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UBS Investment Research

Asian Economic Monitor

China By The Numbers
(April 2011)








Our guide to Chinese monthly data – what the numbers are, what they mean,
and our outlook going forward:

Global Economics Research
Asia
Hong Kong
28 April 2011

www.ubssecurities.com

Tao Wang
Economist
S1460511010018
wang.tao@ubssecurities.com
+8610-5832 8922
Harrison Hu
Economist
S1460511010008
harrison.hu@ubssecurities.com
+8610-5832 8847


Overview and summary . . . . . . . . . . . . . . . . 2
UBS activity indicators . . . . . . . . . . . . . . . . 3
Business indicators . . . . . . . . . . . . . . . . 4
Inflation . . . . . . . . . . . . . . . . 5
Money and credit . . . . . . . . . . . . . . . . 6
Base money and sterilization . . . . . . . . . . . . . . . . 7
Fixed asset investment . . . . . . . . . . . . . . . . 8
Industrial production . . . . . . . . . . . . . . . . 9
Industrial inventories . . . . . . . . . . . . . . . . 10
Industrial profits . . . . . . . . . . . . . . . . 11
Consumption and retail . . . . . . . . . . . . . . . . 13
Property and construction . . . . . . . . . . . . . . . . 14
Trade . . . . . . . . . . . . . . . . 15
FDI . . . . . . . . . . . . . . . . 17
FX reserves and capital flows . . . . . . . . . . . . . . . . 18
Exchange rate . . . . . . . . . . . . . . . . 19
Financial markets . . . . . . . . . . . . . . . . 20
Data tables . . . . . . . . . . . . . . . . 21


This report has been prepared by UBS Securities Co. Limited
ANALYST CERTIFICATION AND REQUIRED DISCLOSURES BEGIN ON PAGE 26.


Asian Economic Monitor 28 April 2011
UBS 2


Overview and summary
What’s new in recent months?
• GDP growth slowed modestly but stayed strong at 9.7% (y/y) in Q1 2011, continued to be boosted by robust
domestic investment and exports. We expect GDP growth to stay strong in Q2 before slowing in H2 on
weaker exports. We maintain our growth forecast of 9.3% for the year.
• CPI inflation climbed up to 5.4% (y/y) in March and is expected to stay above 5% in the next 3-5 months.
We expect food prices will moderate in H2, more than offsetting the rise in non-food inflation.
• Growth of bank lending slowed in Q1 but overall liquidity remained abundant. 3 RRR hikes in Q1 did not
result in a net withdrawal of liquidity. We expect multiple additional RRR hikes to sterilize FX inflows, and
expect 1 more rate hike in Q2 and another one possibly in Q3.

Economic Activity. Economic activity slowed in Q1 from Q4 2010, although remaining robust, helped by credit
expansion at end 2010 which boosted investment, while strong property construction and solid exports helped to keep
industrial production strong. Retail sales have weakened but consumer spending from household survey held up well.
The sequential strength of exports has weakened. In the coming quarter, we expect q/q growth to rebound somewhat on
robust investment and construction demand in inland regions, although there is a downside risk that weakness in the
commodity housing market may occur before the big push in social housing construction. We expect a moderation in
China’s GDP growth in 2011 to 9.3%, mainly on weaker external demand, partly as a result of higher global oil prices.
Domestic demand should be supported by fixed investment, especially a rebound in manufacturing investment.

I nflation and monetary policy. The pick up in CPI inflation so far has been mainly led by food prices, driven by
recurrent bad weather conditions and, to a smaller extent, long-term upward adjustment in domestic food prices. Warm
weather in the spring has led to a decline in vegetable prices and we expect other food prices to moderate following the
summer harvest. With liquidity abundant, real interest rates remaining negative, and inflation expectation staying
elevated, the risk of inflation spreading to the overall economy is high. In addition, upstream pressure of higher
commodity prices has increased. The government has allowed incomplete pass through of higher global oil prices and
used price controls and moral suasion to control non-food price inflation for now. We do not think these measures can
be effective for long and see non-food price inflation to rise throughout 2011. Nevertheless, H2 CPI movement is
expected to be dominated by the moderation of food prices and drop toward 4% in Q4. We maintain our average CPI
inflation forecast of 4.8% for the year.

To help combat inflation and prevent overheating, the central bank continued its moderate monetary tightening with
reserve requirement hikes and lending controls. While the 4 RRR hikes so far this year served to sterilize the large FX
inflows and retiring some of the central bank bills, bank lending has also been managed through unannounced credit
quotas and tighter supervision. RMB lending and M2 growth slowed visibly, but overall liquidity has only tightened
modestly due to some off-balance sheet credit expansion and increased loan securitization in the inter-bank market. We
expect further multiple RRR hikes and control on liquidity, but maintain that the government will not tighten liquidity
aggressively. We also expect 2 more interest rate hikes in the next few months.

Outlook in the coming year. We think investors should look out for the following: (i) the start of the 12-th FYP will
support fixed investment despite the property tightening and fading of the stimulus plan this year, with manufacturing
investment taking the lead; (ii) frequent monetary policy moves as CPI inflation stays high in Q2 before peaking in
early summer; (iii) a strong growth momentum in Q2, boosted by the robust investment and construction demand in
inland regions; (iv) 1 more rate hike in Q2 and 1 possibly in Q3, and multiple RRR hikes; (v) overall liquidity (social
financing) is expected to stay adequate, though bank lending will slow, weighing down on equity market; and (vi)
RMB to appreciate by 5-6% against the USD.

Asian Economic Monitor 28 April 2011
UBS 3

UBS activity indicators

 What the numbers say: The UBS Expenditure Index moderated somewhat in Q1, mainly on weakening net exports.
On the other hand, the Physical Activity Index has recovered recently.
 What they mean: Excluding price effects, Q1 real net exports stood largely flat over one year ago, bringing a
minute contribution to our expenditure index, down visibly from Q4 last year. Meanwhile, contribution from
consumption edged down on weakening retail sales, while that from fixed investment stayed relatively stable. All
components in the Physical Activity Index have seen growth momentums picking up in Q1.
 12-month outlook: We expect the Physical Activity Index to remain robust in the near term. The impact of
stimulus-related fixed investment has faded, property sector activity has stayed resilient but is expected to weaken,
but from Q2 2011, the start of new investment programs should offset expected weakness in property construction
and the end of the 4-trillion stimulus investment.
Chart 1: UBS expenditure index by source

-10
-5
0
5
10
15
20
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Net exports
Fixed investment
Consumption
Growth rate (% y/y 3mma, real, sa)
Source: CEIC, UBS estimates
Chart 2: UBS physical activity index
-5
0
5
10
15
20
25
30
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Physical activity index
Growth rate (% y/y 3mma)
Source: CEIC, UBS estimates
Chart 3: Transport and energy

-10
-5
0
5
10
15
20
25
30
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Electricity
Transportation
Growth rate (% y/y 3mma)
Source: CEIC, UBS estimates
Chart 4: Industry and construction

-20
-10
0
10
20
30
40
50
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Construction
Industry
Growth rate (% y/y 3mma)

Source: CEIC, UBS estimates
...momentums of all components have picked up
Our overall expenditure index slowed on
weaker retail sales and net exports
But the Physical Activity Index has recovered

Asian Economic Monitor 28 April 2011
UBS 4

Business indicators

 What the numbers say: NBS PMI rebounded somewhat in March, but less than usual for this month. HSBC PMI,
on the other hand, stayed flat. Meanwhile, OECD leading index has recovered, while consumer confidence
rebounded sharply in March.
 What they mean: In mid 2010, as the effects of the stimulus faded, credit growth slowed, and property tightening
measures were implemented, most leading indicators fell. However, in H2 2010, PMI and OECD leading index
improved, reflecting a re-accelerating credit expansion and some re-stocking. The recent weakness in PMI
momentum is mainly driven by slowing new orders, and reflects to some extent signs of peaking in external demand
and the fresh property tightening measures. The rebound in consumer confidence in March may be related to a
lower-than-expected reading of CPI inflation and hopes that the latest measures could lower housing prices.
 12-month outlook: We expect most of the leading economic indicators to moderate somewhat in the coming
months. The infrastructure investment is expected to stay relatively weak in 2011, and property construction activity
is expected to slow, though still supported by the massive social housing construction. OECD leading indicators
may slow somewhat while the government’s initiatives on regional development and industrial upgrading will help
sustain a robust business outlook.

Chart 1: PMI indices

35
40
45
50
55
60
2005 2006 2007 2008 2009 2010 2011
NBS PMI
HSBC PMI
Dif f usion index level

Source: CEIC, Bloomberg, UBS estimates
Chart 5: Leading indicators

90
92
94
96
98
100
102
104
106
108
2003 2004 2005 2006 2007 2008 2009 2010 2011
OECD leading indicator
NBS leading index
Consumer conf idence index
Dif f usion index level

Source: CEIC, UBS estimates
Chart 3: NBS PMI breakdown (II)

35
40
45
50
55
60
65
2005 2006 2007 2008 2009 2010 2011
New order
New export order
NBS PMI (dif f usion index level, sa)
Source: CEIC, OECD, UBS estimates
Chart 4: Other business climate indices

90
100
110
120
130
140
150
2003 2004 2005 2006 2007 2008 2009 2010 2011
50
55
60
65
70
75
Entrepreneur expectation
Business climate
5000 Enterprise index (RHS)
Index level Dif f usion index level
Source: CEIC, Bloomberg, UBS estimates
Chart 2: NBS PMI breakdown (I)

35
40
45
50
55
60
65
2005 2006 2007 2008 2009 2010 2011
Production
Raw material inventory
Finished goods inventory
NBS PMI (dif f usion index level, sa)
Source: CEIC, UBS estimates
Momentum in OECD leading index has picked up but NBS
leading index has weakened
PMI has weakened in recent months

Asian Economic Monitor 28 April 2011
UBS 5

Inflation

 What the numbers say: Headline CPI inflation picked up to 5.4% (y/y) in March from 4.9% (y/y) in February,
while PPI inflation climb to 7.3% (y/y) in March.
 What they mean: Food and fuel prices have been responsible for CPI fluctuations in the past few years, with core
goods and services prices remained relatively stable. In Q1 2011, 67% of the CPI increase came from higher food
prices. Supply shocks such as bad weather and the base effects have played major roles in driving food prices in
recent months, while long-term upward adjustment in domestic food prices may also be at work (though to a less
degree). Sequential food inflation has already peaked in Q1, but upward pressure on non-food prices has intensified,
helped by rising input costs and elevated inflation expectations. The government has used price controls (energy
products) and moral suasion (food and household goods) to dampen non-food price inflation for now, but we do not
think this can last long. Producer prices rebounded in recent months on surging global commodity prices, especially
oil price, which was fuelled by MENA unrests.
 12-month outlook: We expect CPI to remain elevated above 5% (y/y) in the next 3-5 months before summer
harvest bringing down large item food prices. Although rapid wage increases have not appeared to drive CPI
inflation as of yet, they may push up services prices higher in the coming months. We expect the government to
continue to allow for only a partial pass through of global oil prices and to provide fertilizer and transport subsidies
to reduce the impact of higher energy costs on food prices. In H2, moderation in food prices is expected to more
than offset the rise in non-food prices, resulting in a slowdown in CPI inflation. For 2011 as a whole, we expect
overall CPI inflation to average at 4.8%.



Chart 1: CPI by component

-5
0
5
10
15
20
25
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Overall CPI
Food and f uel
"Core" inf lation
Inf lation rate (% y/y)

Source: CEIC, UBS estimates
Chart 2: Upstream price indices

-25
-20
-15
-10
-5
0
5
10
15
20
25
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Producer price
Raw materials
Corporate goods
Import price
Inf lation rate (% y/y)
Source: CEIC, UBS estimates
Chart 3: Export prices

-6
-4
-2
0
2
4
6
8
10
12
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Overall China
Chinese consumer goods
Hong Kong import price index (% y/y)
Source: CEIC, UBS estimates
Inflation picked up further in March, led by
food prices
Upstream prices have rebounded while export prices
continued to charge ahead

Asian Economic Monitor 28 April 2011
UBS 6

Money and credit

 What the numbers say: Net new RMB bank lending totalled RMB 679 billion in March and 2.26 trillion in Q1,
lower than the 2.6 trillion in Q1 last year. In contrast, overall social financing has slowed more modestly, totalling
RMB 4.2 trillion in Q1, compared with 4.5 trillion one year ago. Both credit and broad money (M2) growths
stabilized, rising at 17.9% (y/y) and 16.6% (y/y), respectively, in March.
 What they mean: With the strong incentives of banks and depositors to move away from the normal on-balance
sheet banking during the past year, the traditional RMB lending and M2 growth figures have become less
representative of the true monetary conditions in the economy. In Q1 2011, although RMB lending and M2 slowed
visibly, designated loans and corporate bond financing grew rapidly, resulting in a more modest slowdown in
overall social financing. This means that monetary and credit tightening so far has been only moderate, and liquidity
in the economy was still plenty to support robust growth. Moreover, there are other important sources of corporate
financing that are not included in overall social financing, such as foreign direct investment, government financing,
and most importantly, corporate retained earnings, which grew strongly during the past year.
 12-month outlook: In an environment of fast growth, tightly managed exchange rate and rapid FX reserve
accumulation, we believe the government will keep a tightening bias toward liquidity and credit control to contain
risks of inflation and asset bubble. We expect multiple RRR hikes, continued use of differentiated RRRs and 2 more
rate hikes in the rest of 2011. Nevertheless, we expect that new RMB lending will come close to 7 trillion RMB,
and the overall social financing is expected to be kept at a similar level as last year, or about 14 trillion RMB. More
importantly, the significant increase in corporate profits during 2010 should help finance a robust growth of fixed
investment in 2011.


Chart 1: Money and credit growth

0
5
10
15
20
25
30
35
40
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Broad money M2
Bank lending
Growth rate (% y/y)

Source: CEIC, UBS estimates
Chart 2: Sequential growth

0
10
20
30
40
50
60
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Broad money M2
Bank lending
Growth rate (% q/q, sa, annualized)
Source: CEIC, UBS estimates
Chart 3: Monthly new lending

0
100
200
300
400
500
600
700
800
900
1000
1100
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
0
50
100
150
200
250
300
350
400
450
500
Nominal new loans (sa, 3mma)
New loans/GDP(RHS)
New monthly f low lending (RMB bn) Index
Source: CEIC, UBS estimates
Both credit and broad money growth have slowed in Q1,
but overall social financing remained adequate
Headline net new bank lending has been heading south

Asian Economic Monitor 28 April 2011
UBS 7

Base money and sterilization

 What the numbers say: Base money growth moderated somewhat during the first two months of 2011, weighted
down mainly by the larger reflow of government deposits over one year ago. On the other hand, foreign asset
continued to accumulate rapidly while the central bank’s net sterilization operations remained relatively modest.
 What they mean: The slowdown in base money growth during H2 2009 and H1 2010 reflected the base effect as
well as the central bank’s shift away from massive liquidity injection earlier. Concerns about external weakness and
tightness in inter-bank market led the PBC to reduce net sterilization in Q3 2010, while trade surplus increased and
net capital flows turned positive again, forcing PBC to renew sterilization efforts since late 2010. The PBC has
raised RRR four times since 2011 to sterilize large FX inflows, trying to rein in base money and credit growth.
 12-month outlook: We see the central bank facing the challenges of persistent large FX reserves. Since we do not
expect the central bank to stop buying FX and allow the nominal exchange rate to appreciate significantly, we
expect further net issuance of central bank bills and multiple reserve requirement hikes in 2011. The government
will rely more on direct credit control to keep lending, inflation and asset price from getting out of control, if
liquidity is kept loose and interest rates low.

Chart 1: Base money growth (y/y)

-5
0
5
10
15
20
25
30
35
40
45
50
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
PBC base money (RR adjusted)
Excluding cash
Growth rate (% y/y 3mma)

Source: CEIC, UBS estimates
Chart 3: Bank excess reserve position

0
2
4
6
8
10
12
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
PBC reserves less required reserves (% of deposits)
Source: CEIC, UBS estimates
Chart 2: Base money growth (q/q)

-20
0
20
40
60
80
100
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
PBC base money (RR adjusted)
Excluding cash
Growth rate (% q/q, sa, annualized)
Source: CEIC, UBS estimates
Chart 4: Sterilization operations

-60
-40
-20
0
20
40
60
80
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Domestic contribution
FX reserve contribution
Total reserve money growth (RR adjusted)
Growth rate (% y/y 3mma)
Sterilization
Source: CEIC, UBS estimates
Chart 5: Sterilization by component

-3000
-2000
-1000
0
1000
2000
3000
4000
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Other
Bonds
Reserve requirements
12-month cumulative sterilization (RMB bn)
Source: CEIC, UBS estimates
Banks’ excess reserves stabilized on large FX inflows Base money growth moderated during January and February
The PBC has stepped up sterilization recently,
mainly through RRR hikes

Asian Economic Monitor 28 April 2011
UBS 8

Fixed asset investment

 What the numbers say: Growth of fixed asset investment (FAI) edged up in March and Q1 in nominal terms, but
edged down in real GDP-consistent (i.e., excluding secondary asset transactions) terms.
 What they mean: The strong growth in FAI early this year is likely to have been supported by the marked rebound
in bank credit during late 2010. Among the major components, manufacturing investment remained robust; the
strong real estate investment (35% y/y) is in line with continued strength in property construction; and a pickup in
transport investment growth (30.7% y/y) also helped boost overall infrastructure investment. Keep in mind there is a
large and varying gap between the actual pace of investment activity and the headline monthly growth figures due to
the volatile non-capital “asset trading” transactions such as land purchases, and mergers and acquisitions; the
fluctuations in our adjusted investment series better reflect the turns in the broader economy. Moreover, the
National Statistics Bureau (NBS) has revised the coverage of the monthly FAI data since 2011 (including only
projects with more than RMB 5 million investment, up from 0.5 million), making it somewhat difficult to compare
with history.
 12-month outlook: In 2011, we expect the composition of fixed investment to change, with manufacturing
investment recovering on robust exports and government’s initiative to promote industrial upgrading and new
strategic industries. Infrastructure investment growth will likely stay relatively weak as the stimulus ends, while
government’s tightening bias on property will be partially offset by social housing construction and urban upgrading
in inland areas. These together will help to sustain a solid headline fixed asset investment growth of around 25%.


Chart 1: Urban fixed asset investment

0
5
10
15
20
25
30
35
40
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Fixed asset investment
Real adjusted investment
Growth rate (% y/y 3mma)

Source: CEIC, UBS estimates
Chart 2: Fixed investment by key sectors

0
10
20
30
40
50
60
2005 2006 2007 2008 2009 2010 2011
Urban f ixed asset investment
Inf rastructure
Real estate development
Manuf acturing
Growth rate (% y/y 3mma)
Source: CEIC, UBS estimates
Chart 3: Real adjusted urban fixed investment

-5
0
5
10
15
20
25
30
35
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
-30
0
30
60
90
Real adjusted investment
Physical activity index
Financing proxy (RHS)
Growth rate (% y/y 3mma) Growth rate (% y/y 3mma)
Source: CEIC, UBS estimates
Q1 FAI growth stayed robust in nominal
terms, but edged down in real terms
The adjusted real series also correspond more closely to the
movements in our Physical Activity index and in financial flows

Asian Economic Monitor 28 April 2011
UBS 9

Industrial value-added and sales

 What the numbers say: Industrial value-added (VAI) growth was strong at 14.8% (y/y) in March and 14.4% (y/y)
in Q1, from the strong base in early 2010. The growth of real industrial sales has remained stable.
 What they mean: The most volatile determinants of industrial production trends are construction spending and
exports. In Q1, the buoyant property construction, a pick up in fixed investment and solid export growth, together
with the fast credit expansion in Q4 last year, have boosted industrial production. Despite the statistic coverage
change which somewhat clouds the true picture, the 14.4% growth on top of the very strong growth in early 2010 is
still impressive. In particular, heavy industry such as metals & materials led the strength, while electronics in light
industry also picked up. Note that since 2011, NBS revised the statistic coverage of industrial value-added
(including only industrial enterprises with RMB 20 million annual principle revenue, up from 5 million), making it
somewhat difficult to compare with history.
 12-month outlook: In 2011, we expect a fairly robust VAI growth of about 12% (GDP-consistent coverage),
reflecting, in part, solid export and consumer demand, and the push for urbanization and mass market & public
housing construction.




Chart 1: Industrial sales growth

0
5
10
15
20
25
30
35
40
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Nominal industrial sales
Real industrial sales
Growth rate (% y/y 3mma)

Source: CEIC, UBS estimates
Chart 2: Industrial value-added growth

0
5
10
15
20
25
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Industrial value added
Real growth rate (% y/y 3mma)
Source: CEIC, UBS estimates
Chart 3: Light vs. heavy industry

0
5
10
15
20
25
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Overall value-added
Light industry
Heavy industry
Real growth rate (% y/y 3mma)
Source: CEIC, UBS estimates
Industrial value-added growth has edged up in Q1

Asian Economic Monitor 28 April 2011
UBS 10

Industrial inventories

 What the numbers say: Real industrial inventory, as a share of industrial sales, picked up in Q1 this year, led by the
chemical and metals sectors.
 What they mean: In late 2008 and early 2009, the fall of construction and export led to some aggressive de-stocking
in some sectors. Since mid 2009, the impact of the stimulus, strong growth of property construction, and recovery in
exports together have resulted in a strong recovery in sales of industrial products. This helped to lower the ratio of
industrial inventory relative to sales despite equally strong growth in production. Since 2010, inventory/sales ratio
has trended down, before edging up in early 2011. On a flow basis, chemical and metals sectors saw rapid inventory
building during Q1 2011, which is largely a seasonal pattern, but also fuelled by ample liquidity during Q4 2010
and expectations of robust final demand in the coming boom season. Meanwhile, light industry inventory remained
stable from a quarter ago.
 12-month outlook: In the coming months, the rapid restocking early this year will go under the test of real demand
strength. Given that domestic economy will likely continue to grow robustly while exports are expected to show
solid growth on continued global demand recovery, we expect inventory to be gradually digested, and then
stabilized as a share of sales in the coming quarters.



Chart 1: Inventory/sales ratio

30
40
50
60
70
80
90
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Inventory/sales ratio index

Source: CEIC, UBS estimates
Chart 2: Flow inventory/sales ratio

-1
0
1
2
3
4
5
6
7
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
6-month inventory growth as a share of monthly sales (%)
Source: CEIC, UBS estimates
Chart 3: Contribution to flow ratio

-1
0
1
2
3
4
5
6
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Machinery/Equipment
Chemical/Metals
Light industry
Mining
Contribution to f low inventory/sales ratio (ppt)
Source: CEIC, UBS estimates
The aggregate industrial inventory/sales ratio edged
up in early 2011
…led by chemical and metals
On a flow basis, the pace of inventory build-up
picked up strongly in Q1 2011

Asian Economic Monitor 28 April 2011
UBS 11

Industrial profits

 What the numbers say: Industrial earnings growth moderated somewhat but stayed robust at 32% (y/y) in Q1
2011. Heavy industry continued to lead the growth, driven by chemicals and metals sectors, while textile led the
growth in light industry. Both heavy and light industries have seen profit margins narrowed modestly going into
2011 under the pressures of rapidly rising raw material costs.
 What they mean: The collapse of sales amid the global crisis in end-2008 and the subsequent policy stimulus led to
big swings in industrial profit growth in 2008-09. The renewed strength in economic growth since middle-2010 has
resulted in accelerated profit growth since Q3 2010. Despite rapid wage growth, margins in light manufacturing
sector have not been eroded, due to strong growth in labor productivity. On the other hand, heavy industry margin
has shown signs of peaking, partly reflecting the surging raw material costs.
 12-month outlook: In the coming quarters, strong economic growth should continue to support revenue growth,
while the rise of commodity and material costs, as well as wage costs, may erode profit margins. We expect profit
growth to be robust in 2011 but somewhat slower than in 2010.

Chart 2: Industrial profit margins

0
2
4
6
8
10
12
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Overall industry ex Mining
(seasonally adjusted)
Prof it margin (%)

Source: CEIC, UBS estimates
Chart 1: Industrial earnings growth

-60
-10
40
90
140
190
240
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Overall ex Mining
Heavy
Light
Earnings growth (% y/y 3mma)
Source: CEIC, UBS estimates
Chart 3: Heavy industry

0
1
2
3
4
5
6
7
8
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Heavy industry
(seasonally adjusted)
Prof it margin (%)
Source: CEIC, UBS estimates
Chart 4: Light industry

0
1
2
3
4
5
6
7
8
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Light industry
(seasonally adjusted)
Prof it margin (%)

Source: CEIC, UBS estimates
Heavy industry margins have peaked, partly due to
surging raw material costs
Industrial earnings growth remained robust in Q1 2011

Asian Economic Monitor 28 April 2011
UBS 12

Industrial profits, continued


Chart 7: Textile

0
1
2
3
4
5
6
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Textile
(seasonally adjusted)
Prof it margin (%)
Source: CEIC, UBS estimates
Chart 5: Mining

0
5
10
15
20
25
30
35
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Mining
(seasonally adjusted)
Prof it margin (%)

Source: CEIC, UBS estimates
Chart 8: Other light manufacturing

0
1
2
3
4
5
6
7
8
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Other light manufacturing
(seasonally adjusted)
Prof it margin (%)

Source: CEIC, UBS estimates
Chart 11: Machinery and equipment

0
1
2
3
4
5
6
7
8
9
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Machinery and equipment
(seasonally adjusted)
Prof it margin (%)
Source: CEIC, UBS estimates
Chart 12: Electronics

0
1
2
3
4
5
6
7
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Electronics
(seasonally adjusted)
Prof it margin (%)

Source: CEIC, UBS estimates
Chart 9: Chemical

0
1
2
3
4
5
6
7
8
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Chemical
(seasonally adjusted)
Prof it margin (%)
Source: CEIC, UBS estimates
Chart 10: Metals and materials

0
1
2
3
4
5
6
7
8
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Metals and Materials
(seasonally adjusted)
Prof it margin (%)
Source: CEIC, UBS estimates
Chart 6: Food processing

0
2
4
6
8
10
12
14
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Food processing
(seasonally adjusted)
Prof it margin (%)
Source: CEIC, UBS estimates

Asian Economic Monitor 28 April 2011
UBS 13

Consumption and retail sales

 What the numbers say: In both nominal and real terms, retail sales growth recovered somewhat in March, but
stayed lower than Q4 average. Meanwhile, data from household survey show that real consumption expenditure
growth of urban household stayed flat, while rural consumption growth picked up visibly in Q1 2011.
 What they mean: China’s retail sales data does not cover consumption of services, but does include some sales to
firms and government agencies, and some investment goods. The visible slowdown in retail sales growth in Q1 is
led by weak auto sales, but may also reflect the much weaker sales to government entities as the 2-year stimulus
package ended. Of course the weakness is consistent with a drop in consumer confidence as inflation and inflation
expectations stay high. The Q1 household survey shows that urban real income growth has slowed while real
consumption growth remained stable, both eroded by higher inflation to some extent. Meanwhile, rural real income
growth picked up strongly as the robust growths of migrant wage and household business income (which has
benefited from higher prices of agricultural products) more than offset higher rural inflation. On back of the vibrant
real income growth, rural real consumption growth also rebounded strongly. The expenditure survey data is difficult
to interpret, but generally seem to be more consistent with the annual household consumption data.
 12-month outlook: In 2011, we expect private consumption to grow largely in line with GDP, boosted by solid
employment and wage growth and increased government social spending on pension and health care. However, the
rise in inflation could erode real household income and consumption spending.





Chart 1: Real retail sales y/y

0
5
10
15
20
25
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Nominal
Real
Retail sales growth (% y/y 3mma)

Source: CEIC, UBS estimates
Chart 2: Urban income and expenditure

0
5
10
15
20
25
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Urban income
Urban consumption expenditure
Real growth rate (% y/y, 6mma)
Source: CEIC, UBS estimates
Chart 3: Rural income and expenditure

0
5
10
15
20
25
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Rural income
Rural consumption expenditure
Real growth rate (% y/y, 6mma)
Source: CEIC, UBS estimates
Real retail sales growth slowed visibly in Q1
Urban consumption growth remained stable while rural
consumption growth picked up on strong real income growth

Asian Economic Monitor 28 April 2011
UBS 14

Property and construction

 What the numbers say: Property sales growth remained robust at 15.8% (y/y) in March and 15% (y/y) in Q1 as a
whole, with prices of most cities continuing to grow m/m. Meanwhile, growths of housing starts, current
construction and investment have all rebounded in Q1. As a result, our construction index reversed previous
weakness, recovering to 22% (y/y) in March.
 What they mean: Despite the latest round of tightening measures in late January, Q1 property data show little sign
of weakness, with y/y growths rebounding and seasonally adjusted absolute levels staying flat or rising further. It
seems that the reported weakness in tier-1 cities has been more than offset by strength in most tier-2 and tier-3
cities. The continued strength in property sector does not necessarily mean that policy tightening has failed, but it
does entail that the government should continue its current tightening stance. Meanwhile, the government aims to
construct 36 million units of social housing over the next five years, with 10 million units new starts each year in
2011 and 2012.
 12-month outlook: We expect the government will maintain its tightening bias on commodity housing sector in
2011, continuing with restrictions on property demand and credit to developers. As a result, we see commodity
housing sales to gradually weaken in the coming months, leading to a likely drop in commodity housing starts and
investment as well. Nevertheless, we expect overall construction activity to grow by close to 10% in 2011, as social
housing and urbanization in inland regions help to offset some of the weakness.
Chart 1: Real construction index

-20
-10
0
10
20
30
40
50
60
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Real construction activity growth (% y/y)
Source: CEIC, UBS estimates
Chart 2: Construction by component

-30
-20
-10
0
10
20
30
40
50
60
70
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
New & current construction
Completed & sold
Land sales & development
Construction and f loor space indicators (% y/y)

Source: CEIC, UBS estimates
Chart 4: Property lending

5
15
25
35
45
55
2005 2006 2007 2008 2009 2010
Loans to real estate developers
Housing mortgage
Growth rate (% y/y)

Source: CEIC, UBS estimates
Chart 3: Construction vs. steel demand

-20
-10
0
10
20
30
40
50
60
70
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Domestic steel consumption
Overall construction index
Floorspace started & under construction
Growth rate(% y/y)
Source: CEIC, UBS estimates
The construction index matches domestic steel and materials consumption
swings well, with previous divergence quickly narrowing now
Both housing mortgage and loans to developers
continued to slow in Q4 2010
Property activities rebounded in Q1

Asian Economic Monitor 28 April 2011
UBS 15

Trade

 What the numbers say: In Q1 2011, exports growth edged up to 26.5% (y/y) in USD terms, and edged down to
15.2% (y/y) in real terms, still healthy. On the other hand, growth of non-oil imports remained robust at 31.5% (y/y)
in USD terms, partly boosted by surging import prices, and slowed somewhat to 14.2% (y/y) in real terms. As a
result of the stronger imports growth, trade balance showed a deficit of -$ 1 billion.
 What they mean: After rebounding strongly in Q4 2010 on the recovery of external demand, the sequential growth
momentum of exports has weakened during Q1 this year, led by machinery & equipments. Sequential momentum of
imports has also peaked, but still standing at a strong pace, in line with the robust performance of property
construction and domestic demand during Q1. China’s trade deficit in Q1 was due to both the usual seasonality and
the sharp rise in import prices, and was temporary in nature.
 12-month outlook: Export growth should slow in the later part of 2011, along with the slowdown in global demand,
partly weighted down by lower US and Japan growth as a result of higher global oil prices and Japan earthquake.
We expect imports to outpace exports, due to stronger Chinese domestic demand and higher import prices. As a
result, trade surplus is expected to drop to about $150 billion in 2011.
Chart 1: Export growth

-30
-20
-10
0
10
20
30
40
50
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Nominal
Real
Export growth (% y/y 3mma)

Source: CEIC, UBS estimates
Chart 2: Import growth

-30
-20
-10
0
10
20
30
40
50
60
70
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Nominal
Real: oil imports
Real: non-oil imports
Import growth (% y/y 3mma)
Source: CEIC, UBS estimates
Chart 3: Sequential trends

-60
-40
-20
0
20
40
60
80
2005 2006 2007 2008 2009 2010 2011
Exports (real)
Imports (real)
Sequential q/q growth rate (% annualized)
Source: CEIC, UBS estimates
Chart 4: Trade balance

-10
-5
0
5
10
15
20
25
30
35
40
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Headline
Seasonally adjusted
Monthly trade balance (US$ bn)
Source: CEIC, UBS estimates
Chart 5: Change in balance by category

-25
-20
-15
-10
-5
0
5
10
15
20
25
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Primary Chemical
Metals Machinery
Electronics Light
Contribution to change in trade balance (US$ bn, sa, 3mma)

Source: CEIC, UBS estimates
Trade surplus narrowed most in heavy industrial
and primary materials
China trade balance tends to be low or in deficit in
the beginning of the year
Both exports and non-oil imports growths slowed somewhat in Q1

Asian Economic Monitor 28 April 2011
UBS 16

Trade, continued


Chart 1: Trade balance by sector

-60
-40
-20
0
20
40
60
80
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Primary Chemical
Metals Machinery
Electronics Light
Monthly trade balance (US$ bn, sa, 3mma)
Source: CEIC, UBS estimates
Chart 2: Trade balance by region

-30
-20
-10
0
10
20
30
40
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Europe
North America
Japan
Other Asia
Other
Monthly trade balance (US$ bn, sa, 3mma)

Source: CEIC, UBS estimates
Chart 5: Real export growth by sector (i)

-60
-40
-20
0
20
40
60
80
2005 2006 2007 2008 2009 2010 2011
Primary resources
Chemicals
Metals/materials
Real export growth rate (% y/y 3mma)
Source: CEIC, UBS estimates
Chart 6: Real export growth by sector (ii)

-40
-20
0
20
40
60
80
2005 2006 2007 2008 2009 2010 2011
Electronics
Machinery/equipment
Light manuf actures
Real export growth rate (% y/y 3mma)

Source: CEIC, UBS estimates
Chart 3: Real import growth by sector (i)

-40
-20
0
20
40
60
80
2005 2006 2007 2008 2009 2010 2011
Agriculture
Minerals
Fuels
Chemicals
Real import growth rate (% y/y 3mma)
Source: CEIC, UBS estimates
Chart 4: Real import growth by sector (ii)

-40
-20
0
20
40
60
80
2005 2006 2007 2008 2009 2010 2011
Metals/materials
Electronics
Machinery/equipment
Light manuf actures
Real import growth rate (% y/y 3mma)

Source: CEIC, UBS estimates
Imports volume growth
of commodity and
metals stayed strong

Asian Economic Monitor 28 April 2011
UBS 17

FDI

 What the numbers say: Both inward and outward FDI continued to recover in 2010, growing by 62% (y/y) and
37% (y/y), and totalling at 185 and 60 bn USD, respectively. The net FDI reached 125 bn in 2010, up by 78% from
2009. Meanwhile, data from the Ministry of Commerce show that inward FDI grew robustly by 29% (y/y) during
Q1 this year.
 What they mean: Both the recovering global economy and weak base effect have contributed to the strong rebound
since H209 in inward and outward FDI, which collapsed during H109 on global financial crisis. FDI flows have not
been a significant contributor to the Chinese macroeconomic cycle.
 12-month outlook: We expect FDI inflows to remain robust in 2011, as a result of a moderate recovery in global
economy, a large difference between growth in emerging and developed economies, very low interest rates in
advanced economies, as well as expectation of RMB appreciation. Direct investment abroad is also expected to
grow strongly, driven by China’s medium-long term need of raw material resources and continued encouragement
from government.









Chart 1: FDI flows level

-10
0
10
20
30
40
50
2002 2003 2004 2005 2006 2007 2008 2009 2010
Net inward FDI
Net outward FDI
USD bn (4qma)
Source: CEIC, UBS estimates
Chart 2: FDI flows’ share in GDP

-0.5
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
2002 2003 2004 2005 2006 2007 2008 2009 2010
Net inward FDI
Net outward FDI
Share of GDP(%)

Source: CEIC, UBS estimates
Both FDI and direct investment abroad continued to recover in 2010

Asian Economic Monitor 28 April 2011
UBS 18

FX reserves and capital flows

 What the numbers say: Despite the first quarterly trade deficit in 7 years, China FX reserves increased by another
$197 billion in Q1 2011, only slightly below the record high of $199 billion in last quarter.
 What they mean: In Q1 2011, non-FDI “other” capital inflows continued to dominate the FX inflows, accounting
for half of the reserve increase. This, together with a large positive valuation gain (due to exchange rate changes of
euro and other currencies against the USD), has largely offset the shrinking trade surplus. Meanwhile, trade surplus,
FDI and interest earnings have remained relatively stable.
 12-month outlook: Going forward, we expect persistent large FX inflows, as foreign capital inflows continue to be
attracted by the higher returns to investment and expectations of appreciation in China, and as trade surplus recovers
in the coming quarters. This would put more pressures on the RMB, bringing rising challenges of sterilization and
liquidity management to the PBC, particularly if the current gradual appreciation continues.



Chart 1: FX reserve accumulation

-60
-40
-20
0
20
40
60
80
100
120
140
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Headline
Valuation and Seasonally Adjusted, 3mma
Monthly FX reserve growth (US$ bn)

Source: CEIC, UBS estimates
Chart 2: Reserve growth by source

-20
-15
-10
-5
0
5
10
15
20
25
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
FX reserve accumulation (Adjusted)
"Basic" balance of payments
Other capital f lows (Adjusted)
Share of GDP(% 3mma)
Source: CEIC, UBS estimates
Chart 3: “Hot” capital flows

-20
-15
-10
-5
0
5
10
15
20
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
From Financial system FX data
From PBC FX reserve data (Adjusted)
Implied "other" capital f lows (% of GDP)
Source: CEIC, UBS estimates
FX reserve has risen substantially sinceH2 2010 Other capital flows have surged in recent quarters

Asian Economic Monitor 28 April 2011
UBS 19

Exchange rate

 What the numbers say: RMB has appreciated by 1.5% against USD so far in 2011, rising at +7% on an annualized
rate basis. Meanwhile, the trade weighted RMB exchange rate has trended up in recent months.
 What they mean: The de-pegging of the RMB in June 2010 started with no one-off revaluation and no clear
indication of a significant appreciation in the future. Although the move reduced the risk of imminent trade friction,
the pace of RMB appreciation has been measured so far and the international pressures on RMB appreciation have
remained high. Nevertheless, we think the fundamentals for RMB appreciation remains intact. The temporary trade
deficit in Q1 should have little impact on the RMB exchange rate. Recently, the officials have sent out messages
that greater flexibility of RMB should help ease imported inflation pressures. Given that USD has weakened
considerably against other major currencies in recent weeks and that China's inflation pressures stay high, we think
it is possible that RMB will be allowed to appreciate faster against the USD in the next 3 months. However, we do
not think the annual appreciation will be allowed to exceed 5-6% in 2011, and we do not think a one-off
appreciation is likely.
 12-month outlook: Despite the persistent international pressures, both political and speculative, we expect China to
continue to resist calls for a faster and larger appreciation, being concerned about the impacts on its export sector as
well as on asset price inflation. However, we do expect the government to allow for a visible appreciation against
the USD in the coming year to defuse international pressure and reduce the threat of trade protectionism. In
addition, the appreciation would help to fight inflation and help with the adjustment of economic structure. We look
for CNYUSD to trade at about 6.2 by end 2011. Over the medium term, we expect the RMB to continue its gradual
appreciation, with its trade-weighted index strengthening by an average of 5% a year in the next few years.




Chart 1: RMB against the “basket”

6.2
6.4
6.6
6.8
7.0
7.2
7.4
7.6
7.8
8.0
8.2
8.4
Jul-05 Jun-06 May-07 Apr-08 Mar-09 Feb-10 Jan-11
95
100
105
110
115
120
125
130
USD/RMB (LHS)
RMB trade-weighted exchange rate (Inverted)
RMB exchange rate against US dollar Index (7/21/2005 = 100)

Source: CEIC, UBS estimates
Chart 3: NDF RMB expectations

-10
-5
0
5
10
15
Jul-05 Apr-06 Jan-07 Oct-07 Jul-08 Apr-09 Jan-10 Oct-10
3-month f orward
12-month f orward
NDF f orward premium against the dollar (%)
Source: CEIC, UBS estimates
Chart 2: Recent RMB movements

-25
-20
-15
-10
-5
0
5
10
15
Jul-05 Jun-06 May-07 Apr-08 Mar-09 Feb-10 Jan-11
One-month
One-year
Bilateral change (annualized, %)
Source: CEIC, UBS estimates
RMB kept appreciating against the USD, and
trended up on trade-weighted basis
The pace of RMB appreciation remains measured
The NDF market showed RMB appreciation
has picked up again recently

Asian Economic Monitor 28 April 2011
UBS 20

Financial markets

 What the numbers say: A-share market has trended up since February, posting a year-to-date gain of 4.2%.
Meanwhile, money market rates fell rapidly towards 2% during the first half of April on abundant liquidity, before
picking up recently following the latest RRR hike.
 What they mean: The lacklustre performance of domestic stock prices during late 2010 was mainly driven by
market concerns on liquidity tightening and also due to the lack of transparency in policy. The recent strength was
partly driven by pre-stocking in certain sectors in anticipation of the upcoming boom season for construction
activities. The relatively loose liquidity conditions in money market may have also boosted the sentiment. Banks
were not been aggressive in expanding loans during Q1 this year, while FX inflows probably remained large. These
combined have resulted in abundant liquidity in interbank market during most part of April, leading to rapidly
falling money market rates. The latter did pick up on the required reserve payment date, but not as excessively as
before.
 12-month outlook: We think the government will continue its macro tightening measures, which might weigh on
the sentiments of equity investors. But the economic fundamentals such as robust economic activity, inflation
peaking in mid-year, and ample overall liquidity in the economy should be supportive to equity market. We think
liquidity condition in money market will remain loose in the coming month, and money market rates will fall again
going into May as impacts from the latest RRR hike fade.







Chart 1: Money market interest rates

0
1
2
3
4
5
6
7
8
2003 2004 2005 2006 2007 2008 2009 2010 2011
Average 7-day interbank rate
Average long bond yield
PBC 1-year bill rate
Percent per annum
Source: CEIC, UBS estimates
Chart 2: Shanghai composite index

900
1,900
2,900
3,900
4,900
5,900
6,900
2003 2004 2005 2006 2007 2008 2009 2010 2011
Shanghai composite Index

Source: CEIC, UBS estimates
Long term yield stayed stable while short term
rates fluctuated in April
Stock market has trended up since February

Asian Economic Monitor 28 April 2011
UBS 21

Macroeconomic data tables
Apr-10 May-10 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 Dec-10 Jan-11 Feb-11 Mar-11
Physical Activity Index (SARS-adjusted) %y/y 19.0 17.0 15.8 14.8 13.4 12.1 11.4 11.0 11.1 11.9 11.9 12.1
Industrial production %y/y 25.9 22.8 20.4 19.0 16.2 14.2 13.4 13.7 15.3 17.6 17.8 16.2
Energy usage %y/y 21.8 20.0 17.8 14.7 12.6 10.6 9.5 7.5 6.9 8.5 9.6 11.5
Transportation volume %y/y 20.1 15.9 14.9 13.6 14.1 13.9 13.0 12.8 10.2 10.3 10.0 13.0
Construction %y/y 22.8 24.5 25.0 24.2 21.4 19.9 20.2 19.4 16.9 13.3 14.0 16.9
Agriculture %y/y 3.8 3.7 3.7 3.8 3.8 4.0 4.0 4.1 4.2 4.2 4.3 4.4
CPI (2002=100) Index s.a. 122.4 122.7 122.7 123.1 123.8 124.3 125.4 126.8 126.8 127.3 127.8 128.4
Food Index s.a. 161.8 163.1 162.8 164.4 167.0 169.0 172.3 176.4 175.5 175.8 178.3 179.5
Goods Index s.a. 97.7 97.8 97.8 97.8 97.9 97.9 98.1 98.4 98.8 98.7 98.8 99.2
Services Index s.a. 114.9 115.1 115.2 115.3 115.3 115.4 116.0 116.8 117.4 118.0 118.4 118.7
CPI %y/y 2.8 3.1 2.9 3.3 3.5 3.6 4.4 5.1 4.6 4.9 4.9 5.4
Food %y/y 7.6 7.9 6.9 7.4 8.1 8.2 10.3 11.9 9.9 10.2 11.2 11.7
Goods %y/y 0.9 1.2 1.3 1.5 1.4 1.4 1.6 1.8 2.1 2.3 1.9 2.3
Services %y/y 5.9 6.1 5.7 6.8 7.5 8.0 10.1 11.7 9.6 10.3 11.0 11.7
Producer price index (1996=100) Index s.a. 118.0 118.3 118.0 117.2 117.4 118.1 118.6 121.2 122.7 124.3 125.3 125.7
Raw materials price index (1996=100) Index s.a. 147.5 147.8 147.3 146.4 146.5 147.6 149.9 153.1 155.8 158.4 160.5 161.8
Corporate goods price index (1996=100) Index s.a. 114.5 115.0 114.9 114.9 115.7 116.3 118.5 120.7 121.2 122.1
UBS import price index (1996=100) Index s.a. 140.3 140.1 141.0 138.2 135.8 135.6 137.5 142.1 147.3 154.5 160.6 161.9
Producer price index %y/y 6.8 7.1 6.4 4.8 4.3 4.3 5.0 6.1 5.9 6.6 7.2 7.3
Raw materials price index %y/y 12.0 12.2 10.8 8.5 7.5 7.1 8.1 9.7 9.5 9.7 10.4 10.5
Corporate goods price index %y/y 6.6 7.1 6.6 5.9 6.0 6.1 7.8 8.6 7.9 8.0
UBS import price index %y/y 19.4 19.2 17.4 12.8 10.5 9.5 10.4 8.9 10.1 11.7 16.6 15.5
M0 RMB bn (s.a.) 3,968 4,008 4,063 4,106 4,152 4,224 4,305 4,332 4,373 4,770 4,732 4,519
M1 RMB bn (s.a.) 23,541 23,810 23,881 24,147 24,440 24,697 25,458 25,945 26,046 25,700 26,344 26,616
M2 RMB bn (s.a.) 65,368 66,257 66,803 67,044 68,764 69,809 71,023 72,093 72,650 72,782 73,774 75,299
Loans RMB bn (s.a.) 42,475 43,087 43,705 44,359 45,072 45,759 46,630 47,431 48,082 48,260 48,789 49,330
Deposits RMB bn (s.a.) 64,513 65,415 66,270 67,030 68,276 69,598 70,632 71,661 73,003 72,820 73,352 74,663
M0 %y/y 15.8 15.2 15.7 15.5 16.0 13.8 16.6 16.3 16.7 42.5 10.3 14.8
M1 %y/y 31.3 29.9 24.6 22.9 21.9 20.9 22.1 22.1 21.2 13.6 14.5 15.0
M2 %y/y 21.5 21.0 18.5 17.6 19.2 19.0 19.3 19.5 19.7 17.2 15.7 16.6
Loans %y/y 22.0 21.5 18.2 18.4 18.6 18.5 19.3 19.8 19.9 18.5 17.7 17.9
Deposits %y/y 22.0 21.0 19.0 18.5 19.6 20.0 19.8 19.6 20.2 17.3 17.6 19.0
Reserve money RMB bn (s.a.) 14,812 15,052 15,475 15,675 15,909 16,384 17,168 17,399 17,614 18,292 18,606
Reserve money (adjusted) y/y% 17.6 16.2 22.2 21.3 21.7 17.9 28.2 21.2 19.2 28.5 15.8
Banks' excess reserve ratio % 0.8 0.3 1.1 1.0 0.6 1.1 1.8 1.3 2.0 0.8 1.1
Nominal fixed asset investment (monthly) %y/y 26.7 25.6 26.5 22.2 23.0 22.0 29.1 19.7 20.9 24.9 24.0 24.2
Real investment (GDP-consistent basis) %y/y 13.7 12.1 12.4 8.6 9.4 8.4 14.1 5.1 5.6 9.0 8.8 8.4
Industrial sales RMB bn 5,527 5,724 6,180 5,656 5,841 6,242 6,153 6,489 7,074 5,603 5,042 6,700
Real industrial sales %y/y 26.8 23.9 19.3 17.9 19.2 19.1 17.2 18.0 18.8 20.5 14.3 20.4
Real industrial value added %y/y 17.8 16.5 13.7 13.4 13.9 13.3 13.1 13.3 13.5 13.4 13.3 13.9
Industrial inventories RMB bn 1,960 2,022 2,057 2,091 2,126 2,174 2,222 2,270 2,187 2,104 2,104 2,190
Inventory/sales ratio % 43.6 43.5 43.2 43.0 42.7 42.4 42.1 42.3 42.8 43.5 44.2 44.5
Industrial profits (ytd) RMB bn 1,189 1,540 1,893 2,247 2,601 3,028 3,455 3,883 4,840 654 654 1,106
Profit margin %(s.a.) 6.3 6.6 6.6 6.7 6.8 6.9 7.0 7.1 7.1 7.2 6.8 6.7
Retail sales RMB bn 1,151 1,246 1,233 1,225 1,257 1,354 1,428 1,391 1,533 1,525 1,377 1,359
Real retail sales (adjusted) %y/y 14.9 14.8 14.9 14.1 14.4 14.7 13.4 12.5 13.6 10.7 10.7 11.5
Urban income RMB (s.a.) 1,406 1,418 1,434 1,444 1,453 1,461 1,470 1,477 1,493 1,492 1,491 1,491
Urban consumption expenditure RMB (s.a.) 911 914 918 920 921 910 934 937 954 952 955 958
Rural cash income RMB (s.a.) 450 455 461 464 467 470 467 470 442 482 492 502
Rural consumption expenditure RMB (s.a.) 246 248 253 251 250 250 250 253 255 264 271 276
Composite construction index %y/y 23.8 27.3 24.1 21.5 18.8 19.5 22.3 16.4 12.4 11.4 18.4 21.7
Exports USDbn 119.9 131.7 137.3 145.4 139.2 144.9 135.9 153.3 154.1 150.7 96.7 152.2
Imports USDbn 118.4 112.2 117.2 116.9 119.4 128.2 109.0 130.7 141.2 144.3 104.2 152.1
Trade balance USDbn 1.4 19.5 20.2 28.6 19.8 16.6 26.9 22.5 12.8 6.3 -7.5 0.1
Real export growth %y/y 31.3 45.2 39.1 32.7 26.1 19.2 17.2 25.3 12.4 24.0 -8.1 26.3
Real import growth %y/y 25.5 24.4 14.1 8.9 22.4 13.5 13.7 26.8 14.2 35.3 2.6 10.2
FDI utilized (ytd) USDbn 30.8 38.9 51.4 58.4 66.0 74.3 82.0 91.7 105.7 10.0 17.8 30.3
FDI utilized (monthly) USDbn (s.a.) 8.3 8.7 9.8 8.1 8.3 8.9 8.7 11.0 9.3 9.8 10.0 10.7
FX reserves USDbn 2,491 2,440 2,454 2,539 2,548 2,648 2,761 2,768 2,847 2,932 2,991 3,045
Monthly FX intervention (adjusted) USDbn (s.a.) -5.3 15.8 24.0 43.1 23.9 25.0 32.4 7.1 16.5 6.5 2.1
Current account (estimate) %GDP 1.6 2.6 5.0 7.2 7.1 6.5 6.3 6.5 6.2 4.5 2.3
FDI %GDP 1.7 1.9 2.1 2.0 1.9 1.6 1.6 1.7 2.1 2.2 2.1
"Other" capital (residual) %GDP 4.8 0.9 -2.7 -5.8 -3.9 -0.3 3.5 4.4 4.7 4.1 7.1
RMB 3-month NDF premium (implied) 1.3% 1.4% 1.2% 1.3% 1.3% 1.2% 2.0% 2.1% 1.9% 2.1% 2.4% 3.5%
RMB 12-month NDF premium (implied) 5.8% 5.4% 4.6% 4.8% 5.2% 5.1% 6.3% 7.7% 8.1% 8.1% 8.4% 10.3%
7-day interbank market rate %per annum 1.65 1.87 2.71 2.04 1.84 2.43 2.06 2.04 3.99 4.97 3.75 2.40
Average long bond yield %per annum 3.74 3.63 3.64 3.60 3.59 3.61 3.74 4.04 4.08 4.10 4.14 4.08
Shanghai composite index (month average) Index 3,053 2,672 2,544 2,493 2,636 2,638 2,915 2,974 2,846 2,768 2,869 2,942
Source: UBS
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Key Economic Indicators and Forecasts
Economic Indicators
Country China H.K. India
7
Indo. Japan Korea Malay.
Nominal GDP (2009, USDbn) 4990.7 209.3 1382.1 538.9 5028.7 835.5 192.8
Per Capita GDP (2009, USD) 3,739 29,755 1,181 2,329 39,698 17,141 6,911
Per Capita GDP (2009 USD PPP) 7,020 42,820 3,270 4,000 32,230 27,832 13,730
Real GDP Growth: 2010E 10.3% 6.8% 9.1% 6.1% 4.0% 6.2% 7.2%
2011E 9.3% 5.0% 7.7% 6.0% 1.0% 3.8% 4.0%
2012E 9.0% 5.0% 8.5% 5.5% 2.5% 4.0% 5.0%
2005-09(Avg) 11.4% 4.0% 8.6% 5.6% -0.2% 3.4% 4.1%
CPI (Yearly average): 2010E 3.3% 2.4% 11.2% 5.1% -0.7% 3.0% 1.7%
2011E 4.8% 5.3% 7.0% 7.0% 0.1% 3.7% 3.4%
2012E 4.0% 4.5% 7.5% 7.0% 0.4% 3.0% 2.6%
2005-09(Avg) 2.7% 2.0% 7.2% 8.9% 0.0% 3.0% 2.9%
Exports (%): 2010E 31.3% 22.5% 37.6% 35.4% 31.5% 28.3% 26.5%
2011E 15.0% 5.3% 21.0% 15.0% 12.3% 14.0% 4.3%
2012E 12.5% 6.9% 26.4% 6.0% 5.0% 8.0% 4.9%
2005-09(Avg) 16.5% 4.6% 16.9% 11.1% 1.8% 8.1% 5.3%
Imports (%): 2010E 38.6% 24.7% 22.1% 43.5% 25.1% 31.6% 33.2%
2011E 20.0% 5.8% 19.6% 10.0% 15.4% 17.0% 3.3%
2012E 13.0% 6.8% 21.2% 6.0% 7.3% 9.0% 5.7%
2005-09(Avg) 13.1% 5.4% 21.7% 13.9% 5.0% 9.3% 4.1%
Trade balance (USDbn): 2010E 183.5 -43.1 -104.5 42.9 60.0 41.2 34.2
2011E 140.8 -47.5 -121.4 55.1 43.5 34.2 37.4
2012E 150.1 -50.3 -131.6 58.4 24.5 31.9 37.8
2005-09(Avg) 207.2 -21.3 -83.7 35.1 42.7 16.2 32.8
Current A/C (USDbn):1 2010E 305.4 17.3 -20.2 6.3 194.7 28.2 28.2
2011E 299.2 11.6 -22.1 2.0 160.1 10.0 35.9
2012E 339.5 11.6 -12.1 6.0 144.2 8.0 34.8
2005-09(Avg) 278.9 23.2 -20.5 6.4 139.9 18.1 29.4
Current A/C % GDP 2010E 5.2% 7.7% -1.2% 0.9% 3.6% 2.8% 11.9%
2011E 4.2% 4.7% -1.1% 0.3% 2.8% 0.9% 13.3%
2012E 4.0% 4.3% -0.5% 0.7% 2.6% 0.6% 11.2%
2005-09(Avg) 7.8% 11.6% -1.7% 1.5% 3.7% 2.0% 16.3%
Fiscal Balance % GDP (2009)2 -2.8% -1.9% -6.3% -1.6% -11.0% -4.1% -7.0%
Pakistan Phil. Sing. Taiwan Thai. Vietnam Asia
10
155.5 161.2 183.3 377.5 263.5 93.1 9134.8
991 1,747 36,758 16,399 4,148 1,082 12,011
2,430 3,310 39,810 34,660 8,050 2,950 18,450
4.1% 7.3% 14.5% 10.8% 7.8% 6.8% 9.1%
1.0% 4.4% 5.5% 4.1% 4.5% 5.8% 7.2%
4.6% 4.8% 5.0% 4.7% 4.5% 6.8% 7.3%
5.3% 4.4% 5.1% 3.0% 3.0% 7.4% 7.8%
11.7% 3.8% 2.8% 1.0% 3.3% 9.2% 4.4%
16.0% 4.4% 4.0% 2.0% 3.6% 6.0% 4.9%
10.0% 4.5% 2.1% 1.6% 2.8% 7.0% 4.3%
11.5% 5.8% 2.1% 1.5% 3.2% 10.8% 3.8%
9.1% 33.8% 31.1% 34.8% 28.1% 25.5% 30.3%
12.5% 5.0% 2.0% 9.5% 8.4% 15.0% 12.3%
10.0% 8.0% 6.0% 9.0% 4.4% 22.0% 10.8%
7.9% 0.2% 3.3% 3.0% 10.4% 17.9% 10.4%
-0.3% 26.9% 24.7% 44.1% 36.5% 20.1% 33.5%
13.0% 8.0% 2.0% 10.2% 7.7% 15.0% 14.5%
11.0% 10.0% 6.0% 8.2% 4.5% 22.0% 11.1%
19.4% 0.4% 8.9% 1.9% 9.2% 18.7% 9.9%
-15.4 -3.3 40.8 23.4 12.9 -12.4 228.1
-17.5 -4.1 41.7 23.9 15.2 -14.2 175.3
-19.7 -5.6 44.2 28.2 15.8 -17.4 178.9
-13.7 -5.6 28.3 21.8 5.0 -10.6 235.7
-3.9 8.5 49.6 36.5 14.8 -6.1 474.5
-9.2 9.7 38.0 30.3 14.1 -10.3 428.6
-11.4 8.5 38.0 33.9 16.0 -12.3 484.2
-7.3 5.5 34.7 29.9 6.9 -4.6 412.5
-2.3% 4.5% 22.3% 8.5% 4.6% -5.9% 4.3%
-4.8% 4.5% 14.6% 6.3% 3.9% -9.7% 3.3%
-5.5% 3.5% 12.8% 6.9% 3.8% -11.2% 3.2%
-5.2% 3.9% 21.4% 7.8% 2.4% -5.6% 7.3%
-5.3% -3.9% -0.9% -3.5% -4.2% N/A -3.6%

Sovereign Credit Risk Indicators
Country China H.K. India
7
Indo
5
Japan Korea
3
Malay.
Total Foreign Debt (09E, USDbn)6 348.3 39.9 225.6 156.7 N/A 370.8 58.3
Foreign Public LT debt (09E,USDbn)4 89.1 1.7 80.9 80.6 Nil 27.8 22.3
Foreign ST Debt (09E, USDbn) 176.1 16.0 46.3 31.3 N/A 150.0 18.7
Total Foreign Debt/GDP 6.9% 19.1% 17.4% 29.1% N/A 44.5% 30.2%
Total Foreign Debt/Exports Goods & Services 23.5% 7.8% 69.8% 110.4% N/A 82.8% 29.3%
T. Debt Services/Exports Goods & Services 2.6% 1.3% 11.0% 16.3% N/A 10.2% 5.8%
Foreign Ex. Reserves (USDbn) 3044.7 272.5 272.0 105.7 1116.0 298.6 113.8
Reserves/Imports (months) 20.0 27.9 8.6 8.5 16.0 6.6 8.5
Sovereign Rating Moody/S&P A1/A+ Aa2/AA+ Baa3/BBB- Ba2/BB Aa2/AA A1/A A3/A-
Pakistan Phil.
8
Sing. Taiwan Thai. Vietnam Asia
53.6 63.0 20.3 78.6 70.3 27.0 1431.8
40.2 39.9 1.2 1.0 12.4 23.0 356.9
2.6 6.5 6.8 68.3 27.3 3.9 547.3
33.1% 39.1% 11.1% 20.8% 26.7% 29.0% N/A
169.3% 90.4% 4.9% 30.7% 37.4% 38.5% N/A
14.5% 15.2% 1.2% 3.9% 7.3% 1.6% N/A
17.7 66.0 232.0 392.6 181.6 13.7 4979.6
5.2 13.6 13.9 15.5 10.5 1.9 N/A
B3/B- Ba3/BB- Aaa/AAA Aa3/AA- Baa1/BBB+ Ba3/BB Nil


1
Singapore: NODX;
2
Philippines, India = Public Sector Balance; Latest data available;
3
Source of foreign debt: IMF;
4
Indonesia Total Public Sector Debt;
5
Source of foreign debt: Bank Indonesia;
6
Source for all other information: EIU;
7
India GDP and current account balance, Fiscal years beginning April;
8
Total Public Debt as at end 1996;
9
Total Public Debt Figures;
10
All aggregate series calculated using 2007 Nominal GDP fixed weight, Asia (ex. Sri Lanka, Pakistan & Vietnam).
Prices in forecast and databank tables are as at 26
th
April 2010.
Source: CEIC, UBS estimates


Asian Economic Monitor 28 April 2011
UBS 23

Economic Databank
USD Exchange Rate (period end)
2010 2011 2011
1980 1985 1990 1995 2000 2005 2009 2010 2011E 2012E Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr Ytd Avg
China* 1.50 3.20 5.73 8.32 8.28 8.07 6.83 6.60 6.20 6.00 6.83 6.83 6.83 6.82 6.83 6.78 6.77 6.81 6.69 6.67 6.67 6.60 6.60 6.57 6.55 6.51 6.56
Hong Kong 5.11 7.81 7.80 7.73 7.80 7.75 7.75 7.78 7.75 7.75 7.77 7.76 7.76 7.76 7.79 7.79 7.77 7.78 7.76 7.75 7.76 7.78 7.79 7.79 7.78 7.77 7.78
India* - 12.16 18.12 34.63 46.68 44.95 46.40 44.80 43.00 40.00 46.08 46.05 44.95 44.20 46.31 46.41 46.35 47.02 44.56 44.44 45.83 44.80 45.92 45.18 44.54 44.45 44.45
Indonesia 625 1125 1889 2291 9675 9830 9400 8991 9500 9100 9365 9335 9115 9012 9180 9083 8952 9041 8924 8928 9013 8991 9057 8823 8709 8628 8804
Japan 203.00 200.70 135.80 103.40 114.35 117.88 93.08 81.67 85.00 90.00 90.38 88.84 93.40 94.24 90.81 88.49 86.43 84.10 83.53 80.48 83.56 81.67 81.97 81.94 82.76 82.24 82.23
Korea 890 715 809 773 1265 1010 1164 1131 1050 1000 1159 1159 1131 1108 1195 1221 1182 1198 1140 1124 1157 1131 1119 1124 1097 1079 1105
Malaysia 2.22 2.42 2.70 2.54 3.80 3.78 3.42 3.08 3.00 2.80 3.41 3.40 3.26 3.18 3.29 3.24 3.18 3.15 3.09 3.11 3.17 3.08 3.06 3.05 3.03 2.98 3.03
Pakistan 9.90 15.98 21.79 31.01 58.00 59.79 84.24 85.72 90.00 95.00 84.79 85.07 84.02 84.01 85.09 85.40 85.65 85.66 86.24 85.85 85.82 85.72 85.73 85.38 85.28 84.54
Philippines 7.59 19.00 27.20 26.22 50.00 53.07 46.36 43.87 42.00 40.00 46.74 46.26 45.22 44.64 46.21 46.31 45.81 45.18 43.90 43.18 44.26 43.87 44.09 43.84 43.43 43.20 43.64
Singapore 2.09 2.11 1.74 1.41 1.73 1.66 1.40 1.29 1.26 1.15 1.41 1.40 1.40 1.37 1.40 1.40 1.36 1.35 1.32 1.29 1.32 1.29 1.28 1.27 1.26 1.23 1.26
Taiwan 35.84 39.76 26.63 27.29 33.08 32.80 31.95 29.14 29.80 30.20 31.94 32.12 31.73 31.31 32.00 32.27 31.95 32.01 31.19 30.60 30.47 29.14 29.03 29.74 29.40 28.86 29.26
Thailand 20.63 26.65 25.30 25.19 43.38 41.07 33.36 30.15 30.00 27.00 33.15 33.09 32.37 32.32 32.53 32.44 32.28 31.30 30.40 29.98 30.21 30.15 31.15 30.61 30.30 29.97 30.51
Vietnam - - 8125 11015 14505 15900 18472 19498 22260 23800 18474 18950 19085 18965 18985 19068 19099 19488 19495 19498 19498 19498 19498 20875 20908 20660 20485
*China: Official Rate before 1989, Shanghai SwapRate1989-93, Unified Rate fromJanuary 1994; India: Currency unified Mar 1993.
Money Market Interest Rates
2010 2011 2011
1980 1985 1990 1995 2000 2005 2009 2010 2011E 2012E Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr Ytd Avg
China (Avg) - - - - 2.39 1.38 1.25 2.18 3.00 2.60 1.46 1.86 1.64 1.65 1.87 2.70 2.03 1.85 2.42 1.99 2.04 3.95 4.88 3.75 2.39 2.79 3.45
Hong Kong - 6.63 7.94 5.88 5.93 4.23 0.14 0.28 0.25 1.50 0.13 0.13 0.15 0.13 0.27 0.57 0.36 0.25 0.33 0.27 0.26 0.28 0.19 0.23 0.26 0.25 0.23
India - - - 12.97 8.75 6.11 3.68 7.19 7.00 7.50 4.01 4.13 4.38 4.17 5.04 5.28 5.74 6.19 6.27 6.85 6.85 7.19 7.23 7.14 7.31 7.32 7.32
Indonesia - 11.45 18.83 13.99 14.53 12.75 6.46 6.50 8.00 8.00 6.45 6.41 6.27 6.20 6.30 6.26 6.50 6.50 6.50 6.50 6.50 6.50 6.50 6.75 6.75 6.75 6.69
Japan 8.63 6.56 7.91 0.52 0.56 0.10 0.45 0.34 0.35 0.45 0.45 0.45 0.44 0.40 0.39 0.39 0.38 0.37 0.36 0.34 0.34 0.34 0.34 0.34 0.34 0.34 0.34
Korea - - - 12.30 6.88 4.09 2.86 2.80 3.50 4.20 2.88 2.88 2.78 2.45 2.45 2.46 2.63 2.66 2.66 2.66 2.80 2.80 3.05 3.17 3.39 3.42 3.26
Malaysia 9.40 7.79 7.60 6.78 3.22 3.22 2.17 2.98 2.89 2.89 2.17 2.25 2.52 2.65 2.72 2.72 2.91 2.92 2.93 2.95 2.97 2.98 3.01 3.03 3.04 3.09 3.04
Pakistan - - - - - 8.07 12.10 13.17 12.00 11.00 11.86 12.15 12.11 12.03 11.94 12.13 12.07 12.48 12.68 12.71 12.87 13.17 13.62 13.35 13.27 13.23
Philippines - - - - 15.88 5.22 5.00 1.06 6.00 6.50 4.75 4.00 4.25 4.44 4.31 4.25 4.31 4.31 4.13 3.19 1.19 1.06 2.56 1.63 2.00 3.00 2.30
Singapore 13.00 5.31 5.25 2.89 2.81 3.25 0.68 0.44 0.70 1.60 0.68 0.67 0.65 0.52 0.55 0.56 0.55 0.54 0.51 0.44 0.44 0.44 0.44 0.44 0.44 0.44 0.44
Taiwan - 4.14 6.61 6.26 5.40 1.50 0.49 0.63 0.90 1.14 0.50 0.49 0.52 0.52 0.51 0.54 0.54 0.54 0.54 0.58 0.59 0.63 0.63 0.64 0.65 0.74 0.66
Thailand - 15.03 14.87 10.20 5.00 4.50 1.35 2.15 3.30 3.80 1.35 1.35 1.42 1.42 1.42 1.42 1.70 1.85 1.95 1.87 1.87 2.15 2.40 2.60 2.70 2.90 2.65
Vietnam - - - - - 7.75 9.63 10.67 N/A N/A 9.29 9.39 9.48 9.74 9.21 9.10 9.02 8.77 8.61 8.97 10.45 10.67 11.52 12.66 9.88 9.66 10.93
Singapore, Malaysia, Hong Kong, Philippines : 3mInterbank; Indonesia: 28Days SBI; Thailand: Onshore 3Minterbank rate/ 3mimplied forward before Jan 96/interbank call before1988
China: 7 Days Interbank OfferedRate; Taiwan: 31-90DCP; Korea: 91DNCD; India: 91DT-bill, Overnight rate prior to1993; Vietnam: 3MDeposits rate; Sri Lanka: 3MT Bill; Pakistan: 3MT Bill; Japan: 3MCD
10Y Bond Yield
2010 2011 2011
1980 1985 1990 1995 2000 2005 2009 2010 2011E 2012E Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr Ytd Avg
China - - 9.60 12.24 5.85 3.31 3.74 3.90 4.00 4.40 3.70 3.51 3.51 3.45 3.34 3.40 3.34 3.30 3.40 3.75 4.09 3.90 4.08 3.98 3.98 3.94 3.99
Hong Kong 17.00 7.00 10.00 9.00 6.46 4.18 2.58 2.86 2.90 3.50 2.82 2.70 2.79 2.88 2.51 2.29 2.23 1.95 1.99 2.15 2.48 2.86 2.78 2.79 2.68 2.71 2.74
India 19.40 17.50 16.00 16.50 10.90 7.11 7.59 7.92 7.50 8.25 7.58 7.89 7.83 8.06 7.52 7.55 7.82 7.95 7.84 8.13 8.06 7.92 8.16 8.02 7.99 8.04 8.04
Indonesia - 24.50 17.95 19.27 17.65 13.62 10.06 7.61 N/A N/A 9.79 9.85 9.10 8.60 8.94 8.38 8.08 8.26 7.63 7.51 7.46 7.61 8.86 8.74 8.04 7.81 8.36
Japan 9.22 6.17 7.01 2.67 1.63 1.46 1.28 1.12 1.50 1.65 1.31 1.30 1.39 1.28 1.26 1.08 1.07 0.96 0.93 0.93 1.19 1.12 1.21 1.26 1.25 1.21 1.23
Korea 27.60 13.60 18.50 11.95 6.91 5.36 4.92 4.08 4.70 5.00 4.82 4.62 4.52 4.27 4.36 4.44 4.38 4.00 3.71 3.86 3.88 4.08 4.41 4.28 4.11 4.16 4.24
Malaysia 8.50 10.75 7.50 6.90 5.69 4.19 4.25 4.00 4.00 4.00 4.27 4.26 4.16 4.06 4.03 3.91 3.87 3.69 3.61 3.82 3.79 4.00 4.03 4.05 4.10 4.09 4.07
Pakistan - - - - - 9.37 12.63 14.25 13.00 12.00 12.46 12.70 12.65 12.56 12.63 12.84 12.95 13.19 13.75 13.83 13.88 14.25 14.22 14.20 14.08 14.10
Philippines 14.00 28.61 26.80 15.43 18.20 10.19 8.11 6.10 8.50 8.50 8.09 7.98 8.04 8.11 8.00 7.93 7.60 6.94 6.23 5.96 6.00 6.10 7.20 7.41 7.21 6.85 7.17
Singapore 13.60 7.20 7.73 6.26 4.09 3.21 2.66 2.71 2.90 3.40 2.54 2.69 2.83 2.67 2.79 2.37 1.95 2.06 2.02 1.98 2.29 2.71 2.62 2.60 2.48 2.45 2.54
Taiwan 13.50 7.50 10.00 6.31 5.13 1.78 1.55 1.55 1.75 2.13 1.48 1.49 1.44 1.44 1.39 1.41 1.36 1.21 1.20 1.27 1.40 1.55 1.40 1.43 1.36 1.36 1.39
Thailand 16.50 15.50 16.50 14.00 5.76 5.40 4.18 3.73 4.34 3.50 3.91 3.87 3.94 3.53 3.31 3.15 3.44 2.98 3.09 3.20 3.60 3.73 3.80 3.90 3.71 3.66 3.77
Vietnam - - - - - - 11.45 11.75 N/A N/A 12.65 12.50 12.44 12.38 11.95 11.48 11.14 11.20 11.17 11.08 11.61 11.75 11.86 11.94 12.00 12.29 12.02
SG: beforeJune 98 Prime lending; MY: before 95 Prime lending; TH: before95 MOR; ID: beforeJul 03 Prime Lending; PH: before Oct 96Prime lending; CN: before April 2002 Capital Construction Loan: 1Year; HK: before 96BLR;
Taiwan: before95 Prime Lending rate; IN: BeforeJan 2000 Prime lending; Sri Lanka &Pakistan: 10y bondyield; Korea: 3y Ref corp. bond yield before Oct 98/5YTreasury Bond
Real GDP %YoY
2010 2011 2011
1980 1985 1990 1995 2000 2005 2009 2010 2011E 2012E Q1 Q2 Q3 Q4 Q1 Ytd Avg
China 13.5% 13.5% 3.8% 10.9% 8.4% 11.3% 9.2% 10.3% 9.3% 9.0% 11.9% 10.3% 9.6% 9.8% 9.7% 9.7%
Hong Kong 10.3% 0.7% 3.9% 2.3% 8.0% 7.1% -2.7% 6.8% 5.0% 5.0% 8.1% 6.4% 6.7% 6.2%
India**** 6.5% 4.5% 5.4% 7.5% 4.3% 9.5% 8.0% 9.1% 7.7% 8.5% 8.6% 8.9% 8.9% 8.2%
Indonesia 9.9% 2.5% 9.0% 8.2% 4.9% 5.7% 4.6% 6.1% 6.0% 5.5% 5.6% 6.1% 5.8% 6.9%
Japan 3.2% 4.3% 5.3% 2.0% 2.9% 1.9% -6.3% 4.0% 1.0% 2.5% 5.6% 3.1% 4.9% 2.2%
Korea -1.5% 6.8% 9.2% 9.2% 8.5% 4.0% 0.3% 6.2% 3.8% 4.0% 8.1% 7.2% 4.4% 4.8%
Malaysia 7.4% -1.0% 9.7% 9.8% 8.3% 5.3% -1.7% 7.2% 4.0% 5.0% 10.1% 8.9% 5.3% 4.8%
Pakistan *** - - - 5.1% 2.0% 9.0% 1.2% 4.1% 1.0% 4.6% N/A N/A N/A N/A
Philippines 5.2% -7.3% 3.0% 4.7% 6.0% 5.0% 1.1% 7.3% 4.4% 4.8% 7.8% 8.2% 6.3% 7.1%
Singapore 9.7% -1.4% 9.2% 8.2% 9.1% 7.4% -0.8% 14.5% 5.5% 5.0% 16.4% 19.4% 10.5% 12.0% 8.5% 8.5%
Taiwan 7.3% 5.0% 5.4% 6.4% 5.8% 4.7% -1.9% 10.8% 4.1% 4.7% 13.6% 12.9% 10.7% 6.9%
Thailand 4.8% 4.7% 11.2% 9.2% 4.8% 4.6% -2.3% 7.8% 4.5% 4.5% 12.0% 9.2% 6.6% 3.8%
Vietnam -2.9% 6.0% 5.1% 9.5% 6.8% 8.4% 5.3% 6.8% 5.8% 6.8% 5.9% 6.3% 7.4% 7.2% 5.4% 5.4%
Malaysia: Historical GDPdata up to 1996 use 1978 as the base year. Data from1997 and forecasts use 1987; Thailand: Q498, Q199 are NESDBstats releases ; * India: Fiscal year beginning April; ** Pakistan: Fiscal year beginning July
CPI Inflation %YoY (period average)
2010 2011 2011
1980 1985 1990 1995 2000 2005 2009 2010 2011E 2012E Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr Ytd Avg
China 6.0% 8.8% 9.9% 17.1% 0.4% 1.8% -0.7% 3.3% 4.8% 4.0% 1.5% 2.7% 2.4% 2.8% 3.1% 2.9% 3.3% 3.5% 3.6% 4.4% 5.1% 4.6% 4.9% 4.9% 5.4% 5.1%
Hong Kong - 3.5% 10.2% 9.0% -3.8% 0.9% 0.5% 2.4% 5.3% 4.5% 1.0% 2.7% 2.0% 2.4% 2.5% 2.8% 1.4% 3.0% 2.5% 2.5% 2.9% 3.1% 3.6% 3.7% 4.6% 4.0%
India* 11.5% 5.7% 11.2% 10.3% 4.5% 5.2% 9.8% 11.2% 7.0% 7.5% 14.2% 15.2% 14.9% 15.2% 15.7% 15.5% 13.6% 11.8% 12.0% 10.9% 8.8% 11.5% 12.5% 9.9%
Indonesia 18.1% 4.8% 7.2% 9.5% 3.8% 10.5% 4.8% 5.1% 7.0% 7.0% 3.7% 3.8% 3.4% 3.9% 4.2% 5.0% 6.2% 6.4% 5.8% 5.7% 6.3% 7.0% 7.0% 6.8% 6.7% 6.8%
Japan 7.8% 2.0% 3.1% -0.1% -0.8% -0.3% -1.4% -0.7% 0.1% 0.4% -1.3% -1.1% -1.1% -1.2% -0.9% -0.7% -0.9% -0.9% -0.6% 0.2% 0.1% 0.0% 0.0% 0.0% 0.0%
Korea 28.7% 2.5% 8.6% 4.5% 2.3% 2.8% 2.8% 3.0% 3.7% 3.0% 3.1% 2.7% 2.3% 2.6% 2.7% 2.6% 2.6% 2.6% 3.6% 4.1% 3.3% 3.5% 4.1% 4.5% 4.7% 4.4%
Malaysia 6.7% 0.3% 3.1% 3.5% 1.6% 3.0% 0.6% 1.7% 3.4% 2.6% 1.4% 1.2% 1.4% 1.6% 1.6% 1.6% 1.8% 2.0% 1.8% 1.9% 1.9% 2.1% 2.4% 2.9% 3.0% 2.8%
Pakistan** 12.4% 4.4% 12.7% 13.0% 3.6% 9.3% 20.8% 11.7% 16.0% 10.0% 13.7% 13.0% 12.9% 13.3% 13.1% 12.7% 12.3% 13.2% 15.7% 15.3% 15.5% 15.5% 14.2% 12.9% 13.2%
Philippines 18.4% 24.8% 14.2% 6.8% 4.0% 7.7% 3.2% 3.8% 4.4% 4.5% 4.3% 4.2% 4.4% 4.4% 4.3% 3.9% 3.9% 4.0% 3.5% 2.8% 3.0% 3.0% 3.6% 4.3% 4.3% 4.1%
Singapore 13.6% 5.7% 3.4% 1.7% 1.4% 0.5% 0.6% 2.8% 4.0% 2.1% 0.2% 1.0% 1.6% 3.2% 3.2% 2.7% 3.1% 3.3% 3.7% 3.5% 3.8% 4.6% 5.5% 5.0% 5.0% 5.2%
Taiwan 19.2% -0.1% 4.1% 3.7% 1.3% 2.3% -0.9% 1.0% 2.0% 1.6% 0.3% 2.3% 1.3% 1.3% 0.8% 1.2% 1.3% -0.5% 0.3% 0.6% 1.5% 1.2% 1.1% 1.3% 1.4% 1.3%
Thailand 19.8% 2.4% 5.9% 5.8% 1.6% 4.5% -0.8% 3.3% 3.6% 2.8% 4.1% 3.7% 3.4% 2.9% 3.4% 3.3% 3.5% 3.3% 3.0% 2.9% 2.8% 3.0% 3.0% 2.9% 3.1% 3.0%
Vietnam - - - - -1.6% 8.3% 7.0% 9.2% 6.0% 7.0% 7.6% 8.5% 9.5% 9.2% 9.1% 8.7% 8.2% 8.2% 8.9% 9.7% 11.1% 11.8% 12.2% 12.3% 13.9% 17.5% 14.0%
* India: Fiscal year beginning April; ** Pakistan: Fiscal year beginning July. Note: India CPI since 1997: Not official, but UBSversionwhich uses official CPI weights and base, but GDPservices deflator &WPI components.
Source for all tables on this page: UBS estimates, Datastream & CEIC

Asian Economic Monitor 28 April 2011
UBS 24

Economic Databank
Broad Money Supply Growth %YoY (Year-average)
2010 2011 2011
1980 1985 1990 1995 2000 2005 2009 2010 2011E 2012E Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr Ytd Avg
China 25.9% 37.0% 26.9% 32.2% 14.0% 17.6% 27.7% 19.7% 16.0% 14.0% 26.1% 25.5% 22.5% 21.5% 21.0% 18.5% 17.6% 19.2% 19.0% 19.3% 19.5% 19.7% 17.2% 15.7% 16.6% 16.5%
Hong Kong - 21.5% 20.7% 15.1% 8.0% 7.4% 7.1% 5.3% N/A N/A 5.4% 6.5% 5.7% 7.9% 1.8% 1.3% 3.0% 3.6% 5.2% 9.0% 5.6% 8.0% 10.6% 10.1% 10.4%
India 16.4% 16.6% 16.7% 15.6% 15.8% 16.1% 19.2% 18.5% 20.0% 20.0% 17.6% 17.2% 16.8% 15.0% 14.8% 14.7% 15.5% 15.4% 15.0% 17.2% 16.2% 18.6% 16.2% 16.5% 16.0%
Indonesia 46.0% 25.3% 46.8% 24.8% 9.9% 12.6% 15.9% 12.2% 18.0% 18.0% 10.7% 8.8% 10.2% 10.6% 11.2% 12.8% 13.1% 12.1% 12.7% 14.2% 13.8% 15.4% 17.5% 17.1% 17.3%
Japan 8.5% 8.2% 11.6% 3.2% 2.1% 1.8% 2.7% 2.4% 0.8% 2.5% 3.0% 2.8% 2.7% 2.9% 3.0% 2.9% 2.7% 2.8% 2.8% 2.7% 2.6% 2.4% 2.3% 2.4% 2.7% 2.5%
Korea 25.8% 11.8% 21.2% 19.9% 5.6% 7.0% 7.9% 8.2% N/A N/A 8.1% 8.6% 8.9% 9.1% 8.9% 9.3% 8.8% 8.0% 7.7% 7.2% 7.3% 6.9% 6.6% 5.3% 5.9%
Malaysia 28.4% 8.0% 30.0% 15.1% 5.6% 11.6% 7.4% 8.3% 10.0% 10.0% 7.9% 8.2% 8.7% 8.1% 9.3% 8.8% 8.1% 8.2% 8.5% 8.4% 8.2% 7.0% 8.8% 7.9% 8.4%
Pakistan - - - 18.5% 6.6% 19.4% 11.1% 12.9% 13.0% 16.0% 14.2% 13.6% 13.4% 16.7% 12.4% 12.5% 12.2% 12.0% 12.3% 13.6% 13.3% 15.0% 15.1% 15.2%
Philippines 17.0% 8.2% 22.7% 32.7% 10.8% 13.8% 13.3% 9.7% 12.0% 12.0% 8.2% 9.9% 10.3% 12.4% 10.7% 10.3% 10.2% 8.6% 10.5% 7.7% 7.5% 10.6% 9.6% 9.8% 9.7%
Singapore 27.9% 3.6% 22.2% 12.4% 1.6% 5.2% 11.3% 8.9% 8.0% 8.0% 10.8% 9.8% 8.8% 9.0% 9.0% 7.3% 7.5% 8.2% 8.2% 10.0% 9.9% 8.6% 8.5% 8.7% 8.6%
Taiwan 17.1% 21.5% 11.1% 11.6% 7.0% 6.2% 7.2% 4.6% N/A N/A 5.4% 5.1% 4.6% 4.2% 3.5% 3.8% 4.1% 4.6% 4.7% 4.8% 5.2% 5.1% 5.6% 6.1% 6.0% 5.9%
Thailand 19.2% 15.7% 29.2% 17.3% 2.5% 4.7% 8.1% 8.0% 12.0% 11.0% 5.5% 4.7% 6.1% 5.5% 6.8% 7.0% 8.8% 8.5% 9.9% 11.2% 11.1% 10.9% 11.5% 13.7% 12.6%
Vietnam - - - - 35.4% 30.9% 26.2% 20.0% 25.0% 28.0% 22.5% 22.6% 20.5% 19.4% 19.5% 22.0% 20.7% 25.0% 26.2% 25.4%
M2except Malaysia, India, HK&Philippines: M3; Korea: Liquidity Aggregates of Financial Institutions; Japan: M2+CDs; Vietnam: Monthend; Taiwan: Daily averages; Korea : Month-average;
India: Fiscal year beginning April; Pakistan: Fiscal year beginning July
External Accounts (USD bn)
2010 2011 2011
1980 1985 1990 1995 2000 2005 2009 2010 2011E 2012E Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr Ytd Avg
China
Exports 32.1% 39.6% 50.4% 23.0% 27.8% 28.4% -16.0% 31.3% 15.0% 12.5% 21.0% 45.7% 24.2% 30.4% 48.4% 43.9% 38.0% 34.3% 25.1% 22.8% 34.9% 17.9% 37.7% 2.3% 35.8% 25.3%
Imports 27.4% 105.0% 14.2% 14.2% 35.8% 17.6% -11.2% 38.6% 20.0% 13.0% 85.6% 44.7% 66.4% 50.1% 48.9% 34.6% 23.2% 35.5% 24.4% 25.4% 37.9% 25.6% 51.4% 19.7% 27.4% 32.8%
TradeBalance -1.90 -14.90 8.75 16.70 24.11 102.00 195.69 183.49 140.83 150.06 14.17 7.61 -7.24 1.68 19.53 20.02 28.73 20.04 16.87 27.15 22.89 13.08 6.46 -7.31 0.14 -0.71
Cur. Account 0.27 1.69 0.28 1.62 20.52 134.10 261.10 305.40 299.21 339.52 53.70 72.90 102.30 102.20
FXReserves 2.5 12.7 29.6 73.6 165.6 818.9 2399.2 2847.3 3178.0 3500.0 2415.2 2424.6 2447.1 2490.5 2439.5 2454.3 2538.9 2547.8 2648.3 2760.9 2767.8 2847.3 2931.7 2991.4 3044.7 2989.2
Hong Kong
Exports 22.1% 6.6% 12.3% 14.8% 16.1% 11.6% -12.2% 22.5% 5.3% 6.9% 18.3% 28.3% 31.9% 21.5% 23.9% 26.1% 22.9% 35.7% 23.8% 13.8% 16.6% 12.2% 27.3% 24.5% 25.9%
Re-Exports 50.5% 26.5% 19.6% 17.2% 17.6% 11.8% -11.5% 23% N/A N/A 17.9% 28.9% 32.0% 21.6% 24.0% 26.2% 23.1% 36.0% 23.9% 13.8% 16.6% 12.0% 27.8% 24.8% 26.3%
Imports 24.2% -9.5% 5.7% 19.2% 18.6% 10.5% -10.7% 24.7% 5.8% 6.8% 39.4% 22.2% 39.6% 28.6% 29.1% 30.4% 24.6% 28.1% 19.2% 13.9% 16.3% 14.5% 18.7% 24.8% 21.8%
TradeBalance -2.71 0.48 -0.34 -19.02 -10.98 -10.47 -28.90 -43.14 -47.53 -50.35 -3.80 -2.53 -5.01 -4.54 -3.22 -3.93 -3.92 -1.53 -3.15 -2.87 -3.03 -5.60 -2.05 -3.22 -5.28
Cur. Account -1.27 1.90 3.51 - 6.99 20.18 18.01 17.26 11.56 11.60 3.92 1.01 5.67 4.20
FXReserves 5.00 8.74 24.66 55.42 107.50 124.28 255.84 268.74 N/A N/A 257.06 258.23 258.83 259.25 256.18 256.80 260.72 261.40 266.10 267.06 266.05 268.74 273.18 272.69 272.50 272.79
India
Exports 6.4% 5.3% 9.2% 20.4% 19.6% 23.0% -3.6% 37.6% 21.0% 26.4% 20.9% 32.0% 56.2% 42.1% 34.1% 46.5% 12.5% 22.6% 23.0% 19.4% 26.5% 36.4% 32.4% 49.7%
Imports 46.3% 13.2% 13.5% 27.7% 1.8% 32.3% -5.5% 22.1% 19.6% 21.2% 38.6% 73.7% 77.1% 47.6% 36.9% 16.4% 25.9% 22.1% 20.3% 10.4% 11.2% -11.0% 13.1% 21.2%
TradeBalance -5.64 -5.62 -5.93 -4.89 -6.52 -44.87 -108.26 -104.49 -121.39 -131.61 -9.71 -10.41 -9.21 -10.82 -10.92 -6.90 -11.20 -10.76 -7.90 -10.96 -8.90 -2.63 -7.98 -8.10
Cur. Account -1.79 -4.82 -5.93 -5.91 -2.67 -9.90 -38.41 -20.21 -22.10 -12.05 -12.84 -12.47 -16.79 -9.68
FXReserves 6.94 6.42 2.24 17.04 39.55 145.11 254.69 299.48 362.38 440.32 256.36 253.99 254.69 254.77 247.95 249.63 258.55 256.23 265.23 269.09 263.28 267.81 269.89 271.99
Indonesia
Non-Oil Exports 9.1% 3.5% 5.8% 15.1% 22.9% 18.8% -9.6% 33.1% 27.0% 6.0% 47.9% 47.2% 44.6% 36.5% 27.0% 31.5% 29.4% 32.0% 24.8% 14.1% 51.9% 25.1% 29.6% 31.7% 30.7%
Total Exports 41.2% -8.1% 20.7% 13.4% 27.7% 19.7% -15.0% 35.4% 15.0% 6.0% 59.3% 56.5% 48.3% 42.4% 37.0% 31.4% 28.9% 30.2% 23.8% 17.6% 45.1% 26.1% 26.0% 28.9% 27.5%
Imports 51.1% -20.1% 39.8% 27.0% 39.6% 24.0% -24.1% 43.5% 10.0% 6.0% 47.0% 67.3% 74.6% 74.8% 30.8% 51.4% 54.5% 26.5% 14.1% 29.8% 53.4% 28.7%
TradeBalance 11.07 8.33 3.74 4.79 28.61 27.96 36.46 42.93 55.11 58.42 3.65 3.28 3.55 2.49 4.46 2.60 1.54 3.11 4.11 4.06 4.51 5.57
Cur. Account 3.01 -1.92 -3.24 -6.76 7.99 0.28 10.19 6.29 2.00 6.00 2.09 1.60 1.37 1.22
FXReserves 5.39 5.85 8.66 18.76 29.39 34.72 66.10 96.21 96.21 106.21 69.56 69.73 71.82 78.58 74.59 76.32 78.79 81.32 86.55 91.80 92.76 96.21 95.33 99.62 105.71 100.22
Exports, Importsandtradebalance, customsbasis; Current Account, FXReserves,BoPbasis, Export, import growthinUSDterms
External Accounts (USD bn)
2010 2011 2011
1980 1985 1990 1995 2000 2005 2009 2010 2011E 2012E Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr Ytd Avg
Japan
Exports 25.2% 4.3% 3.7% 11.2% 14.1% 6.5% -25.7% 31.5% 12.3% 5.0% 39.3% 52.3% 57.2% 51.4% 40.8% 37.4% 34.3% 28.9% 25.2% 20.3% 18.3% 23.1% 13.4% 19.8% 16.6%
Imports 25.4% -4.9% 12.5% 22.9% 22.4% 12.5% -26.9% 25.1% 15.4% 7.3% 6.8% 35.8% 31.5% 33.5% 44.7% 38.0% 25.0% 34.0% 19.8% 23.5% 25.4% 21.8% 27.4% 23.5% 25.4%
TradeBalance 2.13 57.97 63.80 131.79 114.74 63.10 15.30 59.96 43.50 24.50 1.83 8.71 12.00 9.32 4.38 8.39 10.25 2.00 10.80 11.06 3.10 9.16 -4.77 8.76 3.99
Cur.Account -10.75 49.20 36.30 111.10 119.42 137.90 141.90 194.66 160.08 144.17 18.13 13.95 18.12 15.85 11.65 15.13 17.53 14.47 19.06 18.83 15.21 15.21 18.28 13.18 14.65 46.11
FXReserves 25.23 26.51 77.05 182.82 361.64 846.90 1049.4 1096.2 N/A N/A 1053.1 1051.1 1042.7 1046.9 1041.3 1050.2 1063.5 1070.1 1109.6 1118.1 1101.0 1096.2 1093.0 1091.5 1116.0 1100.2
Korea*
Exports 16.3% 3.6% 4.2% 30.3% 19.9% 12.0% -13.9% 28.3% 14.0% 8.0% 45.4% 30.1% 33.8% 29.6% 39.8% 30.5% 26.7% 26.0% 16.2% 27.6% 21.4% 22.6% 45.2% 16.9% 28.9% 30.3%
Imports 9.6% 1.7% 13.6% 32.0% 34.0% 16.4% -25.8% 31.6% 17.0% 9.0% 26.7% 37.4% 48.7% 42.8% 48.9% 37.2% 28.0% 28.7% 17.6% 21.7% 30.9% 21.7% 32.6% 16.6% 27.3% 25.5%
TradeBalance -4.79 -0.85 -4.83 -10.06 11.79 23.18 40.45 41.17 34.18 31.94 -0.80 2.00 1.73 3.78 4.03 6.79 5.00 1.21 4.41 6.34 2.59 4.09 2.82 2.41 2.78 8.01
Cur. Account -5.07 -1.51 -1.39 -8.01 14.80 18.61 32.79 28.21 10.00 8.00 -0.57 -0.36 1.20 0.53 4.00 4.33 4.46 1.98 3.50 5.11 1.93 2.11 0.15 1.18 1.33
FXReserves 2.92 2.87 14.79 32.71 96.20 210.39 269.99 291.57 N/A N/A 273.69 270.66 272.33 278.87 270.22 274.22 285.96 285.35 289.78 293.35 290.23 291.57 295.96 297.67 298.62 297.41
Malaysia
Exports 16.4% -6.3% 17.7% 25.4% 16.1% 11.8% -21.1% 26.5% 4.3% 4.9% 45.0% 26.1% 50.8% 42.3% 32.0% 26.3% 25.6% 23.4% 19.9% 11.2% 14.6% 14.0% 15.3% 24.1% 19.7%
Imports 37.2% -1.2% 30.3% 30.0% 25.3% 8.7% -20.9% 33.2% 3.3% 5.7% 38.6% 36.2% 60.8% 42.7% 45.4% 40.2% 30.7% 29.9% 28.6% 23.5% 15.5% 21.6% 25.2% 25.0% 25.1%
TradeBalance 21.38 31.40 2.09 -3.73 16.27 27.29 33.57 34.23 37.41 37.84 3.83 3.42 4.31 2.89 2.50 1.85 2.19 2.64 2.25 2.21 2.89 3.10 3.27 4.15 7.41
Cur. Account -0.28 -0.63 -0.92 -8.63 9.15 20.69 31.81 28.19 35.86 34.78 9.17 4.98 6.40 7.65
FXReserves 4.37 5.13 10.00 25.11 28.71 70.18 96.68 106.50 116.50 126.50 96.96 96.84 95.29 95.98 95.47 94.77 95.02 95.25 100.72 105.32 105.80 106.50 108.12 109.78 113.84 110.58
Exports, Importsandtradebalance, customsbasis;
TradeandCurrent Account, YtdSum, not YtdAverage. Philippinescurrent account dataduetomajor revisionsdonetoincorporateresultsof dataimprovement activities. Themonthlyfigureswhensumupwill not totallysamewithlatest annual data.
External Accounts (USD bn)
2010 2011 2011
1980 1985 1990 1995 2000 2005 2009 2010 2011E 2012E Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr Ytd Avg
Pakistan
Exports 20.9% 21.2% 5.8% 19.6% 10.2% 17.6% -7.2% 9.1% 12.5% 10.0% 26.3% 23.2% 37.8% 31.5% 19.9% 19.5% 21.8% 21.2% 7.4% 24.6% 17.0% 34.5% 37.0% 40.1% 38.2%
Imports 26.1% 10.4% 8.1% 21.4% 9.3% 21.8% -12.9% -0.3% 13.0% 11.0% 31.3% 18.0% 39.6% 7.8% 31.3% -3.4% 22.7% 19.1% 14.9% 8.4% 23.6% 29.0% 3.7% 21.9% 4.0%
TradeBalance - -0.20 -0.10 -2.26 -1.74 -4.51 -17.13 -15.42 -17.52 -19.67 -1.62 -0.96 -1.48 -1.28 -1.61 -1.40 -1.45 -1.24 -1.16 -1.23 -1.35 -1.62 -1.12 -0.90 -0.92
Cur.Account - - - -2.17 -0.22 -1.53 -9.26 -3.95 -9.20 -11.40 -0.54
FXReserves - - - 2.74 1.97 12.62 12.43 16.75 16.43 20.43 14.52 14.79 14.95 15.05 15.94 16.75 16.49 15.97 16.98 16.91 16.47 17.21 17.35 17.49 17.65
Philippines*
Exports 28.0% -3.0% 16.7% 29.4% 8.7% 4.0% -21.7% 33.8% 5.0% 8.0% 42.4% 42.4% 43.8% 28.2% 37.3% 33.7% 35.9% 37.0% 46.4% 27.4% 11.5% 26.5% 11.8% 8.3% 10.0%
Imports 27.8% -5.6% 30.8% 24.4% 12.3% 7.7% -24.1% 26.9% 8.0% 10.0% 31.1% 27.6% 38.9% 48.2% 31.4% 2.6% 16.2% 23.1% 24.6% 28.4% 35.3% 25.7% 23.7% 20.1% 21.9%
TradeBalance -2.32 -0.72 -4.02 -9.09 3.59 -6.16 -4.66 -3.27 -4.11 -5.58 -0.71 -0.33 -0.36 -0.94 -0.51 0.34 -0.18 0.31 0.75 -0.11 -0.80 -0.75 -1.30 -0.82 -2.13
Cur. Account -1.90 -0.10 -2.57 -3.30 -2.23 1.98 9.36 8.47 9.69 8.51 -0.05 0.90 0.37 0.20 0.32 1.26 0.70 0.95 1.65 1.09 0.38 0.70
FXReserves 2.85 1.05 1.99 6.37 15.06 18.49 44.24 62.37 73.56 83.58 45.59 45.76 45.60 46.94 47.69 48.70 49.05 49.91 53.75 57.15 60.57 62.37 63.54 63.89 65.98 64.47
Singapore
Non-Oil Dom. Exp. 26.2% -6.1% 17.3% 21.9% 9.8% 9.9% -13.0% 31.1% 2.0% 6.0% 28.7% 32.4% 37.1% 41.4% 30.1% 33.5% 24.6% 39.1% 30.0% 44.1% 17.6% 16.9% 31.0% 18.2% 21.4% 23.5%
Re-Exports 22.8% -6.6% 9.8% 25.8% 28.4% 14.4% -18.9% 28.6% 2.0% 6.0% 52.0% 15.2% 37.2% 31.5% 30.7% 33.2% 27.2% 30.4% 26.8% 18.9% 21.4% 22.6% 17.2% 19.8% 16.7% 17.9%
RetainedImports 139.5% -9.0% 28.5% 18.2% 16.2% 16.4% -27.6% 24.7% 2.0% 6.0% 23.4% 37.0% 50.9% 59.4% 21.8% 29.5% 29.3% 22.1% -0.1% 16.7% 22.3% 2.1% 22.4% 6.3% 45.2% 24.6%
TradeBalance -4.63 -3.47 -8.05 -6.24 3.28 29.65 23.94 40.84 41.66 44.16 2.25 1.51 3.38 2.94 3.82 2.50 1.95 5.12 4.59 5.41 3.13 4.52 4.71 3.76 2.96 11.42
Cur. Account -1.56 0.00 3.20 14.39 10.23 26.49 34.90 49.60 38.00 38.00 10.83 12.47 14.26 12.04
FXReserves 6.43 12.77 28.10 68.81 80.24 115.96 188.07 238.07 244.26 254.26 190.90 187.25 197.05 201.81 199.25 200.22 204.60 206.30 210.46 219.81 221.60 221.20 225.81 229.91 232.04 229.25
Exports, Imports&Tradebalance, customsbasis; *Export, Import growthinUSDterms
Current account, FXReserves, BoPbasis. India: fiscal year beginningApril, monthlydatamaynot adduptototal becauseof prior revisions. Trade&current acc.t, Ytdsum, not Ytdavg
Source for all tables on this page: UBS estimates, Datastream & CEIC

Asian Economic Monitor 28 April 2011
UBS 25

External Accounts (USD bn)
2010 2011 2011
1980 1985 1990 1995 2000 2005 2009 2010 2011E 2012E Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr Ytd Avg
Taiwan*
Exports 23.0% 0.9% 1.5% 20.0% 22.8% 8.8% -20.3% 34.8% 9.5% 9.0% 75.7% 32.6% 50.1% 47.7% 57.5% 34.1% 38.5% 26.6% 17.5% 21.9% 21.8% 19.0% 16.6% 27.3% 16.7% 20.2%
Imports 33.6% -8.5% 4.7% 21.3% 26.6% 8.2% -27.5% 44.1% 10.2% 8.2% 115% 45.7% 80.0% 52.6% 71.7% 39.2% 42.6% 27.9% 24.9% 27.9% 33.8% 21.4% 22% 29% 17% 22.5%
Trade Balance 0.08 10.62 12.50 8.11 11.22 15.82 29.30 23.36 23.91 28.23 2.50 0.90 1.53 2.54 3.13 1.57 2.16 2.27 1.78 2.99 -833.10 562.90 625.10 -18.90 472.70 1078.90
Cur. Account -0.91 9.20 10.73 5.47 8.90 17.58 42.91 36.50 30.31 33.88 10.31 11.15 9.06 10.10
FXReserves 2.21 22.56 72.44 90.31 106.74 253.29 348.20 382.01 N/A N/A 350.71 352.73 355.04 357.56 360.12 362.38 370.11 372.06 380.51 383.84 379.26 382.01 387.11 390.69 392.63 390.14
Thailand
Exports 23.1% -4.0% 14.8% 24.9% 19.3% 15.0% -14.3% 28.1% 8.4% 4.4% 30.6% 23.2% 40.9% 35.1% 42.1% 46.3% 20.6% 23.9% 21.2% 15.7% 28.5% 18.8% 22.2% 31.0% 26.6%
Imports 29.1% -11.1% 27.3% 30.1% 24.6% 25.7% -25.4% 36.5% 7.7% 4.5% 44.8% 71.2% 60.4% 46.9% 55.0% 37.8% 36.0% 41.1% 16.0% 14.8% 35.3% 11.5% 33.3% 22.4% 27.9%
Trade Balance -2.71 -2.12 -9.74 -13.99 7.60 -7.24 18.75 12.92 15.24 15.77 0.49 0.44 1.08 -0.27 2.21 2.33 -0.94 0.65 3.07 2.15 0.41 1.30 -0.86 1.77 0.91
Cur. Account -2.83 -4.80 -20.35 -13.23 9.33 -7.64 21.87 14.78 14.10 16.00 2.11 1.66 1.78 -0.30 1.16 0.82 -1.00 0.28 2.77 2.74 1.02 1.75 1.09 3.82 4.91
FXReserves 2.86 3.00 14.31 37.03 32.66 52.07 138.42 172.13 192.13 212.13 142.40 141.80 144.09 147.59 143.52 146.76 151.52 155.19 163.24 171.06 167.97 172.13 173.99 179.45 181.58 178.34
Vietnam
Exports 23.5% 15.7% 35.8% 34.4% 25.5% 24.0% -8.9% 25.5% 15.0% 22.0% 34.8% -25.6% 5.3% 24.6% 43.0% 33.4% 25.5% 51.6% 34.2% 23.9% 41.7% 37.2% 41.4% 29.6% 26.1% 32.4%
Imports 7.3% 54.4% 48.5% 40.0% 33.2% 17.0% -13.3% 20.1% 15.0% 22.0% 79.0% 21.1% 33.8% 19.0% 26.7% 19.6% 10.8% 24.0% 9.4% 10.2% 17.3% 18.9% 33.7% 17.5% 21.5% 24.3%
Trade Balance -0.35 -0.94 -1.77 -2.71 -1.15 -4.6 -12.9 -12.4 -14.2 -17.4 -0.94 -1.33 -1.16 -1.16 -0.87 -0.74 -0.98 -0.40 -0.88 -1.07 -1.30 -1.29 -0.88 -1.11 -1.15 -3.14
Cur. Account -0.26 -1.40 -1.20 -1.88 1.11 -0.6 -6.1 -6.1 -10.3 -12.3 -1.77 -0.57 0.05
FXReserves - - - 1.32 3.42 9.05 16.03 10.00 12.00 17.00 15.32 15.08 13.45 13.93 13.54 13.72 13.51 13.32 13.69 13.68
Exports, ImportsandTradeBalance, customsclearedbasis; Current Account, FXReserves, balanceof paymentsbasis
TradeandCurrent Account YtdSum, not YtdAverage.

Foreign Exchange and Interest Rate Forecasts
ASIAN CURRENCY
CURRENT 1 mth 3 mth 6 mth 1 YEAR 08 Avg 09 Avg End 2008 End 2009 End 2010 End 2011E End 2012E
USD/RMB 6.51 6.57 6.50 6.40 6.20 6.95 6.83 6.82 6.83 6.60 6.20 6.00
USD/HKD 7.77 7.80 7.78 7.78 7.78 7.79 7.75 7.75 7.75 7.78 7.75 7.75
USD/INR 44.45 45.00 44.00 43.50 43.00 43.37 48.34 48.58 46.40 44.80 43.00 40.00
USD/IDR 8628 8700 9100 9300 9400 9678 10399 10950 9400 8991 9500 9100
USD/JPY 82.24 85.00 85.00 85.00 85.00 108.15 93.68 90.79 93.08 81.67 85.00 90.00
USD/KRW 1079.5 1075.0 1075.0 1050.0 1025.0 1098.7 1274.7 1262.0 1163.7 1130.6 1050.0 1000.0
USD/MYR 2.98 3.00 3.10 3.00 2.90 3.33 3.52 3.45 3.42 3.08 3.00 2.80
USD/PKR 84.54 86.00 86.00 90.30 94.60 70.62 81.69 79.11 84.24 85.72 90.00 95.00
USD/PHP 43.20 43.00 43.00 42.00 42.00 44.45 47.65 47.49 46.36 43.87 42.00 40.00
USD/SGD 1.232 1.240 1.290 1.260 1.220 1.414 1.454 1.438 1.404 1.289 1.260 1.150
USD/TWD 28.86 29.00 28.80 29.00 29.90 31.52 33.02 32.76 31.95 29.14 29.80 30.20
USD/THB* 29.97 30.00 30.00 30.00 29.00 32.95 34.31 34.93 33.36 30.15 30.00 27.00
USD/DONG 20660 N/A N/A N/A N/A 16461 17812 17433 18472 19498 22260 23800
* Onshoreexchangerate
ASIAN MONEY MARKET INTEREST RATE/3 MONTH INTEREST RATE
midrate CURRENT 3mth 6mth 1YEAR End2008 End2009 End2010 End2011E End2012E
RMB7DInterbank 2.79 2.80 2.60 3.00 2.99 1.25 2.18 3.00 2.60
HKD3MHIBOR 0.25 0.25 0.25 0.50 0.95 0.14 0.28 0.25 1.50
INR91DTBill 7.32 7.00 7.00 7.00 4.71 3.68 7.19 7.00 7.50
IDR28DSBI 6.75 7.00 7.50 8.00 10.85 6.46 6.50 8.00 8.00
3MJPY 0.34 0.25 0.25 0.30 0.74 0.45 0.34 0.35 0.45
KRW91DCD 3.42 3.40 3.40 3.60 3.93 2.86 2.80 3.50 4.20
MYR3MKLBOR 3.09 2.89 2.89 2.89 3.37 2.17 2.98 2.89 2.89
PKR3MTBill 13.23 N/A N/A N/A 13.46 12.10 13.17 12.00 11.00
PHP3MPHIBOR 3.00 5.50 5.75 6.25 5.25 5.00 1.06 6.00 6.50
SGD3MSIBOR 0.44 0.50 0.60 0.90 0.96 0.68 0.44 0.70 1.60
TWD90DCP 0.74 0.78 0.84 0.96 1.09 0.49 0.63 0.90 1.14
THB3MBIBOR 2.90 3.05 3.30 3.55 2.95 1.35 2.15 3.30 3.80
VND3MDeposit 9.66 N/A N/A N/A 10.37 9.63 10.67 N/A N/A
ASIAN BOND YIELD
CURRENT 3 mth 6 mth 1 YEAR End 2008 End 2009 End 2010 End 2011E End 2012E
RMB10YGOV 3.94 4.00 4.20 4.50 2.76 3.74 3.90 4.00 4.40
HKD10YGOV 2.71 2.80 2.90 3.00 1.19 2.58 2.86 2.90 3.50
INR10YGOV 8.04 8.00 8.00 7.50 5.26 7.59 7.92 7.50 8.25
IDR10YGOV 7.81 8.50 9.00 9.50 11.89 10.06 7.61 9.50 9.50
JPY10YGOV 1.21 1.10 1.40 1.70 1.16 1.28 1.12 1.50 1.65
KRW5YTREASURYS 4.16 4.50 4.60 4.80 3.77 4.92 4.08 4.70 5.00
MYR10YGOV 4.09 4.00 4.00 4.00 3.17 4.25 4.00 4.00 4.00
PKR10YGOV 14.10 14.20 13.50 12.50 16.23 12.63 14.25 13.00 12.00
PHP10YGOV 6.85 8.00 8.50 8.50 7.44 8.11 6.10 8.50 8.50
SNG10YGOV 2.45 2.90 2.90 3.40 2.05 2.66 2.71 2.90 3.40
TWD10YGOV 1.36 1.50 1.65 1.95 1.41 1.55 1.55 1.75 2.13
THB10YGOV 3.66 3.00 3.00 3.50 2.66 4.18 3.73 4.34 3.50
VND10YGOV 12.29 N/A N/A N/A 10.18 11.45 11.75 N/A N/A
Source for all tables on this page: UBS estimates, Datastream & CEIC



Asian Economic Monitor 28 April 2011
UBS 26


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Asian Economic Monitor 28 April 2011
UBS 27


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Source: UBS; as of 28 Apr 2011.





Asian Economic Monitor 28 April 2011
UBS 28

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Asian Economic Monitor 28 April 2011

Overview and summary
What’s new in recent months? • GDP growth slowed modestly but stayed strong at 9.7% (y/y) in Q1 2011, continued to be boosted by robust domestic investment and exports. We expect GDP growth to stay strong in Q2 before slowing in H2 on weaker exports. We maintain our growth forecast of 9.3% for the year. CPI inflation climbed up to 5.4% (y/y) in March and is expected to stay above 5% in the next 3-5 months. We expect food prices will moderate in H2, more than offsetting the rise in non-food inflation. Growth of bank lending slowed in Q1 but overall liquidity remained abundant. 3 RRR hikes in Q1 did not result in a net withdrawal of liquidity. We expect multiple additional RRR hikes to sterilize FX inflows, and expect 1 more rate hike in Q2 and another one possibly in Q3.

• •

Economic Activity. Economic activity slowed in Q1 from Q4 2010, although remaining robust, helped by credit expansion at end 2010 which boosted investment, while strong property construction and solid exports helped to keep industrial production strong. Retail sales have weakened but consumer spending from household survey held up well. The sequential strength of exports has weakened. In the coming quarter, we expect q/q growth to rebound somewhat on robust investment and construction demand in inland regions, although there is a downside risk that weakness in the commodity housing market may occur before the big push in social housing construction. We expect a moderation in China’s GDP growth in 2011 to 9.3%, mainly on weaker external demand, partly as a result of higher global oil prices. Domestic demand should be supported by fixed investment, especially a rebound in manufacturing investment. Inflation and monetary policy. The pick up in CPI inflation so far has been mainly led by food prices, driven by recurrent bad weather conditions and, to a smaller extent, long-term upward adjustment in domestic food prices. Warm weather in the spring has led to a decline in vegetable prices and we expect other food prices to moderate following the summer harvest. With liquidity abundant, real interest rates remaining negative, and inflation expectation staying elevated, the risk of inflation spreading to the overall economy is high. In addition, upstream pressure of higher commodity prices has increased. The government has allowed incomplete pass through of higher global oil prices and used price controls and moral suasion to control non-food price inflation for now. We do not think these measures can be effective for long and see non-food price inflation to rise throughout 2011. Nevertheless, H2 CPI movement is expected to be dominated by the moderation of food prices and drop toward 4% in Q4. We maintain our average CPI inflation forecast of 4.8% for the year. To help combat inflation and prevent overheating, the central bank continued its moderate monetary tightening with reserve requirement hikes and lending controls. While the 4 RRR hikes so far this year served to sterilize the large FX inflows and retiring some of the central bank bills, bank lending has also been managed through unannounced credit quotas and tighter supervision. RMB lending and M2 growth slowed visibly, but overall liquidity has only tightened modestly due to some off-balance sheet credit expansion and increased loan securitization in the inter-bank market. We expect further multiple RRR hikes and control on liquidity, but maintain that the government will not tighten liquidity aggressively. We also expect 2 more interest rate hikes in the next few months. Outlook in the coming year. We think investors should look out for the following: (i) the start of the 12-th FYP will support fixed investment despite the property tightening and fading of the stimulus plan this year, with manufacturing investment taking the lead; (ii) frequent monetary policy moves as CPI inflation stays high in Q2 before peaking in early summer; (iii) a strong growth momentum in Q2, boosted by the robust investment and construction demand in inland regions; (iv) 1 more rate hike in Q2 and 1 possibly in Q3, and multiple RRR hikes; (v) overall liquidity (social financing) is expected to stay adequate, though bank lending will slow, weighing down on equity market; and (vi) RMB to appreciate by 5-6% against the USD.

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