Investment in China Offers Access and Risk
DAVID HAFFENREFFER, CNN ANCHOR: The U.S. Senate is expected to grant China permanent normal trade relations when it gets back to business next month. The move will bring China one step closer to joining the World Trade Organization.</s>DEBORAH MARCHINI, CNN ANCHOR: That would give U.S. businesses access to more than a billion potential customers. But, as Kelli Arena reports, there are some risks.</s>KELLI ARENA, CNN CORRESPONDENT (voice-over): U.S. businesses are gearing up to expand investment in China and some analysts say it is an opportune time for individual investors to do so too. China's economic growth is strong, interest rates are low, exports are recovering from Asia's financial crisis and World Trade Organization entry is expected to speed up free market reforms.</s>MICHAEL KURTZ, IDEAGLOBAL: We do see enough potential for very broad-based growth and very robust growth in China in the coming several years.</s>ARENA: And that's an attractive prospect in a market of 1.3 billion people, but it is not one without risk. China lacks basic legal protections that Western investors take for granted, including protection from property seizures and fraud.</s>PETER MORICI, ECONOMIC STRATEGY INSTITUTE: There is no Securities and Exchange Commission to establish standards for prospectuses for stocks, there are no accounting standards comparable to ours, there is no analog to Western contract law or business law.</s>ARENA: Nevertheless, mutual funds that invest in China are up sharply in the last 12 months, according to Morningstar, with the strongest gaining nearly 40 percent or more. These funds invest not only in mainland China but elsewhere in the region, including Hong Kong, Taiwan, Singapore and Korea. That diversifies your portfolio and gives you access to countries with stronger disclosure practices. But these funds are volatile. So far this year, there is no consistent trend among them, and many have not been around long enough to show extended performance histories. (on camera): If you want to invest in China, experts advise doing so using a small portion of a large portfolio. While the upside potential could pay off, many say, don't invest money you can't live without. That's "Your Money," Kelli Arena, CNN Financial News, Washington.