"The valuations in our portfolio are higher than when we started the fund in October 2005," says Oberweis, whose fund is up roughly 70% during its brief existence. "But they aren't absurd given the growth in China."
Some skeptics say that Chinese corporate accounting is a black hole, and Oberweis acknowledges that it makes sense to be suspicious. To combat that, his five-member Hong Kong research team frequently visits Chinese mainland companies to talk with management to ensure that their interests are aligned with those of investors.
"It helps, but obviously it's not enough," says Oberweis. "You have to go in with eyes wide open when looking at Chinese companies, and there's no substitute for going out and kicking tires."
John Rutledge, the economist and private equity investment manager, believes that among the biggest short-term risks to the China growth story--and to the overall global economic growth story--are the growing calls for protectionism in the U.S. and other nations.
Rutledge, who also is a visiting professor at the Beijing Academy of Sciences and a Bush administration advisor, is especially critical of proposed congressional action aimed at forcing China to make its currency float and rise in value, a move that could make its exports more expensive. An ardent free trader, Rutledge believes this could lead to potentially unsettling inflation in China. And citing the long period of Japanese deflation, which he says was triggered by U.S. efforts to revalue the yen in the 1980s, Rutledge offers that American currency meddling could possibly lead to deflation in China.
"How would you like to be an American company competing against Chinese companies with falling costs and prices?" he asks.
Others expect China to make some currency concessions, but ultimately to do so at its own pace. Meanwhile, the China growth story likely will continue for the rest of this decade, if not beyond. "I don't think the game is over yet," says Oberweis.