- Growth "China’s investment-led recovery is slowing, but wage and consumer growth still look very strong. Activity levels in the real-estate sector still look reasonably strong. We look for a mild loosening of policy in Q4 or Q1 2011, depending on the Q3 data. We look for 10% real growth in 2010, 8.5% in 2011."
- Investment "Growth in government approvals of infrastructure projects has slowed, and the rationing of bank credit has also had an effect. However, activity levels remain elevated."
- Consumption "Incomes are rising across China in real terms, and that is supporting strong consumption growth countrywide. Incomes seem to be rising for everyone, even if the rich are benefiting the most."
- Money "Credit growth has slowed to a less worrying rate, but there is still a lot of liquidity around, and real interest rates are still negative. This creates an environment where asset bubbles grow easily."
- Trade "We expect exports to rise by 30% this year, though the trade surplus will fall moderately, to around USD 180bn. China’s share of world exports continues to grind higher. We reduce our forecast for the 2010 current account surplus to 4.8% of GDP from 5.2%. We look for the C/A surplus to trend mildly up again in 2011-12."
- Inflation "Price pressures appear to be moderating, though we could still have a pork price shock in H2. Stable commodity prices will help a lot over the next 12 months. We revise down our CPI inflation forecast for 2010 to 2.5% from 3.5%, and raise our 2011 forecast to 3.5% from 3.0% to take account of increased food-price inflation."
- CNY "The Chinese yuan (CNY) has de-pegged, again, and we look for a 3-4% appreciation against the US dollar over the next 12 months, to 6.35 by end-2011. China remains a buyer of US Treasuries but has been actively buying other countries’ bonds too."
- Housing "After the April market-cooling measures by the State Council, land prices and transaction volumes have corrected downwards, but apartment prices have generally not budged. We expect home prices to fall moderately in H2, but do not foresee a rout."
- Fiscal policy "The government has been withdrawing stimulus over the last three quarters. Fiscal revenues are now booming again. Central government debt is not a concern, but local government debt is. The government appears to be preparing to boost central funding of education, health care and low-income housing construction."
- Energy "China’s coal consumption has plateaued, while its thirst for oil continues to grow; oil consumption is on track to reach our estimate of 9.2 mn barrels/day for 2010, up 7.6% on 2009. The filling of stage two of the Strategic Petroleum Reserve is underway."
- Metals and food "The infrastructure slowdown has impacted iron ore imports and steel prices. Less home-building will hit copper demand. Soy demand still looks super-strong, on the back of strong meat and oil consumption growth."
- Hong Kong "Strong consumption underpins our GDP growth call of 5.4% for 2010. Inflation is not a big concern – and we do not think there is a property bubble. The CNY market appears to be on the verge of significant development."
- Taiwan "Consumption is strong, unemployment is falling, and the central bank is normalising rates. Even so, we do not think inflation is much of a risk."
StandChart Greater China Chartbook 2010Q2
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