“China is undisputedly growing in relevance. Early government intervention and lower
levels of debt compared to its western counterparts helped it to weather the financial
storm better than most.”
Since October 2008, the Chinese government has implemented aggressive macro-
economic expansion policies, along with fiscal stimulus packages and monetary
expansion. These policies have led to the rapid recovery of the domestic market and
also signs of a recovery in investment.
The rapid growth in the China economy has led to a 8.7% per cent annual economic
growth rate in 2009. Among the world’s major economies, China is surging at an
unmatched pace with 10 per cent growth forecast for 2010.
Wong said this indicates huge room for rapid, catch-up growth and thus investment
opportunities.
Indeed, the Chinese’s domestic demand contributed 12.6% points to GDP growth in
2009 – the country’s strongest performance since the early 1990s.
With the rebound of the housing sector playing a prominent role in this recovery, the
discussion has now moved to whether China is harnessing a housing boom, or
bubble. Wong continued: “The current upswing is resulting in unprecedented liquidity
easing after the global financial crisis and so there are some recent housing market
developments that appear symptomatic of a bubble.
“Sales have nearly doubled over the past year, housing credit has increased sharply,
and the price of houses in the secondary market has accelerated rapidly. Yet from an
affordability standpoint, property prices appear expensive and seem to have factored
in a certain amount of future income growth.”
Ample saving deposits of residents have helped to support mortgage lending, as well
as contributing to China’s substantial property market boom.
Wong said: “Conventional wisdom holds that if China maintains its phenomenal
economic growth, then last year’s loans need not turn bad. The asset bubble is no
longer a major economic risk with the new tightening policies. Further, property
market cooling measures will not derail economic recovery but enhance sustainability
of future growth.
“Therefore there are enormous opportunities for investing in China’s long term growth
and resurgence as the emphasis changes from growth speed to growth quality,”
Wong concluded.
