China's Economy Grows 9.5%, Besting Estimates
Comment of the Day

July 13 2011

Commentary by David Fuller

China's Economy Grows 9.5%, Besting Estimates

This informative update comes from Bloomberg. Here is the opening:
China's economy and industrial output expanded more than analysts predicted, driving up stocks across Asia as the nation maintains momentum after monetary tightening to cool inflation.

Gross domestic product rose 9.5 percent in the second quarter from a year earlier, the statistics bureau said in Beijing today, after a 9.7 percent gain in the previous three months. The median estimate was 9.3 percent in a Bloomberg News survey of 18 economists.

Industrial output advanced 15.1 percent in June, the most since May 2010, even after the central bank boosted lending rates five times since mid-October and lifted bank reserve requirements to a record. Premier Wen Jiabao said yesterday that stabilizing prices remains the top priority, after food costs soared in June.

"This data should dispel concerns over a hard landing in China," said Wendy Liu, a Hong Kong-based analyst with Royal Bank of Scotland.

The Shanghai Composite Index of shares advanced 1.3 percent as of 2:14 p.m., paring to 0.5 percent the decline this year that has been driven by concern that monetary tightening will choke off growth. Yuan forwards strengthened and Asian stocks climbed.

'Strong' Momentum

An easing of power shortages and supply-chain disruptions from Japan's earthquake and a rebound in money- supply growth may have boosted output, according to Goldman Sachs Group Inc. The statistics bureau said the economy's momentum remained "strong" and highlighted gains in investment by local governments and private businesses.

The International Monetary Fund forecast last month that China's economy will expand 9.6 percent this year. In the U.S., where unemployment is rising, the expansion may be 2.5 percent, and in the euro zone, where soaring bond yields have signaled that a sovereign debt crisis may spread to Italy, the gain may be 2 percent, according to the IMF.

David Fuller's view This latest news is unlikely to stem the flow of bearish articles concerning China, which mostly view the country through a prism of western economic woes.

China has problems aplenty, just like any other rapidly growing country throughout history. However for perspective: Which western government would not happily swap its current economic difficulties for those of China? I can think of three or four…perhaps…and all are heavily reliant on exports to the 'Middle Kingdom'.


Many of Fullermoney's secular investment themes since 2003 are centred on the countries, businesses and companies which provide what China wants, from commodities to technology.

China is also a prime investment opportunity for the longer term, although it has certainly required patience over the last two years, due to new supply mainly in the form of previously untraded government share holdings, plus higher reserve requirements and interest rates to curb property speculation and inflationary pressures. As a consequence, share valuations are as cheap today as I have seen in China over the last decade.

My main personal China investments are the Atlantis China Healthcare Fund (ATCHLTH ID) and the JPMorgan Chinese Investment Trust (JMC LN). The latter currently sells at a discount to NAV of 4.29% according to Bloomberg. Here are JMC's top-10 holdings as of 31st May 2011. The Atlantis Fund just won the Healthcare Fund of the Year award. It has high fees, including 20% of performance on a high-on-high basis, plus a 3% redemption charge. However the impressive Yang Liu, who is quoted in the Atlantis Press Release above, has performed.

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