BHP Billiton is confident that the China growth story will continue.
In its outlook published this week it sees growth in China of 10% and 'risks on the upside", so the risks to the China story are from too warm an economy.
Certainly that's been the overriding story from China this year (and that includes the food and product contamination stories which are symptoms of reckless growth and poor governance and controls).
China's economy is steaming along with growth running at an annual rate of around 11% to 12%; inflation is over 5.5% because of rising food prices: risks are certainly on the upside.
That's why the Central Bank this week lifted interest rates for the fourth time this year.
But while they were doing that the Government took a major decision that will end up as probably second only to the float of the Yuan in importance.
We'll get to that shortly but a look at the rate rise.
The new level for the key one-year lending rate is 7.02%, up from the previous 6.84%
And, besides raising interest rates, the People's Bank of China has ordered lenders to increase the loan reserve ratios six times this year.
Inflation is now around 5.6% (annual rate), the second quarter growth rate of 11.9% was the strongest in 12 years, the trade surplus is heading towards a quarter of a trillion dollars by the end of the year, investment is still strong in factories, plant and property and retail sales are strong.
The stockmarket is up more than 130% on the key CSI 300 Index, house prices are rising.
And it seems the growth in markets, investment (especially in property and plant) and the property boom has forced the Government to make a major concession.
From later this year, individuals will be allowed (under some restrictions) to directly buy securities offshore for the first time.
At the moment all purchases will have to be made through northern city of Tianjin and buyers will be restricted to Hong Kong stocks.
But as one broker in Hong Kong pointed out: the restriction will work in favour of China and the eventual freeing up of destinations. There are company, family and cultural reasons why Hong Kong is the ideal first stop for this important move. Many big Chinese companies are listed there; many big companies looking out into the rest of the world (Swire Group, Cathay etc) are listed there.
Limiting the scheme to Tianjin is a way for the government to keep it small and test the idea. I reckon there will suddenly be an upsurge in people finding out they have a relative or do come from the city.
Investors in the scheme will able to open accounts at the Bank of China to trade securities listed in Hong Kong.
These investments will, under the pilot scheme, be exempt from a $US50,000 limit on the foreign currency Chinese citizens can buy or sell every year.
The Government said that it said it hoped this opening of the capital account would relieve upward pressure on the currency, while giving citizens more investment options. It said that this "is an important action for widening the channels for foreign exchange to leave the country and promoting basic equilibrium in the international balance of payments."
(That is, without mentioning the pressure China is facing to float, the Government has countered with this proposal. It will also be a way of diverting pressure from the overheating stockmarket).
China's rapidly growing trade surplus is pressuring the Government to allow the currency to float more freely: it is a managed float where the movements seem to happen more for external political factors than in response to the domestic economy and exports.
Hong Kong brokers say that the mainland companies which are listed both inside China (Shanghai and Shenzhen exchanges) trade at a huge discount on the Hong Kong exchange.
Hong Kong's H-share Index, covering mainland Chinese companies listed on the exchange, has already started moving upwards in anticipation of the surge in investment interest out of the mainland.
Chinese investors were recently allowed to invest in foreign securities indirectly, via structured products offered by large banks, insurers and fund managers, which are themselves constrained in what they can invest in.
It is only early days. If it works without too many problems it will be expanded to other markets.
The announcement to look for is that banks other than the Bank of China will be allowed to handle these investments: that's when we know that the program is working well in the eyes of China's regulators and they feel confident to allow a wider choice of investment conduits for local investors.
There are more than 100 million people with registered stockmarket trading accounts in China. Not all will be interested in investing offshore, the growth will be slow early on, but if handled properly, this is a major move in bringing China closer to markets around the world, especially in Asia.
It's a development that in its way supports BHP Billiton's confidence in the outlook for China and Asia.
