Play the China slowdown with an ETF

China's economy is showing clear signs of slowing down. Paul Amery explains the best ways to profit with an exchange-traded fund.

China's economy has gone from red-hot to showing clear signs of deflation. The broad inflation index in China is near zero, and still dropping. Local manufacturers are sitting on record stockpiles of unsold goods, while surveys of manufacturing activity point to declines in production in months to come. The prices of key commodities iron ore and coal have fallen by half or more in the last year. Chinese traders are reportedly walking away from purchase orders made earlier, worsening the price drops.

Meanwhile, mining companies have been investing heavily in new production facilities, positioning themselves, at just the wrong moment, for the good times to continue. Assets of the top 40 global miners grew by 13% last year and firms have budgeted for another double-digit increase in capacity in 2012.

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Paul Amery

Paul is a multi-award-winning journalist, currently an editor at New Money Review. He has contributed an array of money titles such as MoneyWeek, Financial Times, Financial News, The Times, Investment and Thomson Reuters. Paul is certified in investment management by CFA UK and he can speak more than five languages including English, French, Russian and Ukrainian. On MoneyWeek, Paul writes about funds such as ETFs and the stock market.