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FX FUNDAMENTAL ANALYSIS


Is Chinese growth running out of time?


Premier Li Keqiang


Year-on-year growth in Chinese fixed asset investment (FAI) last peaked at 33.6% in June, 2009. Subsequently, this


s tatis tic trended s teadily


downwards, reaching a low of 20.1% in May of last year. Since then, it has rema ined in a range of 20.0% to 21.2%. For the first five months of this year FAI was up 20.4%.


Given that FAI growth has be en moving down or sideways for almost four years, his tor y sug g ests that we are now overdue for an upturn. Yet so far there have be en few signs of any streng thening in investment demand.


36 FX TRADER MAGAZINE July - September 2013


URBANIZATION AS PROPERTY DEVELOPMENT


For local government officials, whose care ers depend more on GDP growth within their jurisdictions than any thing else, launching investment projects has always be en essential for promotion. They would thus like to turn Beijing ’s urbanization


pol ic y into an


excuse to start grandiose cons truction schemes. For them, urbanization would ideally be ma inly about building new apar tment s, shops, and offices and the associated infras tructure of


roads,


subways, power and sewer systems .


Interpreting urbanization as a mandate for real estate development also makes sense from the point of view of local government finances. Most loca l ities depend heavily on land sales to cover their operat ing expenses and ser vice debt. In fact, no mat ter how urbanization is


defined, without land-sales heal thy revenues the loca l


governments will be unable to pay for it.


The problem with the local government s’ idea of


l ines,


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