Tingyi's recent success with beverages may help offset margin declines seen currently in its noodle business.
The meat processor's mix of both low and high-end products gives the company more leverage to defend against pork inflation.
No economic trend in China is more important than inflation, as we have been saying since July last year (CC July 9th Big Call). If Beijing fails to control it, it may have to slam on the monetary brakes later this year, potentially precipitating a 'hard landing' for the economy.
The People's Bank of China (PBoC), the central bank, announced that it will raise the reserve requirement ratio for commercial banks by 50 basis points from next Monday, signalling growing concerns over inflation and the pace of credit expansion. We think the timing of the move displays a measure of policy alarm in Beijing and a significant de facto tightening of the official "moderately loose" monetary policy.
Peering into our crystal balls for 2010, things appear bleak or complex, but there are at least some silver linings.
With the consumer price index up 0.6% in November year on year - the first CPI increase in nine months - inflationary pressures look set to intensify, along with the liklihood of policy responses over the next two quarters.
Concerns over the future of credit expansion are weighing on market sentiment.
Economists are busy forecasting the direction of government policy next year.
Inflation, inflation, inflation. We predicted in July that it would return in Q4 or early in 2010 and, right on cue, it looks as if China is re-entering an inflationary phase. But how worried should we be?
Our interviews with bankers in several parts of the country convince us that a real adjustment in commercial bank strategy is already underway.
Renminbi Compass, a new research service launched by the FT, aims to act as a navigational guide through the expanding universe of renminbi asset classes. With the Chinese currency gaining ever-wider acceptance around the world and Beijing taking steps to open its capital account, we are broadening our research coverage to include not only equity funds but also all other important renminbi asset classes, such as chengtou bonds, dim sum bonds, real estate, trust products, underground banking, art, antiques and several others.