China’s economy expanded unexpectedly in the last quarterly of 2010, GDP grew 9.8%, up from 9.6% in the previous quarter. Despite a series of tightening measures, the growth does not seem to slow down.

However, China’s inflation peaked at 5.1% in November, with full year inflation 3.3%. It becomes obvious growth is never a problem of China, but the inflation, which was largely a result of high prices for food.

Ironically, the market react negatively on the news with the fear that further tightening will be placed.

I am rather happy to see the situation as China was not performing for the whole 2010. I’d rather consider the polices as healthy adjustment for quality growth of China’s economy.

The bearishness of the market gives me opportunity to accumulate more valued investment opportunity at low cost.

Another interesting market to note is Gold. Gold has dropped to US$1,346 from all time high of $1,427. I have kept warning all my clients not to think the gold rally is endless since last quarter of 2010 and highlighted the Unsustainable Gold Scheme in Dec.

With recovery of global economy, Gold is fading out as instrument for asset protection or inflation protection. Investors should note Gold does not pay dividends. It is just a piece of metal.

However, I do not expected Gold to just crash like that. I would feel it will stay within a range for a long period of time for consolidation before new direction is set.

(Data and Chart source: Wall Street Journal)