Reading China’s Signs

CLSA’s Andy Rothman is one of the best voices out there discussing the growth of China. Andy’s ability to put today’s activities and government policies in historical perspective sets him apart from both China’s naysayers and those who are overly bullish. Andy’s Sinology report is a must-read for our investment team here at U.S. Global.

The most recent Sinology contains some good 2011 forecasts from Rothman and some interesting tidbits on China that are worth sharing:

• China’s economy is expected to grow about 9.5 percent in 2011—about 5.5 percent of that coming from investment and the rest coming from consumption.
• Infrastructure has accounted for one-third of total urban fixed asset investment over the past six years. The amount of projects scheduled and already underway should keep that pace in 2011.
• Total rail expansion, which includes high-speed rails, should rise to 7,500 kilometers (km) this year, up from 5,000 km in 2010. Rail expansion is expected to peak at 10,000 km
• Investment by manufacturing firms has accounted for roughly 30 percent of total fixed asset investment over the past six years and is expected to continue in 2011.
• Investment by private firms outpaced that of the Chinese government for nine consecutive months through November 2010, accounting for 58 percent of all urban fixed asset investment.
• Led by China’s smaller cities, which house roughly 57 percent of China’s urban population, housing sales rose 12-15 percent on a year-over-year basis in September, October and November.
• Rising incomes, little household debt and a healthy consumer sentiment is expected to facilitate increased consumption. Consumption is expected to account for 42 percent of GDP growth in 2011.

We’ll have to wait and see how Andy’s predictions hold up but history has shown there’s a lot of truth in his crystal ball.

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