China Growth Stocks

[Shengli]

Very well written rational article based on The Chinese Academy of Social Sciences (CASS) annual 'Blue Book' and several other hard sources unlike rumor and guess work we are pounded with all day from the main stream press.
Very balanced points on both sides. The last paragraph caught my eye and reminded me that as Chinas economy shifts as an investor i want to ride that changing curve . So companies that focus on innovation will be the biggest winners in the next few years . China needs to start to shift from making the Ipads and Ipods to developing the ideas for these types of products . They already have but the super high growth will come from these type of companies . The water , printing and travel type companies will still do well but the innovators will fly .

http://www.ibtimes.com/articles/94910/20101223/china-outlook-2011-economy-perform-risks-inflation-reflation-rebalancing-stimuklus-rates-labor-expor.htm#

growth could breach the 10 percent mark in 2011. It put 2010 growth at 9.9 percent.

According to CASS, inflation will remain moderate next year, with the consumer price index (CPI) rising 3.3 percent. However, according to a Goldman Sachs research, inflation rate will surge to 4.3 percent next year.

The Goldman Sachs report says though it's certain that the People's Bank of China will raise interest rates there won't be steep hikes that could result in a deceleration of growth coupled with excessive exchange rate appreciation

The Morgan Stanley report paints hope on this front. It says Chinese consumer spending will become the biggest contributor to GDP growth in 2011, accounting for more than half of the forecasted 9 percent growth.

"This ongoing process of rebalancing from export-led to domestic demand-led growth and vice versa has two important implications. First, it requires a shift of resources (capital and labour) from the external to the domestic goods-producing sectors or vice versa, which takes time and thus weighs on growth in the meantime."



The CASS report says rising labor costs could hit the rapid growth of the economy. "The first challenge comes from the rapid rise of labor costs in the country," Liu Shijin, deputy director of the Development Research Center of the State Council said. "The competitiveness of Chinese companies will be threatened by rising labor costs unless they find a new source of growth, such as innovation."