The Rising Influence of Rising Affluence

[DewDiligence]

Banker Says China GDP Will Grow 8.2% in 2012

http://www.forbes.com/sites/russellflannery/2012/01/09/heres-one-economist-who-doesnt-buy-the-china-hard-landing-fears

›By Russell Flannery
1/09/2012

Fears abound that China’s economy is heading for a “hard landing” amid a slowdown in international growth and its domestic real estate market in 2012. One economist who doesn’t agree is Paul Tang, chief economist at Hong Kong’s Bank of East Asia.

Tang predicts China’s economy will grow by 8.2% this year, fueled by increasing consumer spending. That’s down from expected growth in gross domestic product of 9.1% in 2011, but would be one of the best in the world, Tang said in an interview with Forbes Asia.

Tang, who has been chief economist at the bank for a decade, is optimistic about that consumer will come through because of what he expects will be a solid increase of about 17% in disposable income in the country this year. That figure is roughly in line with the increase in China’s retail spending last year.

The outlook for disposable income growth in 2012 is solid in part because of government tax measures aimed at boosting the income of low- and middle-income families already put into effect last year. “Individuals will have more money to spend,” said Tang, who has been the bank’s chief economist since 2001.

If it turns out that way, that would be good news for numerous foreign companies looking to profit from the country’s growth. U.S. businesses selling into the country range from tech companies such as Apple to Procter & Gamble, Yum!, Kimberly Clark and Coca-Cola [and the various other companies mentioned on this board].

Less promising: exports. Owing to Europe’s debt problems, the export outlook isn’t promising this year, Tang said. Property demand will be relatively weak, owing to tight monetary policies. Cuts in the country’s sky-high bank reserve ratios this year will be only 100-150 basis points, as officials continue to battle inflation and real estate prices. Interest rate cuts would be a “last resort” for government officials because they don’t want to stimulate borrowing for property investments, he said.

Tight monetary policy will likely bring the government’s desired payoff: lower price increases in 2012. Tang predicts growth in China’s consumer price index this year will decline to 3.0% from 5.6% in 2011.‹