Jim Trippon, editor in chief of the newsletter China Stock Digest, runs the largest equity investment research firm in mainland China and advises corporate pensions, private trusts, and high-net-worth families on their China investment strategies. Trippon spoke with SmallCapInvestor.com’s Jennifer Schonberger Tuesday, sharing his outlook on Chinese small caps and the Chinese economy.

Trippon, who returned to the United States from China earlier this week, is the author of  “Becoming your own China Stock Guru: The ultimate investors guide to profiting from China’s economic boom,” published by John Wiley & Sons, Inc. Part two of Trippon’s interview will appear on SmallCapInvestor.com on Monday.

“I would say there’re two trends that people need to focus on that became real clear on this last trip [to China]. One is that the economic growth is continuing at a breakneck pace. This industrial revolution in China is not a short-term thing. It’s a 30- to 40-year trend … and they have at least another 30 years to go before it’s all done.

“The second thing that struck me on this trip was how inflation is hitting China hard — much higher than what we typically see in the media in the United States. This is dramatically different than what I saw just three months ago because I go to China six months a year. [Everyone’s] cost of living is going up 10% to 15% a year. [Most businesses are] giving out major salary increases to make sure [people] don’t get hurt. The other side of that coin is that although [inflation is] a huge issue in China right now, it’s going to be a huge issue for us in the United States before we know it, not only because of the declining dollar, but because most of our consumer products today are made in China. 

“I would think they would increase interest rates, but there’s only so much the central government can do to control an economy — and we’re seeing this with our own economy. Once you let the free market take hold in a free economy — as ours has done for a long time and as theirs has done more recently — what happens, to a large extent, is going to be dictated by market factors . . .

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