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From the start of 2007 until the end of the third quarter of 2008, China's economy grew by a staggering 21.8 per cent. While the story since then has not been quite so rosy, China's economy still holds more potential for growth than any other.

It is testament to this potential that the latest International Monetary Fund forecasts have reduced the country's predicted growth for this year to 'only' 6.5 per cent, a statistic almost any other country would be proud of during a bull market, let alone a recession. This figure becomes more remarkable when compared with predicted global output for 2009, which contracted by 1.4 per cent. While there are some economies that are expected to grow slightly, none is forecast to do so with the vigour of China.

These figures, though, are just the beginning of why China makes an attractive investment opportunity in the current environment. The key to its growth over the past decade is it has not been dependent on the bubbles - primarily credit and property - that drove many of the world's economies, and the bursting of which has caused the current problems.

The foundation of China's development was, and remains, long-term structural growth. It is crucial for investors interested in the country to understand that, while China represents an excellent short-term prospect, the most lucrative returns will come to those who have the foresight to look to the long term. The surge that has seen China become the world's third-largest economy came on the back of a cycle that has not yet come close to fulfilling its potential. This presents an excellent opportunity for investors.

As a demonstration of this, it is instructive to look at the growth story of China's recent past, and how far this story still has to run. The country has a far greater GDP than many of the world's developed economies, and yet does not have the nearly same levels of infrastructure, urbanisation or domestic consumption.

Its infrastructure is very much a work-in-progress. The coastal provinces, which contain many of its largest cities, have undergone rapid recent development, yet much of the central and western parts of the country have not grown at the same speed. China still has a huge amount of infrastructure to invest in, and while this is a gradual process, it is one that will take place sooner rather than later.

Similarly, China's urbanisation is still some way behind those of the developed countries. Only 46 per cent of the population is considered urban, compared with 70-80 per cent in more developed countries. It is the same story with domestic consumption, which only accounts for 36 per cent of China's GDP, compared with an average of 65-70 per cent in developed countries.

This leaves a huge amount of room for growth in this area, an idea not lost on the government, which has started plans to focus growth more on domestic-driven demand. This policy change, however, will certainly not be to the detriment of its promotion of growth through foreign investment. Any fears to that end will have been allayed by the recent announcement of the Ministry of Commerce that China plans to push ahead with its "go abroad" investment policy, despite the global downturn.

In addition to these social factors, China is becoming increasingly more sophisticated in a financial sense, which adds hugely to its potential. As well as its gradual transition from a planned economy to a market-orientated one, the country's industries and manufacturing are undergoing both structural and technological upgrades.

Perhaps most significantly, the stock market is going through a dramatic improvement. While many of these developments will improve aspects of trading, such as corporate governance, transparency and disclosure standards, the improvement in the stock market will also attract more foreign investment. Since Chinese stock markets are the largest of any developing country, they can easily accommodate international money flowing into the greater China region without causing huge market movement.

There is a greater immediacy as to why China is such a good investment - while its long-term prospects are self evident, the short term offers the potential for high returns, especially at a time when there seems to be no such thing as a safe bet for investors.

For a start, China is expected to be among the first of the world's major economies to recover from the global recession. Though the fallout from the global recession had repercussions across all global markets, China was not unduly hurt by the credit crunch. Its own systemic resilience to the crisis was further strengthened by the fact neither the balance sheets of its financial institutions nor its major corporations were damaged. The lack of any toxic debt among these firms means China will not suffer any kind of economic 'hangover' when the markets pick up, which puts it in something of a rare position in the current climate. Moreover, the pro-growth policies put in place by the government will ensure the country is in good a shape when the global recession ends.

Indeed, that point may be sooner than expected. All the signs point to the fact that, in all likelihood, the market bottomed last year. Chinese stock markets have risen by almost 50 per cent since the turn of the year, yet are still between 40-50 per cent below their 2007 peak, making this a timely point to invest.

Furthermore, experts believe a bull market in the stock market may be as little as one year away. It should be remembered also that the stock market is big, but at the same time not very efficient. Besides the huge upside on beta return, there is a very attractive alpha return potential for stock pickers, and a plethora of investment opportunities exist among both the large and medium to small- cap stocks.

Kwokon Fung is China Equity portfolio manager at Nikko Asset Management