"I expect banks' profits will increase by an average 20 percent a year for the next five years," he said.

Sanft of BNP Paribas predicted that Chinese banks' earnings will be "very good" in 2007. He said the only potential risk was non-performing loans (NPLs). But he said he did not expect NPLs to increase in the next two years.

BNP Paribas was particularly bullish about the capital goods sector. Mechanization, Sanft said, would lead China's fourth stage of industrialization with the extensive use of machinery spreading through the manufacturing industry as China moves up the value-added ladder.

Zhang of Industrial Securities said he expected the profit growth of manufacturers of machinery and equipment to continue at a brisk pace. In the first eight months of 2006, these companies' profits had increased an average of 35 percent from a year earlier.

Huang Dongsheng, an analyst at Changjiang Securities, predicted the share prices of heavy machinery manufacturers would increase by an average of 25 percent in 2007.

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