The Premier reiterated that China faces a “very complicated, unstable and uncertain environment both at home and abroad” and that the government needs to be aware of the risks.

UBS cut its forecast last week for China’s expansion this year to 9 percent from 9.3 percent while Deutsche Bank lowered its prediction to 8.9 percent from 9.1 percent. Both banks estimate growth will slow to 8.3 percent next year.

“The government is comfortable with the slowdown currently taking place and isn’t ready to relax policies in the near term,” said Kevin Lai, a Hong Kong-based economist with Daiwa Capital Markets Ltd.

© zhou shuren for China Digital Times (CDT), 2011. | Permalink | No comment | Add to del.icio.us
Post tags: anti-inflation, consumer price, economic bubble, inflation, Premier Wen Jiabao
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China looks like it will soon slip into deflation. But will it be the good kind or the bad kind?

Steep falls in global commodity prices drove a drop in China’s producer-price inflation to 2.0% in November from 6.6% in October.

That’s the lowest level since April 2006, while data Friday is likely to show consumer-price inflation of less than 3% — it was over 8% until May this year. On current trends, headline inflation indicators could turn negative in early 2009, economists say.

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Post tags: anti-inflation, deflation, economic downturn
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China’s State Council, or cabinet, met over the weekend and decided to shift the emphasis toward maintaining “a stable and rapid economic development,” the state-controlled media reported on Monday. The previous policy had been “to ensure growth and control inflation.”

As part of the new policy, the State Council announced that it would increase export tax rebates for everything from labor-intensive products like garments and textile to high-value products like mechanical and electrical products. Banks will be encouraged to lend more money to small and medium-size enterprises and support programs will be drafted to help farmers, the government said.

Government agencies will also spend more to rebuild earthquake-damaged areas of southwestern China, to improve transportation links and other infrastructure and to improve the social welfare system, the official Xinhua news agency said, without providing details.

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Post tags: anti-inflation, economic downturn, economic stimulus plan
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Many people in China right now call these the country’s Golden Years. But after a fantastic run of double-digit growth, bigger pay packets, low inflation and growing international influence, clouds are now forming over China’s economy. Most obviously the dark weather of the snowstorms earlier in the year and the terrible earthquake in Sichuan have rocked the country’s confidence. Less tangibly, but more importantly for the economy, stronger inflation is emerging. And there is a danger that the hard decisions needed to break it will not be made while there’s still time to do so relatively easily.

In part, this is because policy makers are only gradually grasping the magnitude of the inflation threat. On the surface it looks like inflation as measured by China’s official consumer price index has been driven by food, primarily pork and edible oil. CPI has exceeded 8% year-on-year in recent months (but looks set to fall below 8% in May). Exclude food items, and prices overall only rose 1.8% in the year to April.

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Post tags: anti-inflation, inflation
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China’s economy kept growing at a sizzling pace in the first quarter, but the nation’s inflation rate also remained high, at above 8%, the government said Wednesday. The trends prompted officials to raise banks’ reserve requirements for the third time this year to slow lending.

The government said China’s gross domestic product, or total output of goods and services, expanded 10.6% in the January-to-March period compared with a year earlier. Although that was slightly slower than the 11.9% pace for all of 2007, analysts had expected a sharper decline because of weakening exports and severe snowstorms that disrupted production and travel this winter.

Financial Times has a story on China’s stock market slump:

Shares in Shanghai have plunged as sharply in the past six months as they surged during the first part of 2007. The Shanghai composite index closed on Wednesday at 3,291 – down 46.3 per cent from its all-time high of 6,124 on October 16.

Shares on the bigger of mainland China’s two stock markets (the other is Shenzhen) are now worth pretty much the same as in early April last year. Shanghai was the best performer among in Asia’s big exchanges in 2007. It is now very much a bear market.

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Post tags: anti-inflation, overheated economy, shanghai stock market
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China said Friday that it would pay farmers more for rice and wheat, in a move aimed at raising output and cooling surging inflation that threatens to fuel unrest ahead of the Olympic Games.

Beijing has frozen retail prices of rice, cooking oil and other goods in an effort to curb inflation that saw food prices jump 23.3 percent in February over the same month last year. But analysts warned that holding down the prices paid to farmers would discourage them from raising production and easing shortages that have been blamed for rising food costs.

The latest move is meant to “raise farmers’ enthusiasm for growing grain and make progress in the development in grain production,” the cabinet’s National Development and Reform Commission said in a statement. It said minimum grain prices paid to farmers would rise up to 9 percent.

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Post tags: anti-inflation, farmers, food prices, rising costs
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In a closing press conference at the annual parliamentary meeting, Wen said his government faces the conflicting tasks of trying to create jobs through fast-paced economic growth while also battling inflation and excessive investment and credit.

“I am afraid that this year could be the most difficult year for the Chinese economy,” Wen told journalists.

…China’s economy boomed at an 11.4 percent clip last year, with inflation rising 4.8 percent for the year. Prices continued to climb to a near 12-year monthly high of 8.7 percent in February.

See also “China to Take `Forceful’ Steps on Inflation, Wen Says” from Bloomberg. The International Herald Tribune also writes about Wen’s discomfort as he is forced to answer questions about topics he’d rather not discuss, including the unrest in Tibetan areas and the trial of activist Hu Jia.

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Post tags: anti-inflation, economic downturn, NPC 2008, Wen Jiabao
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Chinese Premier Wen Jiabao warned on Wednesday that overheating remains his nation’s top economic foe even as global growth softens, vowing a tough fight against price rises and feverish investment.

In his annual ”state of the nation” report to parliament, Wen targeted pollution, misgovernment and the gulf between the urban rich and farming poor as China prepares to go on show at the Olympic Games.

But he mostly dwelt on the risks that heady inflation poses to China’s social fabric and double-digit growth, which has transformed the country into the world’s fourth-biggest economy.

See also Beijing raises funds for military by 17.6% from Financial Times.

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Post tags: anti-inflation, NPC 2008, Wen Jiabao
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Chinese stock markets have been closed since Feb. 6 as investors welcomed the Lunar New Year of the rat, but when markets reopen Wednesday, analysts fear it might be the year of the bear.

Last Lunar year, the benchmark Shanghai Composite Index plunged more than 20% from its peak, and some expect the government to shore up markets ahead of this summer’s Beijing Olympics. But those who assume the government won’t let the markets fall ahead of the Games may be disappointed.

Chinese investors’ hopes that the government will step in to support sagging stock prices “reminds me of the Greenspan put,” said Robbert van Batenburg, an analyst at global equity broker Louis Capital Markets LP. Batenburg was referring to U.S. investors’ legendary expectations that the Federal Reserve under Chairman Allen Greenspan was always ready to bail out investors by easing interest rates.

But it would be risky to bet that such a “put” is going to come through in China, where the government’s focus is firmly on the domestic economy, especially inflation, Batenburg said.
“Although the appreciation of the stock markets is welcome by the government, it’s not their priority,” Batenburg added. “Their priority is to generate about 10% of economic growth, to absorb the urbanization, and to maintain a benign and peaceful social environment.”

© Kate Zhao for China Digital Times (CDT), 2008. | Permalink | One comment | Add to del.icio.us
Post tags: anti-inflation, Olympics business, stock market
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China’s efforts to rein in rampant inflation took a step backward this week after the central bank made an emergency effort to soften the economic pain caused by ongoing brutal snowstorms.
The People’s Bank of China issued an order Thursday instructing local commercial banks to speed up loans in areas hit by the deadly blizzards. The action amounts to a suspension of the central bank’s efforts to tighten credit in the face of the hottest inflation in 11 years, analysts said.
“[The order] effectively announced that the credit tightening since end-October 2007 is temporarily over for many sectors,” said Merrill Lynch economist Ting Lu in a report. It “makes it very clear that the most important task for the PBoC for now is to guarantee the normal functioning of the economy.”

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Post tags: anti-inflation, Snowstorm 2008
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