Reform will unlock China’s growth potential
The transition to a new party leadership in 2012 should facilitate bolder reform and further unlock China’s growth potential, says Yiqian Jiang, fund manager, DWS Invest Chinese Equities fund…
We believe that fears of an economic hard-landing will prove unwarranted as the Chinese economy is poised to complete the last stage of “soft-landing” in first half of 2012, setting the stage for recovery in the second half of the year. Macro policy crossed an inflection point in the fourth quarter of 2011, turning from tightening to moderately accommodative. We expect policy turnaround to precede economic change by around six months, when the equity market will go through a bottoming stage. Key macro policy predictions for 2012
14% in money supply growth, 8 trillion Renmimbi in new loans, and six more cuts to the Required Reserve Ratio.
Active fiscal policy with increased support for agriculture, social housing, education, culture, and healthcare.
Structural tax cuts and income reforms to reduce inequality, curtail property speculation and boost consumption. Gradual resolution of local government financing issues and its impact to the banking sector.
Biggest risk factor to watch – the European debt crisis.
We forecast retail sales to grow by 16% in 2012, similar to 2011 levels. Declining inflation has led to an acceleration of real consumption growth for five consecutive months since July 2011. Furthermore, automobile sales growth has stabilised and service consumption growth is strong - encouraging signs of consumer optimism. Most importantly, we believe that the Chinese government’s desire to implement income distribution reform is the key to unlock further growth momentum in income and consumption.
We maintain that the normalisation of China’s valuation versus the global average represents a window of opportunity where global investors no longer need to pay a premium for the China growth story. Furthermore, significant social and economic changes and active government reform agenda will lead to sweet-spots of growth.
- Special Reports
- By Location
- Asian Hedge Funds
- BVI Hedge Fund Services
- Bermuda Hedge Fund Services
- Canada Hedge Fund Services
- Cayman Hedge Fund Services
- Channel Islands Stock Exchange
- Future of offshore funds
- Gibraltar Hedge Fund Services
- Guernsey Hedge Fund Services
- Hedge Funds in Germany
- Hong Kong Hedge Fund Services
- Ireland Hedge Fund Services
- Isle of Man Hedge Fund Services
- Jersey Hedge Fund Services
- Jersey Private Equity Services
- Latin American Hedge Funds
- London Hedge Fund Services
- Luxembourg Hedge Fund Services
- Luxembourg Private Equity Services
- Malta Hedge Fund Services
- Middle East Hedge Fund Services
- Singapore Hedge Fund Services
- South African Hedge Fund Services
- Spanish Hedge Funds 2008
- Switzerland Hedge Funds
- US East Coast Hedge Fund Services
- US Hedge Fund Services
- By Subject
Latest Special Report
- By Location