Investments: Chinese growth set for Olympic show
Chinese growth to remain firm
Friday, 02 May 2008 10:55
The credit crunch will not stop long-term growth in China and Asia.
William Fong, manager of the onshore Baring China Growth Fund, explained during the current market corrections China and Asia were "fundamentally bright spots".
"We firmly believe that China and Asia represent fundamentally bright spots in an increasingly gloomy world and that economic fundamentals in the region should act as a strong buffer against the events in the US credit markets," he said.
He added domestic consumption in Asia was in full boom, the Chinese currency, the Renminbi, was continuing to appreciate and Barings believed that secular growth and improving corporate governance would drive a re-rating.
"Despite a reduction in risk appetite on the part of investors, which has prompted a more-or-less indiscriminate sell-off in high beta markets globally including Asia, we strongly believe that this represents an opportunity for investors prepared to take a medium to long-term view," Mr Fong said.
"Monetary tightening and measures to increase food supply should reduce inflationary pressures, especially in the second half of 2008, and fiscal spending on infrastructure should stimulate the economy and buffer any potential deceleration in exports."
He went on to comment: "We do not see a change in the economic fundamentals and the secular growth story of China and Asia.
"Corporate balance sheets in the region are as strong as ever, and the rapid build-up of domestic savings and the recycling of petro-dollars should continue to attract increasing asset allocation into this region, while valuations have become more attractive following the recent correction."
However, he admitted there were concerns over inflation and credit tightening in China – but the return of swings in growth recorded in the 1990s was not forecast.
"We have long argued that the key to long-term growth in China is about sustaining a steady GDP growth of seven to 11 per cent.
"A short-term tightening or slow-down in growth would still leave the growth numbers at a healthy and manageable level, in our view."
Daniel Barnes