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Bank of China to Sell up to $5.8 Billion in Bonds
Beijing is taking new measures to rein in inflation and overheating in the economy, Business Week reports:
Bank of China plans to sell up to 40 billion yuan ($5.8 billion) in bonds to replenish its capital and meet government standards following a record surge in lending last year amid Beijing’s stimulus measures, a state-run news agency reported.
Regulators have warned some banks that they have fallen below minimum capital requirements after handing out some 9.5 trillion yuan in loans last year. Banks are expected to scale back lending to roughly 7.5 trillion yuan in 2010.
Bank of China’s proposal still requires shareholder approval at a meeting in March, the Xinhua News Agency said in its report late Saturday. Approval is likely a formality because the government and state-linked institutions control a majority of the bank’s shares.
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- January 25, 2010 2:54 PM
China Inflation May Exceed 5%, Credit Suisse Says
From Bloomberg News:
China’s inflation rate may accelerate to more than 5 percent by the end of the year, as government measures to cool lending will have little effect, said Tao Dong, chief Asia-Pacific economist at Credit Suisse AG.
“The reserve-ratio hike will have no real effect on draining liquidity, it’s only a symbolic measure,” Tao said at a conference in Shanghai today. There may be a “rush of interest-rate increases” at the end of the year, he said.
The central bank this month ordered lenders to set aside a larger proportion of deposits as reserves and has guided bill yields higher after 2010 began with a surge in lending. Inflation accelerated to a more-than-forecast 1.9 percent in December and gross domestic product climbed 10.7 percent, the fastest pace since 2007, the statistics bureau said Jan. 21.
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- January 23, 2010 10:30 PM
Wen Says China Will Cool Property Prices, Stand Firm on Yuan
From Bloomberg:
Chinese Premier Wen Jiabao said the government will cool property prices, resist pressure for the yuan to appreciate and keep inflation at “reasonable” levels.
“Property prices have risen too quickly in some areas and we should use taxes and loan interest rates to stabilize” them, Wen said today in an online interview with the official Xinhua News Agency. China will “absolutely not yield” to pressure on the yuan, he said.
China’s property prices climbed last month at the quickest pace since July 2008, adding to concern that record lending and inflows of money will inflate asset bubbles in the world’s fastest-growing major economy. Central bank adviser Fan Gang said Nov. 18 that the nation needs to be on alert for stock, real-estate and commodity bubbles as global capital flows into emerging economies.
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- December 27, 2009 8:25 AM
Local Governments to Keep a Close Eye on Prices
From Caijing.com.cn:
China’s top economic planner said it has asked local authorities to keep a lid on prices of key goods in a move to control inflation in the run-up to Oct.1, the 60th anniversary of the People’s Republic of China.
In an Aug. 27 online statement, the National Development and Reform Commission said that while consumer prices had been falling since the second half of 2008, rapid credit growth and soaring asset prices had boosted inflation expectations.
The NDRC said that because overall supply and demand are basically balanced and grain reserves are ample, consumer prices should not rise sharply across-the-board.
Still, the economic planner has asked local price authorities to closely monitor the market and take measures to curb any illegal price hikes.
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- August 30, 2009 6:07 PM
Consumer Inflation Knocks at China’s Door
From Caijing.com.cn:
Inflation fears are spreading in China with expectations for an economic recovery. Sentiments have been on a roller coaster ride since the economy turned sharply from inflationary in the first half of 2008 to deflationary in the first half of this year. And if steep inflation re-emerges in the first half of next year, resource allocations will be distorted and the economy damaged.
The fears may be justified. If the nation’s GDP growth rate hits double digits, and the current flood of excess liquidity is not curbed within 12 months, CPI may rise by more than 5 percent per month next year.
China’s current liquidity levels are unprecedented, laying a foundation for steep inflation. A lesson from the past is that consumer and asset price inflation always follow increased liquidity levels.
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- July 3, 2009 7:40 PM
China’s Consumer Prices Decline 1.4%, Aiding Recovery
From Bloomberg:
China’s consumer prices fell for a fourth month, making it easier for the government to keep interest rates low and boost spending to revive the world’s third-largest economy.
Prices dropped 1.4 percent in May from a year earlier, after falling 1.5 percent in April, the statistics bureau said today. The median estimate in a Bloomberg News survey of 16 economists was for a 1.3 percent decline. Producer prices fell 7.2 percent, the most on record.
Inflation may return as the economy recovers and commodity prices climb from last year’s lows. The central bank triggered an explosion in credit this year by scrapping restrictions on growth in new loans and keeping the one-year lending rate at a four-year low of 5.31 percent.
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- June 10, 2009 11:13 PM
World Looks At China During Current Market Crisis
With George Bush calling a 20 country summit this November to discuss the current credit crisis, the rest of the world questions what role China will play. The Economic Times reports:
China can’t save the world from a financial meltdown, but it’s strong economic growth, even in a time of crisis, can help to alleviate the trouble for the rest of the world. While it might be “impossible” for China to help Europe, Japan or the US, China can still be a stabilizing factor in Asia.
At the upcoming Asia-Europe summit (ASEM) in Beijing this October, China will host 40 European and Asian governments. While China’s growth is declining, it is still hovering around 9.9 percent, and on Sunday, the Chinese State Council set a new economic strategy: away from “rapid growth and inflation control” and instead towards “stable and rapid economic development.”
Jose Barroso and Hu Jintao shake hands before the 2008 ASEM summit
US secretary Henry Paulson sited China as a large factor contributing to the world’s economic growth, and said while “China is feeling the current global financial stress as well… its economy is expected to continue to be an important engine for global growth during this period.”
Bloomberg reports countries like Thailand, South Korea, and the Philippines will all be asking for some sort of assistance in the unstable global financial environment at the upcoming ASEM meeting in Beijing on October 24th.
China will be asked to become more involved in the global financial crisis at ASEM this week. The meeting will include China’s Hu Jintao, France’s Nicolas Sarkozy and more than 40 other heads of state.
The countries will be looking for China, who holds $1.9 trillion in currency reserves, to use this leverage to assist other struggling nations.
With the current financial crisis underway, this year’s ASEM meeting “has the potential this time to achieve something really important,’’ says Phil Deans, a professor of international affairs at Temple University in Tokyo. “If you can get the Asian and European economies singing from the same page the Americans will have to follow.”
Observers believe China will be forced to consider proposals from neighboring Asian countries seriously, because a financially destabilized region will have “more of an impact on China” than the crisis in Europe and the United States.
On November 15th, George Bush will host 20 countries, including China, at a summit in Washington D.C.
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- October 23, 2008 10:26 PM
China’s Central Bank Signals Concern About Sagging Asset Values
The International Herald Tribune’s Karen Yeung and Samuel Shen report that some traders did not anticipate China’s Central Bank rate cut of .27% until later in 2008. The early cut may reflect a need to support Chinese asset prices as oppose to stimulate its slowing economy.
The surprise decision to ease China’s monetary policy may be to help support China’s real estate sector and slowing stock markets rather than to boost the economy.
“This is mainly a signal for the stock market,” said Shi Lei, an analyst at Bank of China in Beijing. “The index is near 2,000 points, and that’s a key level where authorities feel they need to come in and help the market.”
Although China’s economy is slowing, it is still growing at a rate of 10.4%, and most Economists expect its GDP to continue to grow above 8% for the remainder of 2008; however, analysts speculate that if China were anxious to encourage solely economic growth, they would have also cut the bank deposit rates, not just the lending rates. This would encourage customers to shift investments from savings into stocks. By lowering only the lending rate, the Bank of China is trying to avert a further decline in asset markets. Many emerging markets have experienced a decline in their asset markets, such as real estate, and analysts believe China is trying to avoid this.
Also related: From Bloomberg, Li Yanping and Kevin Hamlin “China’s Central Bank May Cut Rates Again”
In the coming months, China’s policy makers may consider further interest rate cuts to allow banks a better ease of lending, to help spur economic growth, and to boost spending.
China’s Central Bank cut rates from 7.47% to 7.0% earlier this week to, “help solve important problems in our economy for its continued stable and fast development,” the central bank reported.
China is experience its slowest inflation rate in 14 months, and an additional cut may assist in continual growth and job protection for China’s economy while the credit crisis deepens around the world.
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- September 16, 2008 10:02 PM
China Lowers Inflation, Increases Trade Surplus
The Wall Street Journal reports that China’s escalating inflation rates seem to be headed back down as food prices decline:
China’s Customs agency said imports increased 23.1% in August from a year earlier, slowing sharply from the 33.7% growth rate in July as the decline in commodity prices cut the country’s monthly bill for things like crude oil, iron ore and soybeans. Export growth also slowed but by a smaller margin, notching a 21.1% increase. That left a trade surplus, or margin by which exports exceeded imports, of $28.7 billion, 15% more than a year earlier and a record.
At the same time, domestic prices for important food items like pork and cooking oil have stabilized or even fallen in recent weeks. The rapid increase in prices for such goods starting last year was the main cause of China’s inflation rate surging to a 12-year high of 8.7% in February. But last month the consumer-price index was just 4.9% higher than a year earlier, the National Bureau of Statistics said Wednesday, coming in lower than analysts’ expectations and below July’s 6.3%.
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- September 10, 2008 1:34 PM
China Inflation Cools, Allowing More Growth Measures
From Bloomberg:
China’s inflation cooled to the slowest pace in 10 months, giving the government more room to restrain the yuan’s advance and bolster economic growth.
Consumer prices rose 6.3 percent in July from a year earlier as food costs eased, the statistics bureau said today, after a 7.1 percent gain in June. That was below the 6.5 percent median estimate of 17 economists surveyed by Bloomberg News.
The slowdown may encourage government policies aimed at sustaining growth in the world’s fourth-biggest economy rather than fighting inflation. While policy makers have halted the yuan’s appreciation and boosted tax rebates to help exporters, data yesterday showing the fastest producer-price inflation in 12 years underscores the risk that consumer prices will rebound.
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- August 12, 2008 7:55 AM
China Targets Stable, Fast Growth: Central Bank
From AFP:
China’s central bank said Sunday it would seek to create conditions for “relatively fast” economic growth in the coming months, despite the ongoing threat of inflation.
“We will use various monetary policy tools to create good conditions for stable, relatively fast growth,” the bank said on its website, outlining policy decisions made at its first-quarter policy work meeting.
The central bank’s statement came after recent figures suggested growth in China’s economy — the world’s fourth-largest — is beginning to slow.
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- July 27, 2008 8:21 PM
Controlling Inflation Remains Top Priority
From China Daily:
Party leaders on Friday named curbing inflation as the nation’s economic priority for the remainder of this year, while also ensuring steady growth with macro-control measures.
The meeting of the Political Bureau of the Communist Party of China (CPC) Central Committee, presided over by Party General Secretary Hu Jintao, said China will strive to maintain stable and fast economic growth and carry on its battle against inflation.
The meeting also decided to convene the Third Plenary Session of the 17th CPC Central Committee in October in Beijing.
The meeting came after senior leaders completed inspection tours of export powerhouses in the nation’s coastal provinces earlier this month.
Read also Maintaining steady, fast economic development still China’s top agenda for second half by Xinhua.
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- July 26, 2008 5:13 AM
China’s Economic Growth Cools to Slowest Since 2005
From Bloomberg:
China’s economy grew at the slowest pace since 2005 in the second quarter, prompting speculation the government will slow the yuan’s gains to protect export jobs.
Gross domestic product rose 10.1 percent from a year earlier, down from 10.6 percent in the first quarter, as exports weakened and the government curbed lending. Consumer prices rose 7.1 percent in June, slowing from 7.7 percent in May, the statistics bureau said today in Beijing.
The yuan fell 0.2 percent against the dollar, paring a 7 percent advance this year that made it Asia’s best performer. Some Chinese officials are pressing for slower currency appreciation to protect jobs as cooling global demand threatens to trigger a slump in shipments from the world’s fastest-growing major economy.
Read also China’s economy slows but still expands at double-digit pace by AFP.
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- July 17, 2008 4:53 AM
Can China Tackle The Great Grain Challenge?
From Reuters:
China has shown that it can act by raising domestic fuel prices, but will Beijing be able to tackle an even thornier issue: cheap subsidized grain?
After oil, grain could be the next big price risk for China. The government shifted the focus of its agricultural subsidies from protecting farmers’ incomes to shielding its 1.3 billion consumers from inflation when food prices surged last year.
In response, Beijing tried to restrict exports and promote imports. Good harvests and restrictions in the last four years had prevented Chinese grains prices from rising as fast as international prices.
But as so often with subsidies, where one worry subsides, another one rises in its place. Chinese farmers are facing the same inflation in farm input costs as their global counterparts. International fertilizer prices are surging along with oil, and although the government shields the farmers to some extent, it cannot keep up, especially on labor costs.
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- July 3, 2008 6:03 AM
Half Of Chinese Expect Inflation To Worsen, Survey Finds
From AFP:
Half the people living in China’s cities expect prices to continue to rise in coming months, state media reported on Thursday, citing a central bank survey.
The survey, which covered nearly 20,000 people in 49 cities, found that for the second quarter of the year 50.5 percent thought inflation would still go up in the next three months, the China Daily said.
People deeming prices “too high” reached 45.0 percent, up 15.5 percentage points from a year ago, but declining for the first time since 2007 from the 49.2 percent recorded in the first quarter of this year, it said.
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- June 26, 2008 5:04 AM