Don't Miss China's Flood of Growth Signals

"Water, water everywhere,
Nor any drop to drink."

The Rime of the Ancient Mariner, Samuel Taylor Coleridge (1798)

Those are fitting words for the battery of naysayers on China's ability to grow. From legendary short seller Jim Chanos to author Gordon Chang, the drumbeat against China has been relentless. Still, there is evidence of more "drinkable water" than the skeptics would have us believe. Key data from China this morning follows yesterday's better-than-forecast import and export flows:

Also note China's retail sales so far this year have risen by almost 13 percent -- though admittedly this merely meets economists' forecasts. Over the past month, more economic data from China has beaten forecasts than fallen short. Citigroup tracks the results in the Economic Surprise Index, where beats add to the running total and misses subtract.

The trend may confound the bears. It also serves as a wake-up call for investors considering whether to buy China via the most liquid exchange traded fund, iShares China Large-Cap ETF (FXI). The fund tracks the performance of 25 large Chinese companies, three quarters of which are mainland-based. Banks account for 35 percent of the index, technology and telecommunications 26 percent, energy 17 percent, insurance 12 percent, real estate 6 percent, and retail 4 percent.

Compared to the Dow Jones Industrial Average, the 25 companies in the FXI are growing earnings nearly 3x faster, trading at about half the valuation, and paying higher dividends.

It's true the China bears have been on the right side of the trade: the FXI has fallen 18 percent the past three years. However, the economic data argue for a rebound. And at 8.2 times earnings and with earnings growth of 16 percent, I'd rather be long than short.

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