China’s top leadership has promised to take fresh measures this Monday in order to boost economic growth. According to statements issued through the official news agency, Xinhua, monetary and stimulus measures will continue to support the economy. Additionally, the government will work to provide monetary conditions which are helpful for carrying out structural reforms.
Further, the leadership will continue to undertake structural reforms and address long-term problems such as burgeoning levels of debt. Recently released economic data indicate that measures undertaken to boost the economy are having the desired effect. Despite recent worries about the economy, stability seems to be on the horizon. Adding select stocks from China to your portfolio may be a good idea at this point.
Fresh Measures to Stimulate Growth
These statements were released at the conclusion of the annual Central Economic Work Conference during which the country’s top economic functionaries determined their course of action on the economy. Expressing concern about slowing growth, officials acknowledged there was an urgent need to transform the economy.
Despite these fears and concerns about a period of stagnant growth, the overall nature of discussions indicates a willingness to undertake fresh measures on the monetary and fiscal front, according to Goldman Sachs GS. The financial behemoth expressed confidence that only a marginal decline in growth was likely next year.
Officials are now planning to increase the fiscal deficit in a phased manner by reducing tax levels. This is a break from the earlier method of doing so by raising government spending. Additionally, there were indications that the monetary policy would continue to be accommodative.
Transforming the Old Economy
Economic data released earlier this month indicates that the government’s stimulus measures are having their desired effect. Industrial output increased 6.2% in November on a year-over-year basis. This was higher than the growth of 5.6% recorded in October. Retail sales surged 11.2%, posting its best reading for the year. Fixed asset investment moved up 10.2% over the preceding 11 months of 2015.
Fresh measures were announced on Monday to tackle lingering problems. Top officials promised to aid rural citizens to purchase homes in urban regions. They will also make efforts to reduce housing prices which will help deal with the large backlog of properties remaining unsold. Other measures will be undertaken to deal with overcapacity, reducing the cost of conducting business and cutting official red tape.
Regulators will work toward cutting costs of business finance and control interest rates in a manner that is beneficial for the wider economy. Cuts in contributions toward social security and reduction of manufacturing sector taxes are likely to be enacted.
Our Choices
These developments indicate that China’s top leadership has taken cognizance of the current state of the economy. Further, they are determined to boost growth and are ready to undertake measures to ensure that the targets are met.
Even if a marginal slowdown does take place, the country will continue to sport an enviable growth record. This is why it makes good sense to pick up specific China stocks. We have narrowed down our search to the following stocks based on a good Zacks Rank and other relevant metrics.
JA Solar Holdings Co., Ltd. JASO manufactures high-performance solar cells.
JA Solar Holdings has a Zacks Rank #1 (Strong Buy) and projected growth for the current year is 78.9%. Its earnings estimate for the current year has increased 54.8% over the last 30 days. The forward price-to-earnings ratio (P/E) for the current financial year (F1) is 5.94 compared to the industry average of 10.48.
JinkoSolar Holding Co., Ltd. JKS is a solar product manufacturer with operations based in Shangrao, China.
JinkoSolar has a Zacks Rank #1 and expected earnings growth of 37% for the current year. Its earnings estimate for the current year has increased 26.5% over the last 30 days. It has a P/E (F1) of 6.44, better than the industry average of 10.48.
ReneSola Ltd. SOL manufactures and sells solar wafers and related products.
ReneSola has a Zacks Rank #1 and projected growth for the current year is 60%. Its earnings estimate for the current year has increased 71.4% over the last 60 days.
China Distance Education Holdings Limited DL is a leading provider of online education in China focusing on professional education.
China Distance Education has a Zacks Rank #1 and its projected growth for the current year is 26.5%. It has a P/E (F1) of 16.92, lower than the industry average of 25.76. It has a PEG ratio of 0.68, lower than the industry average of 2.41.
China Mobile Limited CHL offers mobile telecom and associated services in China and Hong Kong.
China Mobile has a Zacks Rank #1 and its estimated growth for the current year is 9.9%. It has a P/E (F1) of 11.95, better than the industry average of 12.43.
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