I have been reading up a little about China and it is seldom that I come across someone who cautions people to temper their enthusiasm for Chinese investments.

What I have learnt so far about the banking system is alarming: 1) it is almost entirely propped up by the savings of ordinary people - citizens cannot choose to deposit or invest their money offshore, 2) state enterprises are not allowed to fail (even though they are sometimes made to appear to do so) and they are being shored up by an unlimited supply of bank finance (resulting in a serious drain of resources), 3) the only private enterprise allowed in China are the export ‘assembly’ factories in the south that earn important foreign currency and make up a significant proportion of GDP.

Another sobering thought about China is that - regardless of the amount of ‘growth’ - the size of the economy is tiny, not much more than that of Holland or Spain. It would be perhaps wiser (but clearly ludicrous) to invest $22bn in a Dutch IPO - where information is more accurate and freely available and where company directors are allowed to respond to market forces for the good of the company.

There are too many fundamental problems in China - primarily as a consequence of central ‘communist’ planning - that I would also advise against any involvement in China. For those who insist on betting on China, no doubt there are opportunities for making small fortunes - but you probably have to know what you are doing, find innovative ways of doing business in China and only invest what you can afford to lose.

Probably advice that you would give for any market.

China is no different. Except perhaps without the higher returns usually associated with such high risk investments.