{"id":472,"date":"2012-04-08T09:12:51","date_gmt":"2012-04-08T09:12:51","guid":{"rendered":"http:\/\/www.thebizsense.com\/views\/?p=472"},"modified":"2012-04-10T07:18:09","modified_gmt":"2012-04-10T07:18:09","slug":"china-buying-opportunity","status":"publish","type":"post","link":"https:\/\/www.thebizsense.com\/views\/featured\/china-buying-opportunity","title":{"rendered":"China, a Mid-Year Buying Opportunity"},"content":{"rendered":"

China: a Mid-Year Buying Opportunity<\/strong><\/p>\n

\"China<\/a>

China Stock Market<\/p><\/div>\n

Why has the Chinese stock market performed so poorly over the past year when Wall Street has done well? Is the situation about to change?<\/p>\n

The differing performance is because of very different circumstances.<\/p>\n

US policymakers are struggling to re-establish an acceptable level of economic growth \u2013 creating enough jobs, raising incomes \u2013 in the aftermath of the debt crisis. Inflation sustained above 2 per cent a year would signal success.<\/p>\n

But they are hampered in their efforts by conflict between two powerful and opposed political groups \u2013 the more-spenders and the tax-cutters. For the moment, compromise is unobtainable. So fiscal policy is paralyzed and public debt continues to rise.<\/p>\n

The only actor with relative freedom to act is the Federal Reserve (the central bank), which drenches the system with abundant \u201cprinted\u201d money and nearly-free credit.<\/p>\n

But most of the easy money goes into bloated mega-banks, politically well-connected entities — and investment markets. Its positive effect on stimulating economic activity is negligible.<\/p>\n

China\u2019s policymakers are struggling with the opposite problem.<\/p>\n

Their economy is so strong \u2013 its manufacturing sector now the world\u2019s largest, forex reserves of $3.2 trillion accumulated from huge foreign trade surpluses, high savings ratios, sound central government finances and moderate national debt \u2013 that it\u2019s been growing too fast.<\/p>\n

One consequence has been inflation that has been far too high \u2013 politically destabilizing and dangerous in a nation where roughly a third of personal spending is on food.<\/p>\n

Inflation no greater than 2 per cent a year would signal success. China is on the way to achieving that, with the rate down to 3.2 per cent and continuing to fall.<\/p>\n

The US is focused on raising growth, China on containing it. The policies are opposed, so no wonder their stock markets are performing differently.<\/p>\n

There are early signs that this is about to change:<\/p>\n