Get set for more Chinese growth

Recent Chinese economic data has been mixed - first-quarter GDP was 8.1%, below the fourth quarter's 8.9% - and deceleration may have carried into the second quarter. June's "flash" PMI estimate - a measure of manufacturing activity - weakened to 48.1 from May's 48.4 (a molehill, not a mountain).

Many fear China slowing will compound eurozone woes. But this is China's "election" year with leadership changes at every level. Historically, to smooth the transitions every five years, keep citizens happy and prevent unrest, China holds down growth the year before elections to boost it after elections without stoking inflation. They're at it right now.

For the first time in eight years, the People's Bank of China (PBC) cut interest rates by 0.25% in June - a major move for it. It also increased wiggle room banks have on lending rates. Before, banks could offer loans for up to 90% of the benchmark rate (now 3.25%). Now that's dropped to 80% - making loans cheaper, which stokes loan demand and boosts growth. The PBC offered incentives for savers to increase deposits - they will now allow banks to pay up to 110% of the benchmark rate (6.31%) on deposits.

These are the latest of many signs China is revving up its growth throttles - which outgoing premier Wen Jiabao recently explicitly stated was the goal. China recently said it would fast-track major infrastructure projects - which is why May's Chinese iron ore shipments from Port Hedland in Australia (the world's biggest commodity export harbor) hit 22.5 million tons - up 8.7% over April - a record high.

New loan issuance growth more than doubled expectations in May (15.3% year-over-year versus 7.1%), hitting ¥800 billion (£80.9 billion) - a sign China increased loan quotas, a commonly-used tool to goad growth. Wisely, China delayed implementation of Basel III capital requirements until 2013 - giving banks more lending opportunity. And there's word China will test letting banks securitise loans - which should free banks to lend still more.

Land-seizure threat

China's also doing what it can to stimulate real estate purchases. Some provinces are providing tax incentives to buyers. And China changed land-use regulations for property developers - telling them they must begin development of idle land or face seizure in two years. Government seizing private property isn't great - but what do you expect from a communist country? However, the threat of seizure likely inspires developers to build now - which helps accomplish China's growth goal.

More: China will double approval for corporate bond sales in 2012 and let medium and small businesses issue bonds for the first time. That helps growth this year, but also gives smaller firms more opportunity to grow in the future - that's good. There's been a slew of subsidies and tax stimulus thrown at consumers - cash for clunkers and rebates for energy-saving appliances. And, China promises to reduce bureaucratic hurdles for firms entering the financials and energy sectors.

These efforts may not show in second-quarter data, but this is a stimulus tsunami - with likely more yet to come. In the back half of 2012, China's growth is likely to accelerate and global growth will overall be fine. So buy stocks like these:

Israel's Teva Pharmaceutical Industries () is now the world's biggest generic drug maker, spanning 60 nations with 17 research and development centres. With low costs and strong emerging markets presence, expect low double-digit sales growth. It's cheap at 14 times 2012 earnings with a 2.3% dividend yield.

Semiconductor firms can't do well in this economic expansion unless Applied Materials (AMAT) does really well. It's the leading supplier of chip-manufacturing equipment. Folks fear weakness now tied to Europe. But I expect an upgrade in expectations as earnings increase and its trailing P/E of 10 expands. You get a 3.3% dividend yield while waiting.

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.