Changing China

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The Other China Stimulus

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By Zhou Xin

As the world watches how Beijing’s $585 billion stimulus package can create opportunities for investors, they might be overlooking another mini-stimulus that is coming in a matter of weeks: the lavish celebration the government will be staging to mark the 60th anniversary of the founding of the People’s Republic of China on Oct. 1.

On top of what is expected to be a huge military parade through central Beijing, massive firework displays are expected to light up the capital and other big cities around the country.

Although overall spending figures are secret, speculation about the windfall profits that the country’s only listed fireworks firm could reap from the event have caused its share price to, well, explode over the last month or so.

Panda Fireworks shares have more than doubled in value over the past month, even amid a more than 14 percent fall in the benchmark Shanghai Composite Index over the same period. (See the chart plotting their values and relative performance.)

No new stimulus? Buy!

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Global markets surged on Wednesday, led by the Shanghai stock market’s 6.1 percent gain, on hopes that Chinese Premier Wen Jiabao would announce a new stimulus on top of the 4 trillion yuan ($585 billion) two-year spending plan unveiled in November.

Investors were optimistic that with a bit help from the central government, the economy could turn the corner and start to regain lost ground, heading off a rise in unemployment that officials fear could threaten social stability.

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