China's GEM

And so it happened.

China officially now has its own NASDAQ. The GEM, recently started as of last week, is the equivalent to NYC's NASDAQ and will allow companies as young as three years old with net profit of 10 million RMB and net assets of about 20 million RMB ($3 million) to sell stocks to the public.

What will this do? The growth enterprise market aims to allow SME's to more actively grow its investor population all the while creating new jobs.

The story is the same abroad. Give money to small business owners to promote job creation; invest in new technology companies so the stock market overall will have a boom.

The only difference though is that most countries can't afford to do so right now. Despite economic stimulus packages, there are too many ingrained problems that first need to be fixed before any of these goals can be achieved.

This is not true in China. The Chinese government has smartly used the economic crisis to literally push forth an entirely new economic outlook.

Why have they been able to do so? Because the Chinese saved their money. Because there is a huge amount in reserves here that not only makes China the world's bank now, but it has allotted its own money to create things like the GEM.

It's starting out of Beijing and it's second cohort in Shenzhen, a burgeoning port city right across from Hong Kong.

But the real goal is to key in on Shanghai and further push to make it an international trade center.

I think this is really smart for two reasons:

1) it allows for a wider industrial expansion. While China's own economic stimulus package of $586 billion last year focused on state firms in industries like real estate and construction, the GEM allows for the non-public sector to generate capital.

2) GEM provides a way for the Chinese government to use all its pent-up capital. By creating the GEM, investment can actually happen in contrast to just hoarding a ridiculous amount of money.

For anyone who is familiar with Thomas Friedman's op-ed pieces in the NYT, I always feel bad for the guy because I get the sense that's he always lamenting about how one day he was in Beijing and the other he was in Calcutta followed by a trip to Singapore and so forth where he meets investors and inventors of new high-tech technology that just makes the U.S. look bad.

But I think if the Chinese pull this off with the GEM, given that right now isn't the most sound economic time internationally to invest, this will just be one more example of how the U.S. is lagging behind and give some more resonance to Friedman's preaching.