Tickers in this Article: VWO, BKF, GXC, HNP, YZC, GAME, CYOU, ATVI, CYB, FXI, CNU
It's no secret that China is quickly becoming a dominate force on the global stage. The nation's long-term growth could be one of the best investment themes of next decades. China's expanding middle class and infrastructure binge is requiring more natural resources, high industrial goods and consumer products. With its GDP expanding nearly 10.3% throughout 2010, the nation finally over took Japan as the planet's second-largest economy. With the United States firmly in their crosshairs, it's only a matter of time before China moves into the top spot. However, that time may be closer than we think. (To learn more, see How China's New Status Affects You.) TUTORIAL: Economics Basics

Within Five Years
Most people will tell you that the "Age of America" will end decades from now. Most analysts predict in the late 2020s. However, according to a new report from the International Monetary Fund (IMF), that day may be closer than we think. According to the IMF forecast, whoever is elected U.S. president next year will be the last to preside over the world's largest economy. China's economy will surpass that of America in just five years, around 2016. The IMF looked at the nation's purchasing power parities (PPP), which compares what people earn and spend in real terms in their domestic economies. Using PPP estimations, the Chinese economy will expand to $19 trillion by 2016. In the meantime, the U.S. economy will grow to only $18.8 trillion. America's share of world output would fall to 17.7%, its lowest point in modern times. China's would hit 18% and continue rising.

No country has come close to matching the strength of America's economy in the modern era. At its very peak, the U.S.S.R. only managed to produce roughly a third of the goods and services of the U.S. economy. Similarly, Japan at its peak during the 1980s reached only half of America's output. Just 10 years ago, the U.S. economy was three times larger than China's.

While China's economy undoubtedly will experience a variety of growing pains, the IMF's report helps underscore the shift of power. China and emerging market economies, in general, will be the future world leaders. The developed world will most likely be stuck playing second fiddle. At a bare minimum, investors need to hold broad emerging market funds like the iShares MSCI BRIC Index (NYSE:BKF) or the Vanguard MSCI Emerging Markets ETF (NYSE:VWO).

Playing the Future Today
Due to the current overabundance of liquidity, many investors remained concerned with the Chinese economy. Inflation is high and the Chinese property market is red-hot. This short-sightedness can provide a great opportunity to add Chinese equities to a portfolio. With the IMF's outlook firmly in mind, investor should seriously consider the Asian dragon. Simply adding a fund like the SPDR S&P China (NYSE:GXC) is a great way to start. However, there are plenty of other ways to add China to portfolio.

An expanding nation needs to power itself. Showing a 28.77% increase in electricity demand in the first quarter, Huaneng Power International (NYSE:HNP) is way to play China's continued thirst for electricity. The company is quickly becoming a leader in wind power, a booming industry in China. Huaneng pays a 4.9% dividend. Despite the surge of green energy innovation in China, coal remains a very big part of its energy pie. Yanzhou Coal Mining (NYSE:YZC) allows investors to tap into the materials side of growing energy demand.

With internet usage in China expanding quite rapidly, Chinese internet companies are seeing their stars shine. Following a similar model as Activision Blizzard's (Nasdaq:ATVI) popular World of Warcraft MMORPG, companies like Changyou.com (Nasdaq:CYOU) and Shanda Games Limited (Nasdaq:GAME) are honing in on the nation's demand for entertainment.

Finally, one of the more interesting plays on China's new dominance lies not within its stocks, but within its currency. IMF believes that China's yuan 'substantially' undervalued. If and when the yuan is allowed to float, investors in the WisdomTree Dreyfus Chinese Yuan (NYSE:CYB) will benefit.

The Bottom Line
While the IMF's forecast shouldn't come as a shock to investors, the timing of China's move into the number one spot should. With that possible deadline closer than many analysts believe, investors should consider adding the Chinese economy to a portfolio. Funds like the iShares FTSE China 25 Index Fund (NYSE:FXI) or individual stocks like telecomm China Unicom (NYSE:CHU) make ideal picks. (For related reading, see: Investing In China.)

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