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Investors Chronicle-China craves sustainabilityInvestors Chronicle-China craves sustainability

Soruce : Graeme Davies 

9 March 2011

To some economists, China is an economic miracle that’s dug the world out of a deep hole. To others, it’s a destabilising force that will ultimately wreck the global economy. As the country’s leadership unveiled its latest five-year plan this week, there were plenty of nods to the need to make its growth more balanced, and more sustainable.

China’s “growth at all costs” approach in the past two decades has created a mighty exporting machine, but had a withering effect on its natural resources – it’s now a huge importer of many key raw materials – and its environment. Premier Wen Jiabao wants more emphasis on domestic consumption, not just exports, and better use of key resources. As well as further reducing the ‘energy intensity’ of each unit of GDP, ambitious energy efficiency and emissions targets are being set with China aiming to produce 20 per cent of its energy from non-fossil fuel sources by 2015.

This casts the European Union’s plans to reach 20 per cent renewable power by 2020 into sharp relief. True, much of China’s target will probably be fulfilled by nuclear power, but it is also investing heavily in wind and hydro power. This will primarily benefit the burgeoning domestic supply chain that is rapidly developing to serve these sectors.

Aware of the growing dislocation between the haves and the have-nots in China in recent years, Mr Wen also set out plans to improve the lot of the ordinary working Chinese, which in turn should improve household income as a percentage of GDP and, with it, domestic consumption. The intention is to raise minimum wages and income tax thresholds, and implement social welfare insurance.
Investors Chronicle VIEW:

Who wins and loses from all this? A reduction in targeted GDP growth from 7.5 per cent to 7 per cent per annum, plus a move towards a more consumption-led economy, could encourage other export-led economies to pick up some of the slack. The rebalancing of China’s economy will take a lot longer than five years, but given what China has achieved in the past 20 years, few would bet against it. If you’re looking for specific UK plays on alternative energy in China, consider Aim-traded carbon abatement specialist Camco, while in the longer term investors in the domestic Chinese economy such as Fidelity China Special Situations, JP Morgan Chinese Investment Trust (a recent IC fund tip) and Origo Partners could also benefit.

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9 March 2011

To some economists, China is an economic miracle that’s dug the world out of a deep hole. To others, it’s a destabilising force that will ultimately wreck the global economy. As the country’s leadership unveiled its latest five-year plan this week, there were plenty of nods to the need to make its growth more balanced, and more sustainable.

China’s “growth at all costs” approach in the past two decades has created a mighty exporting machine, but had a withering effect on its natural resources – it’s now a huge importer of many key raw materials – and its environment. Premier Wen Jiabao wants more emphasis on domestic consumption, not just exports, and better use of key resources. As well as further reducing the ‘energy intensity’ of each unit of GDP, ambitious energy efficiency and emissions targets are being set with China aiming to produce 20 per cent of its energy from non-fossil fuel sources by 2015.

This casts the European Union’s plans to reach 20 per cent renewable power by 2020 into sharp relief. True, much of China’s target will probably be fulfilled by nuclear power, but it is also investing heavily in wind and hydro power. This will primarily benefit the burgeoning domestic supply chain that is rapidly developing to serve these sectors.

Aware of the growing dislocation between the haves and the have-nots in China in recent years, Mr Wen also set out plans to improve the lot of the ordinary working Chinese, which in turn should improve household income as a percentage of GDP and, with it, domestic consumption. The intention is to raise minimum wages and income tax thresholds, and implement social welfare insurance.
Investors Chronicle VIEW:

Who wins and loses from all this? A reduction in targeted GDP growth from 7.5 per cent to 7 per cent per annum, plus a move towards a more consumption-led economy, could encourage other export-led economies to pick up some of the slack. The rebalancing of China’s economy will take a lot longer than five years, but given what China has achieved in the past 20 years, few would bet against it. If you’re looking for specific UK plays on alternative energy in China, consider Aim-traded carbon abatement specialist Camco, while in the longer term investors in the domestic Chinese economy such as Fidelity China Special Situations, JP Morgan Chinese Investment Trust (a recent IC fund tip) and Origo Partners could also benefit.

End.