{"id":98,"date":"2010-12-03T15:06:36","date_gmt":"2010-12-03T15:06:36","guid":{"rendered":"http:\/\/www.thebizsense.com\/views\/?p=98"},"modified":"2010-12-03T15:26:19","modified_gmt":"2010-12-03T15:26:19","slug":"still-too-dependent-on-exports-and-investment","status":"publish","type":"post","link":"https:\/\/www.thebizsense.com\/views\/investments\/still-too-dependent-on-exports-and-investment","title":{"rendered":"Too dependent on exports and investment"},"content":{"rendered":"
\"Exports<\/a>

Exports <\/p><\/div>\n

continued from > The Case for Investing in China Now<\/a><\/p>\n

\u2022 The government is squeezing the cash flow of property developers to force them to develop their idle land banks. It\u2019s boosting the supply of new housing for sale, which is depressing prices.<\/p>\n

\u2022 Although domestic consumer demand continues to grow fast, it\u2019s off a low base. Private consumption is still only one-third of the Chinese economy, which remains far too dependent on capital investment and exports.<\/p>\n

\u2022 Government policy remains committed to maintaining strong economic growth, which means Beijing will take its feet off the brakes the moment there are any signs of too much of a slowdown.<\/p>\n

\u2022 Official stimulus will be maintained to promote long-term provision of public housing for those on low incomes, improvements to education and healthcare services, and regional development in western China.<\/p>\n

\u2022 There are also political constraints on tough policies to restrain growth. Ahead of the five-year changeover of officials due in early 2013, local-government bureaucrats and their associated interests are keen to invest in projects and spend money before their time in control of events runs out, and are reluctant to see higher interest charges on bank loans to state-owned companies and local governments.<\/p>\n

\u2022 Inflation risk is much less than it seems. Food prices, which fluctuate in response to temporary factors such as bad weather, accounted for three-quarters of the 4.4 per cent increase in consumer prices for the 12 months to October.<\/p>\n

\u2022 The bureaucrats forced the banks to raise much more capital from the share markets to strengthen their balance sheets against the risk of bad debts based on unwise lending last year to regional and city governments. However, that surge in supply of stock is coming to an end. Banks look well-financed to cope with future disappointments and deliver a surge of new lending when Beijing gives the green light.<\/p>\n

\u2022 China, now the world\u2019s biggest exporter, has mind-boggling resources to cope with any setbacks on foreign fronts \u2013 huge state-of-the-art factories so internationally competitive that surpluses pile up at a rate of $25 billion or so every month, foreign reserves of more than $2\u00bd trillion, and tight control over exchange rates and capital inflows.<\/p>\n

\u2022 It also has a massive flow of domestic financial resources based on very high savings, conservative government finances and a culture of thrift. No need to \u201cprint\u201d the stuff to buy government bonds or toxic mortgage loans.<\/p>\n

\u2022 Shares are generally not expensive, with the Shanghai Composite index trading at 16 times forecast earnings for the current financial year \u2013 well below the average for the past five years. London analyst David Fuller recently commented that the world\u2019s fastest-growing economy \u201cis selling on future multiples which are competitive with those in the slow-growth West.\u201d<\/p>\n

Anthony Bolton, the highly-regarded stock-picker who recently moved to Asia to run a new China fund for Fidelity International, points out that Chinese companies listed in Hong Kong generally trade at prices offering better value than their equivalents on the mainland exchanges.<\/p>\n

\u2022 China is still largely a command economy in the hands of highly-trained technocrats who can and have moved rapidly and forcefully to implement policies to counter crises. They can act with far fewer of the foot-dragging effects of political consensus-seeking and pandering to special interests found in the West and in Japan.<\/p>\n

source and CopyRight OnTarget Newsletter by Martin Spring<\/p>\n

next > Weakness now is an opportunity to buy<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

continued from > The Case for Investing in China Now \u2022 The government is squeezing the cash flow of property developers to force them to develop their idle land banks. It\u2019s boosting the supply of new housing for sale, which is depressing prices. \u2022 Although domestic consumer demand continues to grow fast, it\u2019s off a low base. Private consumption is still only one-third of the Chinese economy, which remains far too dependent on capital investment and exports. \u2022 Government policy remains committed to maintaining strong economic growth, which means Beijing will take its feet off the brakes the moment there <\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"amazonpipp_noncename":"","amazon-product-isactive":"","amazon-product-single-asin":"","amazon-product-content-location":"","amazon-product-content-hook-override":"","amazon-product-excerpt-hook-override":"","amazon-product-singular-only":"","amazon-product-amazon-desc":"","amazon-product-show-gallery":"","amazon-product-show-features":"","amazon-product-newwindow":"","amazon-product-show-list-price":"","amazon-product-show-used-price":"","amazon-product-show-saved-amt":"","amazon-product-timestamp":"","amazon-product-new-title":"","amazon-product-use-cartURL":"","amazon_featured_post_meta_key":"","_amazon_featured_alt":"","amazon-product-template":"","footnotes":""},"categories":[3],"tags":[292],"class_list":["post-98","post","type-post","status-publish","format-standard","hentry","category-investments","tag-china"],"yoast_head":"Too dependent on exports and investment - TheBizSense Views<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.thebizsense.com\/views\/investments\/still-too-dependent-on-exports-and-investment\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Too dependent on exports and investment - TheBizSense Views\" \/>\n<meta property=\"og:description\" content=\"continued from > The Case for Investing in China Now \u2022 The government is squeezing the cash flow of property developers to force them to develop their idle land banks. 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