Bank of East Asia : BEA Releases January 2012 Issue of "Economic Analysis" Report Discusses the Global Economic Outlook for 2012

For Immediate Release

BEA Releases January 2012 Issue of "Economic Analysis"

Report Discusses the Global Economic Outlook for 2012

Hong Kong, 18th January, 2012 - The Bank of East Asia ("BEA") has today

released the January 2012 issue of its "Economic Analysis". The report indicates that, two years into the European debt crisis, the rot has continued to spread. Such conditions will threaten markets in the short-run. In addition to the growing impact of the credit squeeze in the coming months, many European countries are implementing steep budget cuts. European economies will be in recession for most of 2012.
In the US, the economy is recovering and the business sector is borrowing once again. Yet, in view of the deleveraging of American household debt and the high unemployment rate, US firms are expanding abroad instead of domestically to tap growing demand in emerging markets. Thus, only moderate growth is expected in the US this year.
The European debt crisis and slow economic recovery in the US are weighing on the Chinese economy. The focus of China's policy in 2012 will be establishing a balance between sustaining correction in the housing market and assisting small and
medium-sized enterprises ("SMEs"). In addition to a moderate reduction of 150 basis points in the deposit reserve requirement ratio, which is expected within this year, the government will resort to fiscal measures and administrative means to assist SMEs. BEA forecasts China's GDP to grow by 8.2% and inflation to ease to 3% in 2012.
Given the weakness of overseas economies, Hong Kong's real export growth will be reduced to 0% in 2012. Furthermore, the Mainland factor will continue to support Hong Kong's economy. Under the "Going Out" policy of the Chinese government, many Chinese companies use Hong Kong as a platform for overseas investment, fuelling the demand for commercial services in the city. The strong purchasing power of Mainland tourists also supports employment growth, which helps boost local wage levels and sustain private consumption. Hong Kong is therefore forecast to achieve GDP growth of 3.5% in 2012, with inflation at 3%.
Published on a quarterly basis, BEA's "Economic Analysis" provides investors with an in-depth look into current market and economic issues. Copies of the report can be downloaded via BEA's homepage: www.hkbea.com / Corporate Information / Economic Research.
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