China Growth Stocks

[tenenbaum]

GS China Economics piece out today. Here are the bullet points

Assessing risks posed by potential property price
corrections and government over-borrowing in China

--Rapid increases in property prices and the acceleration in infrastructure investment with local government guarantees in the past 18 months have raised risk to household and government balance sheets in China.

--We believe the risks of a meaningful price decline on the economy are mitigated by 1) low leverage used in property purchases; 2) conservative borrowing relative to income growth and accumulated savings from the past; and 3) better affordability when the actual income level is considered.

--In our view, despite local governments’ reliance on land sales for revenue, the sustainability of the fiscal position of the government in aggregate terms is still solid if we consider: 1) the large pool of assets on the government’s balance sheet; and 2) the rapid increase in fiscal revenue and government savings.

--The challenge for the Chinese government in the face of rapid urbanization remains how to choose timely and effective countercyclical policy measures to keep a stable pace of growth, as well as intervention measures to prevent long-term risks.