The beneficial effect of China's latest round of interest rate cuts could take years to be felt, but that should not stop investors from accumulating red chips and select H shares, analysts say. Christopher Day, joint managing director at Thornton Management (Asia), said: 'If it is part of a longer monetary easing, all companies will benefit, no matter what their size is.' Infrastructure companies, rather than retail firms, are tipped to gain first from an apparent end to the austerity programme, as the Beijing government will be attempting to stimulate growth without raising inflation. Schroder Securities (HK) economist Dong Tao said that by boosting infrastructure projects the government would be able to lay the foundation for future growth without adding fuel to an already-strong consumer market. At the same time, more infrastructure projects served the dual purpose of relieving rural unemployment and stimulating demand in the long-depressed construction material market. Retailers will also benefit from eased monetary conditions, albeit at a slower pace. Since the first round of rate cuts in May, consumption has actually declined. Analysts said that despite depression in other sectors, consumption in China had remained relatively firm since 1994 and might not have much room for faster growth. As for heavy industrial firms, analysts said the Chinese Government would have to take stronger measures before their business environment improves. Edward Chan, research director at Standard Chartered Securities, said: 'Most producer prices are under downward adjustment in the second half, so margins are not improving.' Most H-share firms are engaged in upstream industries, such as petrochemicals and shipbuilding. Standing in the way of a more tangible recovery for heavy industry is the government's credit quota, which is said to be about 650 billion yuan (about HK$604.5 billion) for 1996, up less than 2 per cent from 1995. The quota determines the amount banks can lend in a given period. 'In terms of boosting organic growth they need to relax regulations on fixed asset investment,' Mr Chan said. While there is talk of the credit quota being scrapped within the next few years, the government has yet to indicate its intentions.