12/21/2007
US-lsited Chinese stocks advanced yesterday. Among the reasons, first the US stock market was up overall, second China on Thurday announced it will raise one year deposit interest rate by 23bp to 4.14% and lending rate by 18bp to 7.47%. This is the sixth time this year Chinese central bank has raised interest rate. This, I belive, gave investors some sort of comfort that Chinese government is making effort to prevent the economy from overheating and to curb the rising inflation.
As to China' economic outlook for 2008, I believe the slowdowns in the US and Europe will affect Chinese economic growth to certain extent, mainly because China will have to export less to the US and European markets, and China is very dependent on its exports. But still, Chinese economy will continue to grow, driven by domestic consumption, fixed assets investment and urbanization. Last week, the ADB, Asian development bank cut Chinese GDP growth forecast next year to 10.5% from 11.4%; still a decent double-digit growth. US GDP growth was forecasted to be 2.4% next year.
One implication on Chinese companies listed in the US: I believe they probably will continue or increase their financing activities in the US market, as obviously, it has become more costly and difficult for them to borrow from domestic banks to support their growth.
-Dragon Lady
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