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China’s Economy Expected to Maintain Stable Growth in the Second Half of 2012

China’s Economy Expected to Maintain Stable Growth ...

Today, KPMG's Global China Practice (GCP) issued the first edition of the KPMG Review of China's Economic Globalisation in Beijing.


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KPMG Review on China’s Economic Globalisation: First Edition - China’s Economy Expected to Maintain Stable Growth in the Second Half of 2012

Today, KPMG's Global China Practice (GCP) issued the first edition of the KPMG Review of China's Economic Globalisation in Beijing.

The quarterly review aims to provide a comprehensive analysis of China's major economic indicators and policies in the first half of the year, interpret trends in the macro economy, major sectors, offer up-to-date information on the latest inbound and outbound developments, and forecast the future of high-profile industries.  

Peter Fung, Chair of GCP, remarked: "Macro-economic indicators show that China’s economy continues to slow down in the first half year. Major indicators include the 9.5% year-on-year increase in scaled industrial added value in June, which is weaker than markets’ projection. And the 3% year-on-year drop in actual use of foreign capital in the first half year, largely due to the European economic crisis, the increased cost of production factors, and the weak real estate market."

Fung also mentioned that, as export and investment demand rebounded in the first half year, there would be little chance of a hard landing for China’s economy. Meanwhile, the economy is expected to enjoy stable growth in the second half year thanks to weaker inflation data, adjustable monetary policy, and positive effects of approved stable growth-centred policies.  

The review gives an analysis of China's inbound and outbound investment. In the first half of the year, China's indirect outbound investments (non-financial category) amounted to USD 35.42 billion, a year-on-year increase of 48.2%. Where inbound investments are concerned, China's actual use of foreign investments totalled USD 59.1 billion, a year-on-year drop of 3% due to the impact of the international economic environment.  

Fung said: "We discovered a new trend in China’s inbound and outbound investments through analysis of capital flow and structure. Specifically, with respect to overseas investment, China has increased direct investment to Europe and America, which shows how emerging Chinese enterprises are keen on technology and markets in Europe and America. China's outbound M&A was spread across 34 countries, with America and Canada receiving the largest investment flows. M&A by Chinese enterprises was directed mainly at the energy and power sectors, with other investment in the oil and natural gas and materials sectors.  

Regarding the use of foreign investment, Peng Yali, head of research at GCP, believes "Despite the fact that in the first half year, China's use of foreign investment dropped, the structure of capital is evolving towards industrial optimization. This is in line with the goal of attracting foreign investment; i.e., improving the business environment for enterprises and exploiting potentials in the markets, thus driving the development of the economy as a whole."  

Peter Fung explained further: "Given the economic data in the first half of the year, we don’t foresee a hard economic landing in China, nor do we believe it necessary to worry about deflation. There are many signs showing that stable growth-centered measures have started to work. As the lagged effects of stable growth-centered policies begin to emerge and the external economic trends become clear, the economy’s increased pace should stabilize in the 3rd and 4th quarters. However, if external demand remains weak and addressing internal structural issues requires time, we should not be over-optimistic about a rebounding growth rates in the second half of the year. As a result, we estimate that growth for the whole year will be approximately 8%." 


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KPMG is a global network of professional firms providing Audit, Tax and Advisory services. We operate in 152 countries and have 145,000 people working in member firms around the world. The independent member firms of the KPMG network are affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. Each KPMG firm is a legally distinct and separate entity and describes itself as such.

KPMG China has 13 offices, including KPMG Advisory (China) Limited, in Beijing, Shenyang, Qingdao, Shanghai, Nanjing, Chengdu, Hangzhou, Fuzhou, Xiamen, Guangzhou, Shenzhen, Hong Kong and Macau, with around 9,000 professionals.  


KPMG Global China Practice (GCP) 

KPMG's Global China Practice (GCP) aims to integrate its global resources of KPMG, including talent, expertise, industry insights, rich project experience, draw on KPMG's global network to help Chinese enterprises bridge information gaps, overcome cultural differences, and improve their success rate in expanding overseas. GCP also helps enhance the effectiveness and profitability of foreign investors' investment activity in China. This will ultimately speed up the business growth of the enterprises and develop the local economy and society. GCP is committed to providing its customers with value-creating services by communicating with such partners as governments, domestic and foreign enterprises, associations, and mobilizing KPMG's cutting-edge expertise, experience, information, and human resources.  

GCP has established more than 50 China Business teams in hot areas that Chinese investors are interested in, as well as in countries that carry out a large amount of direct investment in China. The teams are composed of professionals with fluent Chinese who are familiar with China's culture, business practices, and local markets. GCP is dedicated to helping China enterprises to invest overseas and helping foreign enterprises to expand in the Chinese market. 

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