Newspaper article The Christian Science Monitor

Investment Managers Fascinated by China

Newspaper article The Christian Science Monitor

Investment Managers Fascinated by China

Article excerpt

THE investment community smells fancy profits in China.

"Investment opportunities for foreign investors will rise dramatically as China speeds up its corporate sector reforms," notes the China Analyst, a new report turned out by the Bank Credit Analyst Research Group in Montreal.

Bear Stearns & Co. has also just distributed a report on "China's Economic Breakthrough" to investment money managers. The brokerage firm has a large and expanding office in Hong Kong that follows Chinese stocks.

"We are demand-driven in our research," says David Malpass, who wrote the report. "People are interested in China."

What has stimulated this fresh interest is the extraordinary growth in output in China and a vigorous turn to capitalism that includes the privatization of state industries.

"China's growing economic success is rapidly creating a new world hub for growth and investment," writes Mr. Malpass, a former Treasury and State Department economist. "The prospect of 1.2 billion people leaving central planning behind explains today's high stock market valuations for China and its neighbors. Market corrections, while inevitable, will be buying opportunities."

Both Malpass and the China Analyst are encouraged by reforms launched last summer and at last month's session of the Communist Party Central Committee, held in Beijing.

"The reform package," says the China Analyst, "is aimed at attacking China's traditional economic boom/bust cycle at its roots by advancing the country's transition to a market economy and setting the stage for fast economic growth, which we would hope can be accomplished with less inflation." This report talks of the inflation rate moving from 15 percent this year to 18 percent next year. "It is too early, however, to conclude with certainty that China is heading into another upward spiral of inflation." But it sees high odds that the economy is headed toward another round of overheated growth.

Malpass views as incorrect the "conventional analysis" that China is in the midst of a boom-bust cycle. This cycle was broken by economic reforms decided in late June that introduced a stable currency and a more disciplined monetary policy, he holds. …

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