SHOWS: HONG KONG, CHINA (JANUARY 3, 2012) (REUTERS - ACCESS ALL)

YIFAN HU, HEAD OF RESEARCH & CHIEF ECONOMIST, HAITONG INTERNATIONAL

1. REPORTER OFF CAMERA SAYING:

'Stock markets rallied after the U.S. House finally passed a bill to avert the fiscal cliff - how will the deal impact Asian economies this year, particularly China?'

2. YIFAN HU SAYING:

'I think after the U.S. pass the agreement and I think it's just give positive side to the market so that will greatly boost the market sentiment. So I think that will also bring the positive impact on the stock market, capital market. So especially we expect more capital also flowing into A-share markets this year as well. At same time I think that we'll also probably bring the commodity price increase as maybe the overall economy sentiment increase.'

3. REPORTER OFF CAMERA SAYING:

'Amid a constructive macro backdrop & solid economic data from China, what can we expect in terms of economic policy and reform under China's new leadership?'

4. YIFAN HU SAYING:

'We think that as we expected so the Chinese economy bottomed out at the third quarter and so the fourth quarter the data gradually pick up. But overall speaking, I think the economy is still at the quite weak level especially if we look at PMI. Yes, it's above 50 but if we look at the employment data, actually it's still contracting. So I think the overall economy still needs government policy to support. So for the new leadership, we expect more accommodating of monetary policy and fiscal policy to come out in 2013.'

5. REPORTER OFF CAMERA SAYING:

'What sort of fiscal or monetary measures do you see coming?'

6. YIFAN HU SAYING:

'I think that for the fiscal side, I think for the market have the large expectation especially I think the government will encourage for infrastructure investment, especially including railway, expressway, ports, airports, and metro. Many projects already started. I think that will be the boost of the economy for the next 3-5 years. At same time, I think the urbanization is a very hot concept now. So I think many issues put in this basket including the welfare house, including other measures to increase household income. So I think that overall will also give a boost to the consumption as well as for the investment. So for the monetary policy side, we think the monetary policy will gradually ease this year so especially we expect for the required reserve cut we think it will empty into a downward cycle. So that means not only 1 or 2 cuts and it could be more continuously cut. And at same time we are very cautious for the inflation because inflation is gradually enter into an upward cycle. Although I think that this year for the whole year is still under the comfortable zone, maybe between a 3-4%, but still with upward trend I think the central bank will be very cautious to cut the interest rate.'