Asset management company Allianz Global Investors RCM said it remains bullish on China for 2001, particularly on its domestic consumption growth story.

"The Chinese government is continuing to shift its development emphasis to the central and western regions in a bid to bring more balanced wealth growth," said Christina Chung, senior portfolio manager of Allianz RCM China Fund.

"Rapid urbanization will ramp up demand for infrastructure, cement, and materials like construction steel, which will be key in boosting domestic consumption in the near future," Chung told reporters during a media briefing in Hong Kong Tuesday.

According to the 12th Five-Year Plan - the key policy document spelling out the country's development initiatives for 2011 to 2015 released in late October, China will stick to its strategy of expanding domestic demand - consumption in particular - and promoting urbanization in an active and stable way.

"More capital would be channeled into central and western regions," the plan notes.

However, the urbanization of central and western regions, which together account for nearly 90 percent of the nation's territory, is only about 45 percent and 40 percent respectively - well behind that of the more than 55 percent in eastern China, a Morgan Stanley research report said last year.

"Scattered population and large swathes of land with a low urbanization rate have impeded economic development in the central and western regions," Zhao Zhihao, a Shanghai-based scholar told China Daily in an earlier interview.

He noted that developing more cities in these areas is one way of correcting the imbalance with the more developed eastern and southern regions.

Allianz RCM's Chung believes that infrastructure-related sectors and companies with established or expanding footholds in the central and western regions are likely to deliver more attractive returns in the coming years since the Central Government is determined to accelerate urbanization.

She added that it is also transforming its economic development model to focus on innovation and value-added industries. These include emerging industries such as new energy, information technology and high-end manufacturing. The policies are likely to help them grow.

In April, the State Council released new regulations on overseas investment, restricting funds from going to environmentally unsound projects, and encouraging foreign-funded enterprises to increase their investment in the central and western regions, particularly in environmentally friendly and labor-intensive companies.

However, Allian RCM is underweight the mainland property market, saying that current stringent government policies will remain in place for quite a long time.

"As long as policy risk persists, investors should be cautious with the property sector in China," Chung added.

China Daily

(HK Edition 11/10/2010 page3)