China is entering a new cycle of accelerated economic growth underpinned by booming demand from industrialisation and a growing middle class, says JP Morgan. In a report, the brokerage spelled out its bullish outlook founded on the belief these forces of demand would lead to an expansion cycle of 18 to 24 months. It gave the thumbs up to oil and gas, real estate, motor vehicles, petrochemicals, commodities and machinery. On the downside, JP Morgan advised steering clear of power generators, technology and gas distribution, arguing these sectors would languish due to over-investment from previous years. Recent moves by Beijing to tighten credit expansion should not dampen the outlook. Liquidity remained accommodative due to negative real interest rates. If anything, rising inflation should be self-reinforcing for the near term. The discount between H shares and A shares had widened in the past two months, giving weight to the idea H shares should rally, driven by mainland liquidity. The report lists three stocks as having the largest earnings-per-share upgrades for 2004 - Tom. com, Maanshan I&S and CNPC Hong Kong.