Jim Rogers Photo: Zhang Ni/GT

Editor's Note:

Veteran investor Jim Rogers has been investing in Chinese stocks for the last 25 years. During his recent trip to China, Rogers (R) talked to Global Times (GT) reporters Zhang Ni and Hu Weijia in an interview in Shijiazhuang, capital of North China's Hebei Province, where he was attending a forum on finance. Rogers is still upbeat about China's future and believes the 21st century will belong to China. 

GT: China's economic growth has been slowing down but the mainland stock markets are booming, with share indexes doubling in value since the beginning of 2014. Does this mean mainland stock markets are rising into bubble territory? What do you think of the outlook for the markets?

R: I don't know for sure whether mainland stock markets will return to the peak reached on October 16, 2007, when the Shanghai Composite Index reached a record high of 6,124.04 points, but I suspect they will.

This judgment is based on the fact that the country's stock markets have languished for most of the past six or seven years, with the share prices remaining at an undervalued level.

China is now a richer country than it was in 2007, and the share indexes will eventually catch up with the economic growth, but it is not an easy question to answer when this will happen.

I suspect the share indexes may catch up in the next year, but I hope the surge can slow down so the rise could be more balanced - it would be better if it took two or three years to reach the 6,000 level again.

GT: Will you trim your holdings of Chinese stocks, and what are the industries you focus on?

R: If the mainland stock markets continue to go straight up and enter into bubble territory in the future, I will have to sell my holdings of Chinese stocks, but I hope this will not happen.

I bought Chinese stocks for the first time 25 years ago and have increased my holdings several times in the past few years.

I'm currently paying close attention to areas addressed by the Third Plenary Session of the 18th Communist Party of China Central Committee in 2013, which include railroads, healthcare, finance, petrochemicals, online retail and agriculture.

GT: The Chinese stock market is a relatively closed one and not connected with the world market. What are the advantages and disadvantages of such a market?

R: Yes, it is a closed market but it's opening up more and more. The advantage is that sometimes it is shielded from problems abroad. If there are problems abroad, they do not necessarily affect closed markets like China.

But China has become a more and more global economy. Therefore that is not so true of China now as it has been in the past. So that advantage has become less and less. The disadvantage of being a closed market is that it's not subject to the reality of the whole world, which it should be.

For instance, sometimes the world economy is doing well, but if the market is closed to outsiders, the market will not reflect the fact that the world is doing well.

I can think of no good reason why a market should be closed for any long period of time. China has been opening its market more and more, which is good for both China and the world. 

If I were China, I would open all of the markets today.  China is a successful and very strong nation, and there is no reason to close up any more.

GT: While the Chinese stock markets have been on a bull run, the property market has cooled down. Do you think there is still a bubble in China's property market, and are you going to invest in it?

R: I would not buy Chinese property unless it was in the countryside. There are probably good places to buy houses in the countryside, but house prices in most of the cities are very expensive, and most of the cities have too many buildings. When I traveled around China, I also saw many empty houses in cities.

GT: It is said that you hold a lot of yuan assets. Are you going to continue to buy yuan?

R: I have bought yuan for many years and I have never sold any of it. I will continue to buy and hold yuan.

The yuan may depreciate and I hope it will as often happens in markets, because if the price goes down I can buy more of it.

GT: China's GDP grew by 7 percent in the first quarter, the slowest pace in six years. What do you think of the long-term prospects for China's economy and for other major economies in Asia?

R: I don't pay much attention to short-term economic growth data in China, and it would not be easy to forecast the country's economic growth for the whole of 2015.

The world economy may experience some setbacks in the future, and that would affect China because the country is more international now.

With its cooling economy, China needs to pay more attention to avoid building up debt. In the past few years China has built up more debt than it ever had in the previous 30 years.

There have already been some companies that have defaulted on their debts, and there may be more. But if China comes out of this cooling period, it is likely to see rapid growth in its economy.

Britain was dominant in the 19th century, and then it was replaced by the US in the 20th century. In my view, the 21st century will belong to China.

It's likely that more and more Chinese consumers will spend their money overseas as they =become richer and some Chinese firms will speed up their process of overseas investment.

The increased purchasing power from China will continue to change the world in the future, similar to the way that Britain and the US did when they were rising.

I encourage my daughters to speak Chinese and learn about Asia, because I want them to prepare for the 21st century. That is why I have moved my whole family from the US to live in Asia.

India may never become an economy as important or as strong as China. As for Japan, under its current economic policy the country has been printing money, but a depreciating currency will not support the sound development of the real economy in the long run.

GT: Chinese President Xi Jinping in 2013 initiated the "One Belt, One Road" initiative - referring to the Silk Road Economic Belt and the 21st Century Maritime Silk Road - to support partner countries along the routes in terms of infrastructure construction and cultural development. What do you think of the initiative?

R: It's fabulous for China and it is also fabulous for the world. In my view, the strategy may change the global economic geography and some people are going to make a lot of money from it. It's opening up the Chinese economy to the whole world.

GT: China in May unveiled a 10-year plan to upgrade the country's manufacturing sector by encouraging innovation. The plan, dubbed "Made in China 2025," aims to transform the country from a factory for the world to a leading manufacturing power over the next decade. How do you view the outlook for China's manufacturing sector?

R: In the last 35 years, China has been very good at adapting to what the world needs and I presume the plan is just another step in this direction. I suspect China is doing the right thing but we won't know until 2025.

In the 21st century, buying goods made in China will be almost unavoidable, as the country has become the major manufacturing force in the world.

Even 20 years ago, I had a refrigerator produced by Chinese home appliance maker Haier Group. I have never bought a Chinese car but I suspect eventually everybody will have Chinese cars. During my second trip around the world in 1999, I was driving across China and we had Changyu wine (produced by the Chinese winery Changyu in East China's Shandong Province). I was surprised by how good it was.

Some people have the impression that products made in China are cheap but of poor quality. In the 1950s, that was what people said about products made in Japan. Then people changed their mind about products made in Japan and realized they were of very high quality.

It's good that China has realized that the only way to nurture the market is to make high-quality goods. It is not necessary to worry about the future of China's manufacturing sector.

GT: Chinese people are now being encouraged to innovate and facilitate entrepreneurship, while some traditional companies also want to surf the Internet wave. But it will not be easy and some people believe the efforts may fail. What is your comment on it?

R: The efforts are part of the reason for my view that China will be the most important country in the 21st century. China has a long history of innovation, and entrepreneurship is also being revived. It's in the Chinese soul and Chinese genes.

There may be some difficulties and failures, but it's normal that some people succeed while others do not. It is just the way the world works and should not be a reason for concern.

The Internet has changed and will continue to change our lives. Traditional companies, even those in the steel sector, can benefit from focusing more on the Internet. But some firms might fail if they do not adapt to the new technology as quickly as others.