Economic Forecasts & Opinions Dian
L. Chu

Source: http://www.chinadaily.com.cn/

 Chinas consumer price index
(CPI) rose 4.6% in December, 2010 year-on-year. The CPI was up 3.3% in 2010 from the previous year The prices of food, which accounts for a third of the basket of goods in Chinas CPI calculation, surged 7.2% year-on-year in 2010 Source: http://www.chinadaily.com.cn/

 Chinas producer price index
(PPI) rose 5.5% in 2010. The December PPI was up 5.9% year on year. Source: http://www.chinadaily.com.cn/

 Home prices in 70
major Chinese cities rose 6.4% year-on-year in December, 2010. New home prices and existing home prices climbed 7.6% and 5%, respectively year-on-year in December. December is the eighth consecutive month of slowing growth from a peak of 12.8% in April, 2010 Source: http://www.chinadaily.com.cn/

 Chinas urban fixed-asset investment
rose 23.8% year-on-year in 2010, vs. 30.1% year-on-year in 2009. Source: http://www.chinadaily.com.cn/

 Chinas retail sales rose
18.4% year-on-year to 15.46 trillion yuan ($2.34 trillion) in 2010. The real inflation-adjusted growth rate of retail sales was 14.8% in 2010. Source: http://www.chinadaily.com.cn/

 Chinas factory inflation cooled
in December as the official Chinese purchasing managers index (PMI) edged down to 53.9 in December from Novembers 55.2. An index reading above 50 represents growth/expansion. The number indicated China manufacturing sector is still expanding despite the slight pull-back in activity. Source: http://www.chinadaily.com.cn/

 Chinas foreign trade in
2010 jumped 34.7% from a year earlier to $2.97 trillion, while trade surplus fell 6.4% to $183.1 billion from the 2009 level. Exports grew 31.3% year-on-year last year to $1.58 trillion while imports surged 38.7% to $1.39 trillion. China trails only the US as a net importer of crude oil Source: http://www.chinadaily.com.cn/

 New yuan-denominated lending in
China reached 7.95 trillion yuan ($1.2 trillion) in 2010 The figure was 1.65 trillion yuan less than the 2009 level. New yuan-denominated loans in December last year stood at 480.7 billion yuan Source: http://www.chinadaily.com.cn/

 Foreign direct investment (FDI)
into China hit a record $105.74 billion in 2010, up 17.4% year-on-year In December alone, China attracted $14.03 billion of FDI, up 15.6% year-on-year - the 17th consecutive month of FDI growth The rapid FDI growth could be attributed to robust development in the service sector and the countrys central and western regions Source: http://www.chinadaily.com.cn/

 China’s fiscal revenue grew
21.3% year on year to 8.31 trillion yuan ($1.26 trillion) in 2010. Of the total, the central fiscal revenue topped 4.25 trillion yuan, up 18.3% from the previous year, while local governments collected 4.06 trillion yuan, up 24.6%. The fiscal revenue for last December surged 23.7% year on year to reach 634 billion yuan. Source: http://www.chinadaily.com.cn/

Source: http://www.chinadaily.com.cn/

 “Tightening excess money supply
and increasing competitive investment could help lower commodity prices.” ~ Guo Tianyong, The Central University of Finance and Economics. “Unexpected increase in interest rate should help contain the soaring prices and real estate bubble in the new year.” ~ Yi Xianrong, The Chinese Academy of Social Sciences “Unless the central bank changes its current policy approach, inflationary pressure is likely to rise further, at least in the first half of this year.” ~ Huang Yiping, professor at Peking University.

 There are many things
China has to do to get the inflation problem under control, or risk civil and economic chaos. Chinese government will likely be vigilant and implement a combination of more aggressive fiscal and monetary policies in 2011 and 2012. Expect shock waves to hit commodities and other global financial markets, albeit temporary, as China tightens more. However, I believe China’s long term growth prospect is still intact, but the next two years would be a pivotal and transformational period to a more sustainable growth for the Middle Kingdom.

 The best way to
invest in China, and hedge inflation is in Commodities, instead of focusing on region Buy on any pullbacks via option, futures, ETFs, stocks of resource related companies such as producers, and oilfield services companies Graphic Source: Financial Times

Economic Forecasts & Opinions Dian
L. Chu