government action infiltrates the Chinese economy even more this year.

In addition to global stock markets rallying nicely recently, we've seen a nice pop in a number of our China Strategy holdings. Many even posted double-digit gains over the past two weeks:

• China's state-owned offshore driller, up 20%
• A Chinese insurance provider, up 19%
• The number-one education services provider in China, up 14%
• The Google of China, up 13%
• China's leading aluminum producer, up 12%

That's just a drop in the bucket of profits I'm expecting from these companies. Each one has significant market share in their respective industries -- in fact, a couple have virtual monopolies! And as the Chinese economy continues to show strength this year, I expect to see the shares of these companies only move higher.

It's all about timing, and now is the time for a renewed focus on China.

In fact, I'm getting ready to recommend a 144-year-old bank that has an extensive international network in Europe, Asia, Hong Kong, China, North America and South America. And since we're nearing the end of the global sell-off in bank stocks, there's no better way to profit than to take advantage of the increase in bank lending in China in one of the world's strongest lenders.

I'm expecting double-digit profits in the next six months, so don't miss the boat on this banking play. Plus, you're fully protected by my 100% money-back guarantee so go ahead and give China Strategy a try today!

Sincerely,

Robert Hsu