Best of the Week
Most Popular
1.BrExit House Prices Crash, Flat or Rally? UK Housing Market Affordability Crisis - Nadeem_Walayat
2.Stocks Bull Market Climbs Wall of Worry, Bubble? When Will it End? - Nadeem_Walayat
3.Gold Price Is Now On Its Way To All-Time Highs - Hubert_Moolman
4.Deutche Bank Stock Price Crash - The EU Has Problems Far Beyond the Brexit - Harry_Dent
5.UK interest Rate PANIC CUT! As Banks Prepare to Steal Customer Deposits - Nadeem_Walayat
6.Gold and Silver Bull Phase 1 : Final Impulse Dead Ahead - Plunger
7.Central Bankers Fighting An Unprecedented Global Economic Slowdown - Gordon_T_Long
8.Putin Hacking Hillary for Trump, Russia's Manchurian Candidate? - Nadeem_Walayat
9.Stock Market Insiders Are Secretly Selling, Cycle Top Next Month - Chris_Vermeulen
10.Gold Sector - Is it time to Back up the Truck? – Mortgage the Farm? - Peter_Degraaf
Free Silver
Last 7 days
Theresa May Instructs Police, NHS Gp's, Public Sector To Stop Racial Discrimination in Service Delivery - 28th Aug 16
Ignore Yellen and Buy the Dip in Precious Metals - 27th Aug 16
SPX Downtrend Should be Underway - 27th Aug 16
Unraveling the Secular Economic Stagnation Story - 27th Aug 16
The Precious Metals Sector and the Fed. . . - 27th Aug 16
Stock Market - All Is Calm, All Is Not Right - 27th Aug 16
Gold Junior Stocks Q2 2016 Fundamentals - 26th Aug 16
Buy Gold’s August Dip? Gold’s Monthly Sweet Spot In September - 26th Aug 16
The IMF’s Internal Audit Reveals Its Incompetence and Massive Rule Breaking - 26th Aug 16
Commodities Are the Best Bargain Now—Here’s What to Buy - 26th Aug 16
Why I Left Canada and Became A Citizen of the Dominican Republic - 26th Aug 16
The GLD vs GOLD - 26th Aug 16
Can Stocks Survive Without Stimulus? - 25th Aug 16
Why Putin Might Be on His Way Out - 25th Aug 16
Bond Guru Gary Shilling - The Bond Market Rally of a Lifetime - 25th Aug 16
A Zombie Financial System, Black Swans and a Gold Share Correction - 25th Aug 16
OPEC’s Output Freeze: What Has Changed Since Doha? - 25th Aug 16
Merkel Prepares For a Deliberate Crisis While White House Plans For a Disastrous Succession - 24th Aug 16
Suspicious Reversal in Gold Price - 23rd Aug 16
If Trump Can’t Pull Off a Victory, Expect a Civil War - 23rd Aug 16
Ceding ICANN and Internet Control to Globalists - 23rd Aug 16
How to Spot an Oversold Stock Market - 23rd Aug 16
Gerald Celente Sees Worst Market Crash, New Military Conflict, Gold Spike to $2,000/oz - 23rd Aug 16
EU Olympics Medals Table Propaganda Includes BrExit Britain - 22nd Aug 16
BrExit Win's Britain Olympics Success Freedom Dividend, Economy Next - 22nd Aug 16
Stock Market Top Forming, but Slowly - 22nd Aug 16
(Really) Alternative Banking Systems - 22nd Aug 16
Vauxhall Zafira Fires - Second Recall Issued - Inspection Before Bursting into Flames? - 21st Aug 16
Will the Stock Market Bubble Pop Regardless if the FED Never Raises Rates? - 21st Aug 16
US Government Spending - 3 Big Stories Not Being Covered – Part III - 21st Aug 16
Silver Analysis - 20th Aug 16
SPX New Highs, Correction Next? - 20th Aug 16
Housing Bubble - The Marginal Buyer Holds The Pin That Pops Every Asset Bubble - 20th Aug 16
Gold Miners Q2 2016 Fundamentals - 19th Aug 16
Which Price Ratio Matters Most in a Fiat Ponzi? - 19th Aug 16
Big Policies, Bigger Failures - 19th Aug 16
Higher Crude Oil’s Prices and USD/CAD - 19th Aug 16
Here’s Why You Should Look for Dividend Stocks and How - 19th Aug 16
Deglobalization Already Underway — 4 Technologies That Will Speed It Up - 19th Aug 16
These 6 Charts Show Why the Average American Is Fed Up - 18th Aug 16
SPX Easing Lower - 18th Aug 16
Low / Negative Interst Rate’s Legacy - 18th Aug 16
The 45th Anniversary of The Most Destructive Event In Modern Monetary History - 18th Aug 16
USDU - An Important Perspective on the US Dollar - 17th Aug 16
SPX Completes Wave 1 Decline - 17th Aug 16
How to Quickly Spot Common Fibonacci Ratios on a Chart - 17th Aug 16
When Does a Forecast Become a Trade? - 17th Aug 16
Kondratiev Wave - The Financial Winter Is Nearing! - 17th Aug 16
Learn "The 4 Best Elliott Waves to Trade -- and How to Trade Them" - 16th Aug 16
Stock Market Bears Turning Bullish At New All Time Highs - Time to Get Worried? - 15th Aug 16
Job Seekers Sacrificed to the Inflation Gods - 15th Aug 16
A Look At Commodities and Financial Markets Trading Week Ahead - 15th Aug 16
Stock Market New Top Forming? - 15th Aug 16

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

How to Trade Elliott Waves

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