Best of the Week
Most Popular
1.Gold Price Target of USD 2,300 - GoldCore
2.Greece Banking System Collapse Monday as ECB Pulls the Plug, Capital Controls Ahead of GrExit - Nadeem_Walayat
3.Why British Muslims Are Leaving Elysium Paradise for Syrian Hell - Nadeem_Walayat
4.Greece BANKRUPT! Financial and Economic Collapse to Follow IMF Debt Default - Nadeem_Walayat
5.Extreme Gold/Silver Shorting - Zeal_LLC
6.European Empire Strikes Back Against Greek Debt Fantasy, Counting Down to GREXIT - Nadeem_Walayat
7.Gold And Silver – Three Choices: Sell, Hold, Hold and Add. A Trading Treatise - Michael_Noonan
8.Gold and Silver Price Headed for Breakdown - Jordan_Roy_Byrne
9.Greece Crisis OXI - Raul_I_Meijer
10.Flatline Investing and Dead End Debt Schemes - Doug_Wakefield
Last 5 days
Greece Debt Crisis to Trigger Euro-zone Credit Freeze, Expiry of Greek Euro Bank Notes - 7th July 15
SPX Sinking Premarket - 7th July 15
Marc Faber Warns: “Wake Up, People Of The World! Greece Will Come To You …Very Soon” - 7th July 15
The Greek Vote and the EU Miscalculation - 7th July 15
SPX Stocks Index Still on a Sell Signal - 7th July 15
Bill Gross on Greece: 'We're in the Eye of the Hurricane' - 7th July 15
Dow Stocks Bear Market Underway - 6th July 15
Marc Faber Warns of Greece Crisis Contagion Very High Risk - 6th July 15
Greece to Print Counterfeit Euros or IOUs, Hyper-Inflation Beckons - 6th July 15
Stock Market, Investing Big Picture - 6th July 15
“Oxi!” - Greeks Defy EU As Varoufakis Resigns To Ease Tensions With “Partners” - 6th July 15
Stock Market Rally in a Downtrend? - 6th July 15
Silver Price Consolidating Ahead of Another Sharp Drop - 6th July 15
Gold Price Gravitating Lower Towards $1000 - 6th July 15
Syriza Convinces Greece to Commit Suicide, GrExit Beckons, Market Reaction - 6th July 15
Financial and Commodity Markets Become Scary: Crash Point Or Turning Point - 5th July 15
A Revolutionary Pope Calls for Rethinking the Outdated Criteria That Rule the World - 5th July 15
Forget 'Haircut', Instead Syriza Plans Beheading of Greek Bank Depositors, Theft of Deposits - 5th July 15
The Pentagon’s 2015 Strategy For Ruling the World Through Endless War - 5th July 15
United States Celebrates the Disastrous Secession From Great Britain - 5th July 15
Greece Referendum Vote Result Forecast Yes Win, But Depression Will Continue - 5th July 15
The Great Greek Economic Depression - 4th July 15
Happy 4th of July Stock Market Analysis - 4th July 15
The Most Pressing Reason Yet You Want to Avoid Investing in Retail Stocks - 4th July 15
Fed’s Full Normalization and the Stock Market - 3rd July 15
The U.S. Dollar's 2014-2015 Rally: Wave 3 in Action - 3rd July 15
Stock Market Where are we? And where are we Going? - 3rd July 15
Xi’s Anti-Corruption Campaign Is Key to China’s Prospects - 3rd July 15
How the New Iranian Nuclear Deal Will Impact Crude Oil - 3rd July 15
China's Stock Market Rollercoaster Ride Continues - 3rd July 15
Gold Stocks Cheap to Buy but Not for Long - 3rd July 15
Capital Controls and a Bank Holiday in Greece… Here’s How You Can Profit - 3rd July 15
Greece's Varoufakis: I will Resign if there's a 'Yes' Vote - 2nd July 15
The Student Loan Bubble: Gambling with America’s Future - 2nd July 15
Inflation Is Lurking, but This Asset Can Protect You - 2nd July 15
Three Total Wealth Stock Investor Tactics You’ll Need Because Greece Isn’t Over - 2nd July 15
Why This $5.6 Trillion Investor Profit Boom Is Set To Take Off - 2nd July 15
Greek Debt Crisis: "Too late to prepare now" - Video - 2nd July 15
Guaranteed US Dollar Death Dynamics - 2nd July 15
The Greek Stress Test & The Reality Of Incremental Changes - 2nd July 15
Forget Drachmas Greece Syriza Government Could Instruct Central Bank to Print Euros! - 2nd July 15

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

China Stocks - Where are they going?

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 .


© 2005-2015 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

Biggest Debt Bomb in History