Generational change for China’s PSC ::Macquarie Research,

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Generational change for China’s PSC
With the 90th anniversary of the Chinese Communist Party last Friday, Paul
Cavey’s report on generational change in China’s leadership is very topical.
By now most investors know the formal reign of the 4th generation leaders, Hu
Jintao and Wen Jiabao, will start to end in Autumn 2012. Paul thinks Xi Jinping
and Li Keqiang are likely to lead the 5th generation, but the rest of the G9 is less
certain. The G9 is the nine-person Politburo Standing Committee (PSC), which
is China’s most powerful political body, and its composition will have a major
impact on their policy direction for many years to come.
With the assistance of Cheng Li, from the Brookings Institution, Paul’s report
focuses on the 14 people that are most likely to be part of the G9. For each one
he looks at their professional background, supporting networks, and most
importantly their likely policy preferences. Looking forward, Paul expects the
selection of the new G9 to start at the summer 2012 meeting of the current G9.
He also says to expect more about the economic implications of this globally
relevant generational change over coming months. >> Read Report
By the way, except for the time of the release which is always unpredictable,
Paul Cavey was not surprised by the latest rate rise in China. In fact, he says
everyone was expecting the move. In his view, this rise will likely be the only
monetary policy event in July, and he now expects policymakers to start focusing
more on what is happening to growth. In his scenario, recognition that growth
has slowed will lead to a reversal of monetary tightening in the second half,
which would be a positive catalyst for upward momentum in global equities.


Highlights
 After updating the Macquarie Country Alpha Model, David Rickards expects
German and Korean equities to outperform.
 Rebecca Hiscock-Croft expects US economic activity to rebound in the
second half, and is comfortable with her 3.1% GDP growth forecast.
 Due to growing overcapacity, Shai Hill recommends to short wind turbine
makers, and go long wind farms like Acciona (ANA SM).