China Economy

1

Money supply growth tumbling in China

The People’s Bank of China has published the latest set of monetary statistics for May 2011. At the end of May, M2 money supply reached RMB76.34 trillion, increasing by 15.1% yoy, lower than 15.3% yoy growth last month, and continued to dip below the pre-crisis average growth rate.  The market consensus looked for a 15.5%

11

Chinese banks feeling the heat

Following on from last night’s post on S&P’s recent report on China and commodities, the Royal Bank of Scotland (RBS) yesterday released an interest report (available below) on the precarious position of the Chinese banking system. Here are some key extracts: Chinese banks’ aggressive credit expansion in the past two years greatly facilitated China’s strong economic recovery

11

S&P on a China disaster

Late last week, Standard and Poors (S&P) released a 22-page report entitled The Potential Risk of China’s Large and Growing Presence In Commodities Markets, which warns that record high commodities may represent an unsustainable bubble at risk of correcting in the event of a significant slowdown of the Chinese economy  (hat tip Interest.co.nz for the

3

Chinese shadow banking

Exclusively from Michael Pettis newsletter: My SWS associate Chen Long tells me that last week’s markets indicate that monetary conditions in China are still pretty tight, as measured by the cost of short-term liquidity in the interbank market. As I have argued before, I think this says a lot more about the extent of domestic

43

This time it’s different in China

From Project Syndicate today comes this piece from Stephen Roach (who I do admire) on why this time it is different for China. I’ll give a peremptory hat tip to anyone that can debunk all ten… Here are ten reasons why it doesn’t pay to diagnose the Chinese economy by drawing inferences from the experiences

11

The great Chinese inflation

From Societe Generale overnight comes a new intensive study of the changing composition of Chinese inflation and how it will radiate outwards. Fascinating reading and essential knowledge for every Australian. Remember the phrase: “deflation in all you own, inflation in all you need”…

16

China’s hidden debt

Niall Ferguson coined the term “Chimerica” to characterise the economic relationship between China and the United States. In his view, China does the saving, and the United States does the spending.  This is true to a certain extent but that does not mean that China does not borrow. Today, I want to explore debt in the

18

China not slowing enough

The People’s Bank of China has raised interest rates and reserve requirement ratios a number of times since last year as the government pledged to make inflation fighting and property price curbing their top priority.  So far, the two main objectives have not been achieved.  However, the effect of tightening has been increasingly visible. For

4

Chinese inflation spreading

Exclusively from Michael Pettis’ newsletter: Quite a lot of data came in this week as I was recovering from the jet lag generated by last week’s trip to the US, and for good measure, the PBoC then raised minimum reserve requirements Thursday evening. I don’t have much to say about the hike, beyond what will

76

China is different

  We need a new framework for understanding and interpreting what is happening in China. As a friend recently commented to me, there should be three categories of economies: developed, developing and China. China may struggle, but it will struggle in a uniquely Chinese way, and inevitably pose deep questions about the future of capitalism.

6

World Bank warns China (Canberra)

The World Bank has damned the lifeboats in its China Quarterly Update and called out multiple risks including a housing bubble, inflation and external imbalances. Here is the money excerpt: Inflation is unlikely to escalate but there are risks. Food price increases seem to have slowed for now, sequentially, and the (yoy) rate of increase in

3

Pettis on yuan

From Michael Pettis this week: On Friday last week the National Bureau of Statistics released the eagerly anticipated first quarter data.  As has been widely reported, first quarter GDP was up 9.7% year on year. CPI inflation 5.4% in March, a 32-month high, and up from 4.9% for the first two months of this year.  For the first

29

A warning to Canberra

From the ANU’s East Asia Forum comes this sobering assessment of the challenges facing the Chinese economy: China recently wrapped up the National People’s Congress (NPC) and Chinese People’s Political Consultation Conference (CPPCC) with the approval of the 12th Five Year Plan (FYP) (2011-2015). At the top of the new blueprint is a commitment to

26

Roubini calls time on China (part 2)

Earlier this month, Houses and Holes posted a report from Professor Nouriel Roubini warning that the Chinese economy is overheating and risks a sharp slowdown sometime after 2013. Now Professor Roubini has followed up with an article on Project Syndicate fleshing-out his views in greater detail. Professor Roubini  more or less supports earlier warnings from Michael Pettis and prominent China

7

China’s leading indicators

Here’s a heads up about the important Chinese data that is out around lunchtime today.  Amongst the raft of data to be released is the GDP data. Chinese growth is increasingly important to everyone on the planet as our beloved Central Bank Governor pointed out in New York two nights ago. The chart below shows the

18

Moody’s downgrades China’s property sector

Just in, credit rating agency, Moody’s Investor Services, has downgraded China’s property sector to negative from stable, citing both falling property sales and prices [my emphasis]: Hong Kong, April 14, 2011 — In a new report, Moody’s Investors Service changes its outlook for the China property sector to negative from stable. The change reflects the

5

Beijing down 29% ?

On new years day of this year the Chinese government announced that it had a new plan for housing China’s central government will strengthen its campaign to control soaring housing prices in 2011, a senior official said on Wednesday. Minister of Housing and Urban-Rural Development Jiang Weixin told a national work conference that the government will

13

Andy Xie on China

Andy Xie, an independent economist based in Shanghai and the former Morgan Stanley chief Asia-Pacific economist, yesterday published an excellent article in Caixin warning that an inefficient public sector and negative real interest rates are pushing China towards stagflation, instability and a possible financial crisis (h/t interest.co.nz). Xie’s article more or less supports earlier warnings

7

EIU report on China’s housing bubble

Below find the executive summary of a new report into China’s housing bubble from The Economist Intelligence Unit. It has some terrific stats and is well worth your time, even though its analysis and conclusion add up to the intensely suspicious conclusion that ‘this time it’s different’. One particular claim I’ll take umbrage with is

25

Canberra please read: Roubini calls time on China

From Nouriel Roubini at RGE Monitor: I’m writing on the heels of two trips to China during which I met with senior policy makers, bank executives and academics, just as the government launched its 12th Five-Year Plan, intended to rebalance the long-term growth model. My meetings deepened my own impression and RGE’s long-standing house view of

2

Michael Pettis: China easing off tightening

Exclusively from Michale Pettis’ newsletter: Three months ago during their 2010 Q4 conference, the PBoC said that they believed that the global economic recovery would continue in 2011, although they acknowledged a great deal of uncertainty. The PBoC also said that stabilizing the price level was their top priority, and the central bank planned to

9

Power hungry China

Analyst presentations can be tedious affairs, often an equal mix of the obvious and the dubious. But one I saw about China’s Five Year Plan’s implications of Australia really had me listening closely. The visiting China-based analyst was showing a slide of the projections of the growth in “low carbon” energy out to 2015. It

38

China’s largest ghost city filled

At last, a good news story on China. Readers might remember that I posted an article in December showing alarming satellite photos of entire cities laying vacant (see China’s empty cities). In that article appeared the below photo of Zhengzhou New District, which was supposedly “China’s biggest ghost city, complete with entire blocks of totally

2

Michael Pettis: China slowing

` Exclusively from Michael Pettis newsletter: Quite a few numbers came out this week, but none of them were especially dramatic or likely to change anyone’s mind about anything. The most interesting thing to me is that there are indications that, once again, the economy may be slowing quickly. Every time Beijing gets worried about too

4

Macquarie bursts the China bubble

The pressure is growing for China to open up its capital markets as a way to solve its internal bubbles. The question is: how will that affect the rest of the world? The greatest impact of China – its massive scale – is so far largely confined to trade and global production chains. What happens if

5

Pettis on China’s Five Year Plan to consume

Exclusively from Michael Pettis’ newsletter: It seems the weird period of money-market tightening seems to have abated, at least for now.  My SWS colleague Chen Long tells me the following: The PBoC has injected liquidity through open market operations for the 16th consecutive week. The central bank issued RMB 1 billion in 3-month bills and RMB

0

Pettis on Chinese inflation

From Michael Pettis’ exclusive newsletter: Last week the National Bureau of Statistics released inflation data for the month of January: In January 2011, consumer price index rose by 4.9 percent over the same period of the previous year. Of which, urban area and rural area was up by 4.8 percent and 5.2 percent respectively; the price

20

The China domino

The stated goal of the Hu Jintao-led Chinese government is a “harmonious society”. Perhaps that is why the word “Egypt” was blocked on certain search engines over the weekend. Multiple factors are in play in Egypt, but there is one vital similarity with China: Food inflation of a breadth and severity that few in the