Indecisiveness between inflation-fighting and growth-supporting may lead to awkward consequence. I certainly hope that the government will not cut interest rate to slow the economy like Turkey, but the Turkish case does help to highlight some of the paradoxes we have in Chinese economy. Inflation-fighting and growth-supporting are incompatible, and in attempt to do both at the same time, there is a possibility of achieving none of them.
4. Are there any chance that the real estate market bull market is headed towards an abrupt end or a soft lending?
5. Will the government allow Chinese Yuan to appreciate much faster?
One way to contain inflation would be to allow Chinese Yuan to appreciate. We might continue to hear pressure from the west on China to allow Yuan to appreciate faster. The question is at what rate of increase would Chinese allow.
6. How about the structural adjustment?
To address global imbalances, it is important for China to shift from an export- and investment- driven economy to a domestic consumption driven economy. There is certain progress, but not quite enough. Investors have been talking about the domestic consumption theme for 2 years or so as the government is supportive on domestic consumption. The facts are wages are still low on average to allow much consumption, and Chinese people are still more incline to save. It would be interesting to see if the market expectation of these consumer companies can really materialise, as I suspect some of those will not.
7. Will China be friend with neighbours and other countries?
The conflicts between the two Koreas highlights the geopolitical uncertainties in the region. China, of course, had some territorial clash with Japan, which subsequently led to an alleged export embargo of rare earth. Going forward, the geopolitical risks in Asia is certainly something that investors should be aware of