Greater China
Economics
Issues in Focus
China: Mind the Gap: “End of Easing” vs
“Beginning of Tightening”
In view of the economic recovery underway in China,
concern on an early tightening has been rising but the
Chinese authority recently reiterated its strong
commitment to the current policy stance. Whilst the ‘end
of easing’ may well have begun, a 10-month gap is likely
before the ‘beginning of tightening’. We expect a
gradual policy shift and tightening in terms of rate hikes
seems unlikely until the middle of next year.
China: Railways vs US Government Bonds: Putting
China’s “Over-investment” in Context
Despite rising concerns, we think that China’s strong
investment-led economic recovery is justified. We argue
that the opportunity cost is the total return from
investment in US government bonds, and infrastructure
investment is a better alternative for deploying China’s
savings.
China: Policy-drive Decoupling: Upgrading 2009-10
Outlook
A policy-driven economic decoupling between China
and the rest of world is materializing. We upgrade our
GDP growth forecasts to 9% for 2009 and 10% for 2010.
The next 6-12 months will likely feature a mix of growth
acceleration and low inflation against the backdrop of a
relatively stable policy stance.