"Instead of being 'reactive' and waiting for inflation, the Chinese leaders are choosing to be 'proactive' to head off inflation before it takes hold," says Tony Sagami in UnCommon Wisdom.
"The People's Bank of China (PBOC), China's central bank, increased the reserve requirements by 0.5% effective on January 18 from 15.5% for large banks and 13.5% for small banks.
"The reserve requirement is the amount of cash reserves a bank must keep on hand instead of loaning it out. The PBOC also increased interest rates on three-month bill rates by 4 basis points and one-year rates by 8 basis points.
"The real question for us as investors is whether this newfound tighter monetary policy will derail China's economic recovery and expansion. I'm more enthusiastic than I've been since 2005.
"Those were great times to invest in China. In 2006, the Shanghai Composite Index jumped by 130%, 97% in 2007, and 80% last year.
"If you have not done so yet, this is time to jump on the China bandwagon. Although I favor individual stocks over mutual funds and ETFs but if you want to get some fast, easy exposure to China, here are some ETFs for you to consider.
"iShares FTSE/Xinhua China 25 Index (NYSE: FXI) seeks to track the performance of the FTSE/Xinhua China 25 index.
"This index consists of 25 companies that represent the largest 25 Chinese companies listed on the Hong Kong Stock Exchange.
"The PowerShares Golden Dragon Halter USX China (NYSE PGJ) seeks results that correspond to the returns of the Halter USX China index.
"This index consists of 103 Chinese companies whose common stock is publicly traded in the U.S. The index uses a formula that prevents the largest market-cap companies from becoming too large a component of the index.
"SPDR S&P China (NYSE: GXC) seeks to replicate the total return performance of the S&P/Citigroup BMI China index. This index consists of the largest 342 companies that are publicly traded and domiciled in China."
