This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Reality Check in China as the Economy Slows

And so what if it happens? It's not 7.5%, per se, that worries the already beleaguered world about where its second-largest economy is headed. It's the prospect that policymakers behind the $7.4 trillion GDP may be using that number to lie about a very different reality. Is the world looking at the economic equivalent of SARS, the respiratory disease that choked China in 2003 as the government tried to cover up a mounting caseload? Or will China grow at 10% again, claim itself the surgeon of the world economy and throw everyone off their market positions?

"No one would be worried if there were no doubt about 8.2%," says Tim Condon, Asia research head with ING Financial Markets in Singapore, citing the bank's growth forecast for China this year. "But there's also this 'unknown hard landing' camp."

Investors who think China's charts will fall into the red should start buying defensive stocks far from China. In the U.S., conservative utilities such as Consolidated Edison (shares up 14% over the past year) and Southern Co. (up 15.3%) might provide insulation. Avoid banks and real estate companies linked to China.

Better yet, forget the fear, likewise the math. Look at consumer appetite, the trailblazing by factories and China's lack of a Western-style credit crisis or sovereign debt problem. There's one other piece of the reality formula that often escapes debate: Beijing may lie about numbers, but it basically keeps broad promises.

China routed SARS within half a year of the outbreak. The government said in 2010 it would tighten controls over real estate prices. That crisis has passed its worst, and property share prices have risen accordingly since early April, notes Mark Williams, chief Asia economist with Capital Economics in London.

Most change in China is engineered or guided by the government, not a result of organic market forces. Whether China gets something done depends almost solely on how badly China wants to do it. China wants a mild slowdown but not a slump. So it's safe to park money in the broad category of risky assets, which include most company stocks linked to ongoing sources of growth in China.
2 of 3

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
SYM TRADE IT LAST %CHG
AAPL $126.44 -0.13%
FB $87.28 0.43%
GOOG $523.40 0.30%
TSLA $280.02 4.04%
YHOO $39.38 0.13%

Markets

DOW 17,730.11 -27.80 -0.16%
S&P 500 2,076.78 -0.64 -0.03%
NASDAQ 5,009.2140 -3.9090 -0.08%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs