This month marks the beginning of the Chinese New Year and in stockmarket terms, the Year of the Rabbit has been often been a bumpy one.* Philip Ehrmann, Manager of the Jupiter China Fund says that in spite of a choppy start, in his view China's economy looks set for a further year of strong growth:
"Despite near term concerns about the rate of food inflation, we think that China's economy is still likely to deliver reasonable growth rates of around 8-9%. Although we are expecting further interest rate rises and restrictions on bank lending activity, we do not believe that there will be a material contraction in liquidity.

"In the short-term the government will be seeking to curb inflationary expectations. However, we are looking forward to the launch of the 12th Five-Year Plan, the specifics of which are likely to ignite investor interest in a number of emerging strategic industries. For example, Beijing has recently detailed a comprehensive plan for water conservation for the first time and total investment in this important issue is expected to reach 4 trillion renminbi in the next 10 years - double what had been expected. This is an area that the Fund has focused on with its holdings in China Everbright International, Beijing Enterprise Water, and China Water Affairs. There is also more of a focus on infrastructure development like high speed railways and metro systems and this should be good for companies like China Automation and Midas, which we hold in our portfolio.

"For now, all eyes will be on inflation and the impact of volatile food prices. We believe that by April/May, the effects of seasonal influences should have dissipated as these include the rising price of vegetables due to the cold weather and strong demand arising from Chinese New Year, plus the unfavourable comparison with the previous year's data. With forthcoming corporate results likely to be supportive, falling inflation should provide investors with confidence that margins and returns on equity remain intact.
 "With valuations towards the low-end of historic ranges the market as a whole looks increasingly attractive to me".

* CLSA  Feng Shui Index report, page 11

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Jupiter Unit Trust Managers Limited (JUTM) and Jupiter Asset Management (JAM) are both authorised and regulated by the Financial Services Authority and their registered address is Grosvenor Place, London SW1X 7JJ. They are both subsidiaries of Jupiter Investment Management Group Limited and the group is collectively known as "Jupiter. The above commentary represents the views of the Fund Manager at the time of preparation and may be subject to change and this is particularly likely during periods of rapidly changing market circumstances. Their views are not necessarily those of Jupiter and should not be interpreted as investment advice. Every effort is made to ensure the accuracy of any information provided but no assurances or warranties are given. The Jupiter China fund invests in a single developing geographic area. There is a greater risk of volatility and lower levels of liquidity than typical with western markets, which can cause sharp falls and rises in price