December+2010-JP+Morgan-China+in+2011+–+Cultivating+Sustainable+Growth.pdfVIP

h t w o r G e l b a n i a t s u S g n i t a China in 2011 – Cultivating Sustainable Growth v i t l u C – Jing Ulrich 1 1 0 Managing Director and Chairman, China Equities Commodities 2 n i a n (852) 2800-8635 i h C jing.l.ulrich@ 0 December 2010 Amir Hoosain Benjamin Wong, CFA Kelvin Wong amir.h.hoosain@ benjamin.mc.wong@ kelvin.x.wong@ To access Hands-on China publications on Bloomberg type JPRA GO or on Morganmarkets at /handsonchina h t w o r G e l b a n i a t s u S g n i t a v i t l u C – 1 1 0 2 n i a n i h C 1 Executive Summary As the year draws towards an end, economic fundamentals in China remain firm, but inflation concerns have led to a clear shift in monetary policy. Following five increases in banks’ reserve requirements this year, and the nation’s first interest rate hike since 2007, it comes as little surprise that the Chinese Politburo has said it will shift from a “moderately loose” to a “prudent” monetary policy stance next year, reverting to a choice of wording last in place before the global financial crisis. For investors, uncertainties about the course of Chinese tightening are compounding concerns about the debt crisis affecting several countries of the Eurozone. Chinese policymakers are also clearly concerned that quantitative easing in some developed economies might attract capital inflows and fuel domestic inflation and