China Growth Stocks

[forzagrifo]

China Crash -- I beg to differ. Few things needs to be considered:

- housing prices are high, but structural demand is also high because of urbanization and population age distribution. The age distribution is such that the 20-35 year olds who are looking to get married and purchase a property (it is Chinese preference to own a property when a man gets married) still occupies a large % of the entire population. (although this age group will shrink in the future as population gets older)

http://www.china-profile.com/data/ani_pop_1.htm

- The Chinese generally see property as an investment vehicle that is less risky than stocks. This adds to the rigid demand mentioned in my first point.

- There is no credit bubble, not even close to resembling what happened in the US. Mortgage policy is tight. (high down payment, strict credit checks, tighter credit policy for second homes, etc)

- the Communist Party will do whatever necessary to avoid mass public discontent with housing prices. They will not risk mass of people rising up and overthrowing them.

- the 12th 5-year Plan will now de-emphasize pure GDP growth. The government is very cognizant of the fact that pure GDP growth is bringing down standard of living. The new emphasis will be placed on quality (not quantity) of productivity and improvement of standard of living through other means and measures, such as technological innovation and environmental protection. Cities and counties, rather than setting targets of "X % in GDP growth", will now set targets such as "Plant X trees this year".

I suggest everyone to peruse the 12th 5-year plan or at least the outline of it to get familiar with current Chinese policies.

IMO, housing prices will be brought to control through tight monetary and regulatory policy. You may see wide swings in isolated locations such as Sanya last year due to speculations, but a systemic "crash" of say > 30% in magnitude is unlikely.