Best of the Week
Most Popular
1.The Trump Reset, US Empire's Coming Economic, Cyber and Military War With China (2/2) - Nadeem_Walayat
2.Now Is the Time to Buy Gold - 5th Jan 17 - John Grandits
3.CIA Planning Rogue President Donald Trump Assassination? Elites "Manchurian Candidate" Plan B - Nadeem_Walayat
4.The Trump Reset - Regime Change, Russia the Over Hyped Fake News SuperPower (Part1) - Nadeem_Walayat
5.Most Popular Financial Markets Analysis of 2016 - Stock Market Crash Postponed Again - Nadeem_Walayat
6.No UK House Prices Brexit Crash 2016 Despite London Weakness, Forecast 2017 - Nadeem_Walayat
7.President Trump Understands the NSA, CIA... LIE, America's Intelligence Agencies Crime Syndicate! -Nadeem_Walayat
8.President Donald Trump's 2017 New Year Message, BBC Fake News, Was 2016 a Dream? - Nadeem_Walayat
9.Major Stocks Bear Market Still Looms - Zeal_LLC
10.Biased 2017 Forecasts - Debt, Housing and Stock Market (1/2) - James_Quinn
Last 7 days
Bitcoin and Gold - Outlook, Volatility and Safe Haven Diversification - 17th Jan 17
Stock Market Uptrend on Borrowed Time - 17th Jan 17
The One Stock to Retire On - 17th Jan 17
Trump anti-Communist Counter Revolution - 17th Jan 17
US Stock Market Update as the Trump Inauguration Approaches - 17th Jan 17
The American Crisis - Common Sense 2017 - 17th Jan 17
Obama Leaves, Hope Arrives, Will Stupid Stay? - 17th Jan 17
Damage Inflicted by Precious Metals Manipulation Is in the “Multi Billions” - Keith Neumeyer - 17th Jan 17
Gold Price Forecast 2017 Update - Video - 17th Jan 17
The Story of the U.S. Regime Change Plan in the Philippines - 16th Jan 17
Gold Price 2017 Trending Towards $1375 as Forecast - 16th Jan 17
'Deep State' CIA Director States We are Not NAZI's, Warns Trump Does Not Understand Russian Threat - 15th Jan 17
UK House Prices Forecast 2017 - Crash or Bull Market? - Video - 15th Jan 17
SPX Stocks Bull Market Update - 14th Jan 17
President Trump vs the Deep State that Hides in Plain Sight - 14th Jan 17
The Impact of Sir Alex Ferguson's Retirement on Man United's Share Price - 14th Jan 17
What Can Stock Market Tell You About Politics? - 13th Jan 17
Big Gold Buying Coming 2017 - 13th Jan 17
A Bullish Case for Gold 2017 - 13th Jan 17
Will Stocks Bull Market Continue to Charge or is it Time to Sell the News - 13th Jan 17
Gold and Silver Off To Shining Start to 2017 - 13th Jan 17
Gold’s Fundamental Outlook for 2017 - 13th Jan 17
Is trading stocks and shares just as luck-based as roulette? - 13th Jan 17
Trump CIA Like Nazi Germany - Fake MI6 Intelligence leaked to Fake News Mainstream Media - 13th Jan 17
USD in Decline. SPX and TNX May Follow - 12th Jan 17
CIA War On Trump - Leaks Fake MI6 Intelligence to Fake News Broadcast Media - 12th Jan 17
Registered Address.co.uk London Business Registered Office Address Mail Forwarding Review - 11th Jan 17
13 Contrarian Economic Predictions For 2017 - 11th Jan 17
10 Potential Black Swans and Opportunities for the US Economy in 2017 - 11th Jan 17
How to Get a Bird of Paradise Plant to Flower - UK Growing Video - 11th Jan 17
The No.1 Energy Stock To Buy Right Now - 10th Jan 17

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

What Can Stock Market Tell You About Politics?

Don’t Count China Economy Out

Economics / China Economy May 10, 2012 - 01:54 AM GMT

By: Yiannis_G_Mostrous

Economics Double-digit growth in the world’s second largest economy is officially over. China this month reported that gross domestic product (GDP) growth slowed to 8.1 percent a year in the first quarter of 2012, down from 8.9 percent in the previous quarter.

Investors were disappointed, anticipating a milder drop to 8.4 percent. Much of the slowdown in China’s GDP stemmed from a drop in demand for its exports in key markets including the US and Europe.


Pessimism now seems to envelope the Middle Kingdom, but a more balanced view is appropriate. Despite the slowdown, China’s major economic indicators are still at relatively healthy levels. A soft rather than hard landing seems in place.

For starters, the country’s Five-Year Plan for 2011 to 2015 had called for annual long-term GDP growth of 7 percent. Consequently, investors shouldn’t have been surprised by the possibility of slower growth in China.

Price pressures are expected to remain in check, but the Chinese government could easily kick-start growth if warranted. The median forecast for inflation this year is 3.4 percent, well below Beijing’s 4 percent target. That gives the People’s Bank of China room to stimulate if necessary.

Two developments could push the Chinese to provide a fiscal economic stimulus. The first is the potential of an exogenous shock that affects the global economy. Candidates are a blow-up of the European sovereign-debt crisis, a US recession, or war in the Middle East. The second is a collapse in exports, which would lead to massive layoffs in the most populous parts of the country.

In any case, expect the Chinese to roll out a stimulus package substantial enough to cushion the blow. Any fiscal or monetary loosening in the second quarter would likely stimulate growth in the second half of the year to above-potential growth.

To be sure, Europe’s debt woes and the still patchy US recovery are dampening demand for China’s exports, but China’s leaders are reorienting the economy more toward domestic consumption and away from volatile foreign demand for manufactured goods. China is taking rigorous measures to boost household spending, steps that will pay off later this year.

China also is poised to accelerate spending this year on roads, bridges and utilities. This increased spending on infrastructure provides an additional lever, beyond consumption and exports, for the Chinese to boost economic growth.

The Real Issue: Real Estate


The most significant issue affecting China’s short-term sustainable growth is housing. Residential housing investment represents around 15 percent of overall investment in China. The Chinese leadership’s efforts in bringing down housing prices and curbing speculation have worked. For the first quarter of the year, new housing starts were down 5.2 percent year over year, while sales were down 15.5 percent.

However, the main reason for the slowdown in housing has been restrictions imposed by the government, not lack of demand. Chinese authorities don’t want to undermine the housing market over the long haul. Later in the year, they’ll probably relax housing-related restrictions that were put in place to curb excesses. Such a move would boost housing sales and construction.

The broad Chinese market is nearly impossible for foreign individual investors to tap into because of restrictions on investment and foreign capital. Most China-focused funds invest in US-listed American depositary receipts, the few local B-shares open to foreign investors, or H-shares, the Hong Kong listings of Chinese stocks.

The best way to access the local Chinese market is through the Market Vectors China ETF (NYSE: PEK). The fund tracks the CSI 300 Index, a local market capitalization-weighted index designed to capture the 300 largest and most liquid stocks. For more Chinese stock picks, check out my free report, The Best Asian Stocks to Buy Now.

By Yiannis G. Mostrous

Editor: Silk Road Investor, Growth Engines

http://www.growthengines.com

Yiannis G. Mostrous is an associate editor of Personal Finance . He's editor of The Silk Road Investor , a financial advisory devoted to explaining the most profitable facets of emerging global economies, and Growth Engines , a free e-zine that provides regular updates on global markets. He's also an author of The Silk Road To Riches: How You Can Profit By Investing In Asia's Newfound Prosperity .


© 2005-2016 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Catching a Falling Financial Knife