Last year’s worries about the Chinese economy suffering a ‘hard landing’ eventually proved to be misplaced. Or should that be, worries that the government wouldn’t be able to engineer a soft landing, proved to be misplaced. Yet, while the economy seems to be on a more stable footing these days, there may be too much optimism that this will continue.
The consensus is for growth of a touch more than 8 per cent this year, roughly in line with what Beijing itself is forecasting. Yet Zhiwei Zhang and Wendy Chen, economists at Nomura, argue this is too bullish, and offer five reasons why they think 7.7 per cent is more realistic, with growth slowing to 7.3 per cent in the second half of 2013. Read more
China’s attempts to cool persistent price increases appear to be taking effect as the pace of inflation slowed in August from a three-year high in July, the FT reports. The country’s consumer price index, a key indicator of inflation, rose 6.2 per cent in August from a year earlier, compared with a 6.5 per cent rise in July, according to figures released on Friday by China’s National Bureau of Statistics. Consumer prices rose 0.3 per cent in August from the previous month, compared with a 0.5 per cent increase in July, marking the second consecutive moderation in the month-on-month reading. The Chinese government and most economists had predicted that inflation would peak by August and the slowdown is largely in line with expectations. Read more
You wouldn’t want to be a Chinese local government official, just now:
(Reuters) - China will link local officials’ performance appraisals to the level of debt held by local governments, state media reported Monday, an apparent move to cap borrowing and address worries that possible defaults could damage China’s economy. Read more
Blackstone pulled out of its investment in a Chinese agricultural company earlier this year after the mainland group warned the buy-out firm that its involvement would complicate moves to raise prices,the FT says. The US private equity firm sold its stake in Dili Group, the parent company of a Shandong province vegetable trader, just weeks before Unilever was fined in China for announcing planned price rises. The case offers a stark illustration of the sensitivity surrounding rising prices as China seeks to combat inflation running at a three-year high. Chinese leaders have repeatedly identified food prices as one of the most pressing problems, because of its potential to cause social unrest.
While Chinese inflation is growing rapidly, imports are decelerating sharply, says the FT – further complicating Beijing’s attempts to maintain rapid growth and while containing prices. China’s imports increased 19.3 per cent in June from the same month a year earlier, a sharp deceleration from May’s 28.4 per cent annual increase and well below what most economists were expecting. In a sign that industrial activity in the country was moderating, imports of key commodities like crude oil, aluminium and iron ore all fell in June from a month earlier. Crude oil imports fell to the lowest level in eight months and were down 11.5 per cent from the same month a year earlier and, while copper imports rebounded in June, they were significantly down on 12 months ago. The growth news is not expected to improve, with a Bloomberg survey forecasting GDP data later this week to show the slowest growth rate in two years. Also in the FT, Chinese inflation hit three year highs in June, with consumer prices up 6.4 per cent from the same month a year earlier. Much of the increase was in food prices, particularly pork, which rose 57.1 per cent from a year earlier in June. Read more
Premier Wen Jiabao said China can keep 2011 inflation within 5 per cent as tightening measures take effect, Bloomberg reports. “I see difficulties in reaching the full-year inflation target of 4 percent,” Mr Wen said in comments broadcast on Monday by Hong Kong-based Cable TV. “But it still can be kept below 5 percent after the efforts we have made.” Meanwhile the FT reports that Mr Wen began his visit to the UK on Sunday by visiting Stratford-upon-Avon, where he spoke of how literature and culture could be a bridge between nations. Read more
China’s inflation rate rose to 5.5 per cent in May, Bloomberg says, its highest level in almost three years. Industrial output rose 13.3 per cent, higher than the 13.1 per cent average forecast by economists surveyed by the news agency. The inflation data comes after signs in recent days suggesting the economy is cooling, with exports, new loans and money supply in May all growing slower than expected. It also follows several days of riots in the Guangdong city of Zengcheng, driven in part by anger over food and housing price inflation. Read more
Spirits are running high before this week’s Chinese New Year holiday as prices of a popular grain liquor soar, reports the FT. Moutai, the fiery official liquor for state banquets since the Communist revolution, has been variously described by foreign dignitaries as “liquid razor blades” and “smelling like a barnyard and tasting like turpentine”. With annual food inflation hitting 7.2 per cent last year and with stocks running dry, the state-controlled company that makes China’s most famous moutai brand raised wholesale prices 20 per cent this month – its first increase in a year. Read more