Direct individual purchase of stock by foreigners in Chinese companies is prohibited by Chinese law. That doesn't mean that you can't invest in Chinese companies or profit from Chinese economic growth, however. There is a number of indirect investment methods that can help you profit from growth in the Chinese market. One is to buy stock in an institution that has large holdings of Chinese stock. Another is to invest in a mutual fund that focuses on Chinese stock.
Buy Chinese B class shares or Hong Kong H class shares. Contact your stock broker to purchase shares in listed companies that invest heavily in these shares. Hong Kong H class shares are shares of companies incorporated in mainland China but approved for listing on the Hong Kong index. Chinese B class shares are shares specifically set aside for purchase by foreign institutional investors. They are denominated in renminbi but listed on the Shanghai exchange in U.S. dollars.
Buy mutual funds or exchange-traded funds, or ETFs, through your broker. These funds are primarily or completely invested in Chinese class B shares or Hong Kong class H shares. According to TheStreet.com, these funds have not only closely matched the growth patterns of their underlying securities, they are among the highest-performing funds available.
Consult your broker about possible emerging investment opportunities. Rules and regulations on Chinese stock investing evolve very quickly and there might be new ways to invest in Chinese stocks other than indirect investing.
Investing in companies with a large Chinese presence is a good way to profit from Chinese growth without indirectly investing in firms holding large blocks of Chinese stock. For example, investing in Google would put you in a good position to profit from the growth of Google's Google.cn properties.
Investing in economies closely tied to China is another way to profit from Chinese growth. Taiwanese, Malaysian and South Korean companies invest heavily in Chinese manufacturing. Investing in manufacturers in these countries means you are indirectly investing in Chinese manufacturing interests.
Although the Chinese economy and stocks have done astoundingly well, even in the face of a global recession, this is not a guarantee of future performance. This is true both for individual companies, groups of companies invested via mutual funds, and with the overall Chinese economy in general. Investing in China involves significant risk as well as significant rewards.