Update alerts

China's GDP figures suggest further liquidity easing

17 Jan| China's 4Q11 GDP growth rate of 8.9%, down from 9.1% in 3Q11, shows a slowing economy that is more resilient than many have expected. However, we think that clear signs of a slowdown in fixed asset investment is likely to spur progressive liquidity easing in 1H12.

Fall in China forex reserves adds pressure for liquidity easing

13 Jan| Data from the People's Bank of China (PBOC) published today shows a $20.6bn, or 0.6 %, fall in China's official foreign exchange reserves which slipped to $3.18tn in 4Q11. A fall in reserves in both November and December represents the first consecutive monthly fall since the first quarter of 2009. We think the figures show continued outflows of "hot money" and raise pressures for a further easing in domestic liquidity.

Growth in discretionary spending among cardholders moderates in December

13 Jan| China's Bankcard Consumer Confidence Index, a measure of cardholder spending on non-essential items, picked up 0.8 percentage points YoY to 86.72 in December, China UnionPay, which compiles the index, said. However, MoM growth moderated to a mere 0.03 percentage points from November, the slowest magnitude in MoM growth since July last year when discretionary spending began recovery.

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12 January 2012

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Macro View

Stimulus required

The Big Call

Utility prices climb

Artificial suppression of key utility prices – including water, electricity and gas – has been part of the secret of China’s industrial success. But now things are changing.

Consumer China

Beverages – sour, turning a little sweeter

Lower input costs, increasing competition and industry consolidation are the key themes for 2012.

Want Want – distribution is king

Want Want’s impressively wide distribution network is driving sales and brand recognition, even in rural areas.

Huiyuan – chasing a margin recovery

Having seen gross profit margins dive in 2011, the company is hoping that softer input prices will improve fortunes this year.

Tingyi – seeking a boost from PepsiCo

In spite of a brisk instant noodle business, the company’s mainstay beverage sales have been hit, but a tie-up with PepsiCo may hold promise.

Uni-President China – fighting back

Softening raw material prices suggest a recovery in operating margins as the company conducts an aggressive marketing campaign.

Financial China

Selected financial charts

A selection of key financial data.

Default risks goad Beijing into loosening curbs

During 2012 authorities are set to relax restrictions they have imposed on bank support for local government financing vehicles (LGFVs) and on the property market because the rising risk of defaults among LGFV and trust companies will oblige Beijing into a softer stance. Some aspects of this predicted relaxation may be announced and some, such as a few recent initiatives, may be communicated through largely confidential “window guidance” from regulators to financial institutions.

Capital Intensive China

Knock-on effects of real estate slowdown apparent in related sectors

Prices for cement, steel, and glass are all set to decline in 1H12 due to weak demand from a softening real estate sector as government credit restrictions persist.

Rural China

Rural wealth creation stays strong in December

Strong land transfers, rising pig prices and plentiful credit to rural enterprises creates a robust picture, which looks set to continue.

“Insourcing” pig producer in no mood for caution

The price of pigs may have slumped but Chuying Agro-Pastoral, relying on a pioneering ‘insourcing’ business model, remains bullish.

The Best of Chinese Commentators

Carbon tax levy

According to a report from China Cement Net, Beijing may implement a carbon tax in 13 provinces in 2013 including Guangdong, Liaoning, Hubei, Yunnan, Shanxi, Chongqing and Guizhou. The tax rate will be Rmb30 ($4.7, £3.0, €3.7) to Rmb40 per tonne of CO2 emissions. The details of this new tax have yet to be announced but if it is implemented it could impact the profitability of cement companies.

Pension funds invest in A-shares

China’s national pension fund has invested over Rmb10bn ($1.6bn, £1.0bn, €1.2bn) into the domestic stock market, state media announced. Dai Xianglong, the head of National Social Security Council, a government entity that manages national pension fund, also encouraged local authority pension funds to invest in equities to preserve and increase their value. He added that 90% of around Rmb1,500bn in pension funds managed by the local government were deposited in banks for an average annual return of 2% in the past decade. In addition, pension funds’ deficits in 14 provinces nearly doubled to Rmb67.9bn in 2010, according to official data. Investing pension funds into stocks has sparked a debate among domestic commentators.

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