Investment firm Gartmore reports that Chinese banks have posted positive results for the first quarter of 2008, as robust lending, strong growth of wealth management products and a cut in the corporate tax rate from 33 per cent to 25 per cent in January work in their favour.

The company found that net profit rose 157 per cent at China Merchants Bank and 77 per cent at the Industrial and Commercial Bank of China in the first three months of the year. China Construction Bank reported profit of RMB32.1 billion (£2.31 billion), almost equalling its profit for the first six months of last year.

Charlie Awdry, manager of Gartmore’s China Opportunities Fund, said: “Chinese banks have been recapitalised, with many raising funds via Hong Kong. Some have seen the arrival of strategic investors with specialist management and risk-control expertise.

“At the same time, the opportunities for banks to lend increased again in the first quarter as the government loosened controls on lending after severe winter weather.”

And Barings backs this up, claiming that Chinese growth is likely to continue through the medium and long term. It reports that problems in the credit markets are unlikely to seriously hamper economic growth in the country. Manager of the new onshore Baring China Growth Fund, William Fong, believes valuations in China have become more attractive following the recent market correction.

“We firmly believe that China and Asia represent fundamentally bright spots in an increasingly gloomy world and that economic fundamentals in the region should act as a strong buffer against the events in the US credit markets,” he said. “Domestic consumption is in full bloom, the Renminbi is continuing to appreciate and we believe that secular growth and improving corporate governance will drive a re-rating.

He added: “It is true that concerns over inflation and credit tightening in China have added to the negative sentiment in the market. However, we have long argued that the key to long term growth in China is about sustaining a steady GDP growth of seven per cent to 11 per cent not returning to a period of volatile swings in growth as we saw in the 1980s and early 1990s.

“A short-term tightening or slowdown in growth would still leave the growth numbers at a healthy and manageable level, in our view.”

©Fair Investment Company Ltd