China In Focus : Losing The Crown ?

It looks like India will overtake China in GDP growth this year after they “tweaked” their GDP calculations, India is expecting to hit 8.5% growth. http://www.wsj.com/articles/india-forecasts-gdp-growth-of-up-to-8-5-1425024900

But China will still be no. 1 in other things.

For instance, even as car sales growth halves, China is buying more ultra luxury cars than all of Europe. China is making in roads into the rest of the world, building the rival to the Panama canal in Nicaragua and now preparing to embark on their modern Silk Road project which will bring billions in infrastructure investment into central Asia.

“President Xi Jinping called for a revival of the 2,000-year-old land-based Silk Road and a maritime silk route. The New Silk Road will encompass Central Asia and South Asia and end in Australia, while the sea route will link Chinese ports to the Belgian port of Antwerp..”http://www.scmp.com/business/economy/article/1724779/china-sign-new-silk-road-investment-deals-next-month-state-media

FDI continues to rebound with its best growth since 2011 with investors looking for a share of her US$2 trillion e-commerce pie and 648 million internet users (out of the world’s 3 billion).

china fdi

Ignoring India’s claim to 8.5% GDP growth, China is still firmly entrenched at the top.

fastest growing economiesThe real estate, debt and commodity picture is not too rosy and we saw a weekend rate cut yesterday for 0.25% after reducing banks’ reserve ratios on 4 Feb. http://www.bloomberg.com/news/articles/2015-02-28/china-steps-up-easing-with-second-rate-cut-in-three-months

I would say this is more than a timely move as we prepare for the BOE and ECB (and RBA and BoC) next week. The ECB will start their 1 trillion dollar asset purchases from March which makes a cut from China a prudent decision.

It is the erosion of confidence in the economic picture that a cut conveys that worries me and that the financial instability that persists.

Granted that the CSI 300 Index and Singapore’s STI are both vying neck to neck for the worst performing Asian market status, rallying just 1.11 to 1.12% each, if the rate cut does not do the trick to revive a rally, I would not be too optimistic about the future at all.

The other matter would be the continued clampdown of former politicians and their business affiliates which is causing ripples in the corporate (bond) world as we now know the reason for the removal of Minsheng Bank’s president was due to his links with another party official expelled today, Ling Jihua. http://www.euronews.com/newswires/2964582-china-military-official-booted-from-parliament-in-anti-graft-drive/

But rumours are growing of the former big chiefs to come with a former vice president, Zeng Qinghong, in danger of being next. http://www.ft.com/intl/cms/s/0/c5b00b6e-bd9e-11e4-9d09-00144feab7de.html#axzz3T4hj4kel

I am still adjusting to the idea of a new normal and to spend more time looking at India.

Leaving with the indicative prices.

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