The document summarizes recent economic data from China. It reports that China's consumer price index rose 4.6% in December 2010 and 3.3% for the year. Producer prices increased 5.5% in 2010. Home prices rose but at a slower rate of 6.4% in December. Foreign direct investment reached a record $105.74 billion in 2010, up 17.4%. However, economists expect inflationary pressures to increase in China in the first half of 2011, forcing the government to implement more aggressive fiscal and monetary policies to control inflation.

1. Economic Forecasts & Opinions
Dian L. Chu

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

3.  China's 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
China's CPI calculation, surged 7.2% year-on-year in 2010.
Source: http://www.chinadaily.com.cn/

4.  China's 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/

5.  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/

6.  China's 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/

7.  China's 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/

8.  China's factory inflation cooled in December as the official Chinese
purchasing managers' index (PMI) edged down to 53.9 in December
from November's 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/

9.  China's 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/

10.  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/

11.  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 country's central and western regions.
Source: http://www.chinadaily.com.cn/

12.  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/

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

14.  “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.
Source: http://www.chinadaily.com.cn/

15.  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.

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

17. Economic Forecasts & Opinions
Dian L. Chu
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