This Day On The Street
Continue to site right-arrow
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
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

How Will China Temper its Growth in 2013?

Stocks in this article: VTNI COSCZ

Let's presume the magic number 7.5% isn't really that magic. Communist China controls its economy more so than less Communist countries. If it wants 7.5%, it will get something pretty close to that. And a leadership out to prove its ability, as most governments try to do at the start of their terms, will do visible, concrete things to realize their top-priority goals.

"As for the immediate outlook, we are already seeing signs that policymakers are shifting towards a tighter stance, on fears that credit growth has been excessive," says Mark Williams, chief Asia economist with Capital Economics in London. "The People's Bank has signaled that it will shift to a tighter monetary stance during the year ahead."

Going back to the premier's comments, I'd vote for modest a modest, symbolic interest rate hike at some point this year. The government still wants to pull down property prices. Higher rates could also indirectly cap everyday inflation, the leading conversation topic at Beijing restaurants whenever the bill comes.

Property price controls would slow momentum of the country's top real estate stars China Vanke (000002.SZ) and Vantone Real Estate Group (VTNI).

But the hikes wouldn't be ridiculous, as China still wants a relatively loose monetary environment while it tries to eradicate poverty, increase consumer spending and give its top domestic firms more muscle in other countries.

Any new monetary policy should then steer away from domestic MNCs such as China Merchants Holdings (0144.HK) or China Ocean Shipping (COSCZ).

Foreign firms keen on expanding in China might find their JV partners paying more interest on loans, an obvious extra cost of doing business that could muck up the bottom line.

But since the government wants consumer spending to lead the economy, it won't touch companies that sell affordable stuff to the masses.

Good on the likes of Starbucks (SBUX), with plans to take its 570 China stores to 1,500 by 2015, and Pizza Hut (YUM), which was on track to open 150 stores around the country last year.

"Three factors should be grabbing our attention in China right now: policy action around property prices, a loose monetary environment and increasing inflationary pressures," forecasts James Berkeley, director of the British customer management consultancy Berkeley Burke International.

He adds a caution: "It is too early to find hard evidence from data releases at this time of the year, to state which of those policy tools will be favored to achieve the 7.5% GDP target."

Expect evidence to emerge in April with first-quarter economic indicators. Expect China to act, and expect markets to react.

At the time of publication the author had no position in any of the stocks mentioned.

Ralph Jennings is on LinkedIn.

This article was written by an independent contributor, separate from TheStreet's regular news coverage.

2 of 2

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

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
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

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

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, 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
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

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

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 17,912.95 +108.15 0.61%
S&P 500 2,075.58 +4.93 0.24%
NASDAQ 4,778.4320 +13.0520 0.27%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs