Investors taking stock as fortunes start to improve

圖片說明

A moderate recovery

China saw GDP growth of 7.8 percent in 2012, according to data from the National Bureau of Statistics. Although that was the lowest level for 13 years and a decline from the 9.3 percent recorded in 2011, it was still far higher than that of many of the world's major economies, under siege by ongoing debt and fiscal crises.

The figure was also higher than the Chinese government's full-year growth target of 7.5 percent. It flew in the face of economists' assertions that the economy faced strong downward pressure. Some had predicted a hard landing, which now seems unlikely to happen.

Meanwhile, the NBS announced that the country's consumer price index, a major measure of inflation, was 2.6 percent in 2012, much lower than the government's target ceiling of 4 percent.

In light of the data, the past few weeks have seen a number of institutions release optimistic outlooks for the Chinese economy in 2013.

"The big picture is that China has avoided a hard landing and has engineered a gradual rebound in growth, starting in the second quarter of 2012. The strong mandate given to the new leadership of the Communist Party of China should boost confidence, and the new administration is likely to add to it by pursuing new development goals," said Dariusz Kowalczyk, senior economist at Credit Agricole SA.

Meanwhile, Qu Hongbin, chief China economist at HSBC Holdings PLC, said the country is likely to record economic growth of 8.6 percent this year, despite the uncertainty in beleaguered overseas markets such as Europe, a major destination for Chinese exports. That uncertainty is likely to present the country with a sizable challenge this year, but on the plus side, a rapid rebound in inflation is unlikely to occur.

"I am optimistic about the market, but yes, there are some potential risks," said Shaun Rein, managing director of the China Market Research Group in Shanghai.

One of the decisive factors will be whether the country is able to stimulate consumption effectively, he added.

In January, the NBS announced that consumption overtook investment in 2012 to become the largest contributor to economic growth. Domestic consumption accounted for 51.8 percent of GDP, as opposed to 50.4 percent from capital investment, while the "contribution" from net exports was minus 2.2 percent, according to the bureau.

That indicates that, rather than simply looking to quicken the rate of growth, the government has focused on restructuring growth and rebalancing the economy.

It seems that better days may be on the way after the new leadership pledged to stabilize the economy, push forward reform and economic restructuring, and remain open to foreign investment.

"The bear (market) is over," said Chen Li, head of China equity strategy at UBS Securities Co, predicting that the A-share market will rise a further 20 percent this year.

"The dynamic price-to-earnings ratio (a measure of equity valuation) for 2012 didn't decline. That's an obvious signal that the bear market is ending. And a small bull market is expected to arrive in 2013," said Chen.

Rein echoed those sentiments, "You've seen a bull market in the last month and a half. Actually a raft of data released by the authorities indicates that China's economy is doing all right."