China has managed to deliver more than 8% GDP growth with an infrastructure-focused stimulus plan. Manufacturing and industrial production have been revived, while welfare programmes such as increased spending on healthcare have made its citizens more predisposed towards consumption.

 

New bank loan growth is expected to decelerate in 2010, although it should remain at adequate levels, as China is expected to fine-tune its monetary policy to combat overheating assets. Strengthening domestic consumption continues to offset an anaemic export sector. However, trade is expected to recover in 2010 on the back of a wider global recovery.

 

Stimulus funding will carry over into 2010, supporting infrastructure efforts and favouring several building and construction sectors, including cement and railway equipment providers. We expect domestic consumers to drive China’s long-term economic growth, as rising income levels and favourable tax reforms address social stability. Rapidly growing rural consumption and a stable population of wealthy young adults further solidifies the growth momentum, with central authorities deregulating the financial and utilities sectors in order to encourage private investment.

 

New media sectors, including internet and non-traditional advertising companies, are looking to gain market share, while hospitality and travel service sectors should grow on strengthening international trade.

 

Improving relations with China will also continue to lift Taiwan’s economy in 2010, as market sentiment remains positive towards policy agreements, including the memorandum of understanding, as well as the economic cooperation framework agreement. Subsidy programmes in China, including the mainland’s home appliance rebate scheme, have helped to increase export demand for Taiwan’s electronics, partly offsetting global declines.

 

Cross-Strait relations also favour non financials, including technology companies in areas such as hand held appliances and clean energy management. The release of Windows 7 should serve as an export catalyst, helping related sectors such as smart technology, while CAPEX is expected to increase on corporate IT upgrades.

 

Like their Taiwanese peers, Korean technology and export companies should rally on the back of a sustainable global recovery. Various subsidy programmes and low interest rates were sufficient to spur domestic consumption growth in Korea, helping the economy expand during the second quarter of 2009.

 

As doubts surrounding Korea’s recovery begin to peter out, monetary tightening should be expected during the first quarter of 2010 – a clear indication of both economic recovery and growth. However, a rise in interest rates should gradually lead to the appreciation of the Korean won, which might negatively affect export growth.