Jan. 22, 2010, 10:11 a.m. EST
Rhetoric shift seen as major turning point in China policy
By Chris Oliver, MarketWatch
HONG KONG (MarketWatch) -- The omission of a handful of words from statements by senior Chinese officials this week has fueled speculation that unofficial government policy has tilted towards tighter monetary conditions, a milestone that could have policy implications for years to come.
A speech by Premier Wen Jiabao posted on the People's Bank of China' Web site on Tuesday left out the words "proactive fiscal policy and relatively loose monetary policy" when referring to China's macroeconomic policy.
Heard on the Street: China's GDP Tradeoff
China exceeds its own economic growth target in 2009. But at what cost? Hong Kong bureau chief Peter Stein speaks with Heard on the Street's Mohammed Hadi about some of the concerns about China's GDP report.
The phrase had been used consistently in policy statements since the fourth quarter of 2008 and was highlighted as recently as December in a statement from China's Central Economic Working Conference.
Bank of America Merrill Lynch economist Ting Lu said in a research note that the shift in rhetoric "marks a significant change in China's policy stance, and officially draws an end to the emergency mode of government policies."
National Bureau of Statistics Director Ma Jiantang also dropped the phrasing from his statements Thursday summarizing China's fourth-quarter economic data. Published materials that accompanied the data release also omitted the language. See story on China's GDP data.
Merrill's Lu said the speech by Wen was really an early glimpse at what will be presented to China's legislature at the National People's Congress in March.
Although minor policy adjustments can be expected for the foreseeable future, the new climate can be seen as a tidal shift in what has been China's ultra-loose stance.
"This is an inflection point," Lu said. He added policy makers were crafting an exit after six quarters of historic easing. "It's not a 'U-turn,' it does not suggest that they will raise benchmark interest rates very soon."
SocGen Chief Asia-Pacific Economist Glenn Maguire said in a note Thursday that rhetorical cues this week indicated the tightening would be expressed through monetary policy rather than fiscal policy.
Changes to the ratio of reserves that banks must set aside as deposits were likely, but interest-rate hikes also couldn't be ruled out, he said.
Among the latest indications of the tightening environment were reports Thursday that China's banking regulator plans to introduce credit quotas for banks as well as administrative caps on how much they can lend each month.
The state-run China Daily, which broke the story, citing an unnamed source, said that policy being drafted will limit new loan issuance by Chinese banks to around 900 billion yuan ($131.8 billion) a month. See story on China loan issuance.
Chris Oliver is MarketWatch's Asia bureau chief, based in Hong Kong.
Rhetoric shift seen as major turning point in China policy
By Chris Oliver, MarketWatch
HONG KONG (MarketWatch) -- The omission of a handful of words from statements by senior Chinese officials this week has fueled speculation that unofficial government policy has tilted towards tighter monetary conditions, a milestone that could have policy implications for years to come.
A speech by Premier Wen Jiabao posted on the People's Bank of China' Web site on Tuesday left out the words "proactive fiscal policy and relatively loose monetary policy" when referring to China's macroeconomic policy.
Heard on the Street: China's GDP Tradeoff
China exceeds its own economic growth target in 2009. But at what cost? Hong Kong bureau chief Peter Stein speaks with Heard on the Street's Mohammed Hadi about some of the concerns about China's GDP report.
The phrase had been used consistently in policy statements since the fourth quarter of 2008 and was highlighted as recently as December in a statement from China's Central Economic Working Conference.
Bank of America Merrill Lynch economist Ting Lu said in a research note that the shift in rhetoric "marks a significant change in China's policy stance, and officially draws an end to the emergency mode of government policies."
National Bureau of Statistics Director Ma Jiantang also dropped the phrasing from his statements Thursday summarizing China's fourth-quarter economic data. Published materials that accompanied the data release also omitted the language. See story on China's GDP data.
Merrill's Lu said the speech by Wen was really an early glimpse at what will be presented to China's legislature at the National People's Congress in March.
Although minor policy adjustments can be expected for the foreseeable future, the new climate can be seen as a tidal shift in what has been China's ultra-loose stance.
"This is an inflection point," Lu said. He added policy makers were crafting an exit after six quarters of historic easing. "It's not a 'U-turn,' it does not suggest that they will raise benchmark interest rates very soon."
SocGen Chief Asia-Pacific Economist Glenn Maguire said in a note Thursday that rhetorical cues this week indicated the tightening would be expressed through monetary policy rather than fiscal policy.
Changes to the ratio of reserves that banks must set aside as deposits were likely, but interest-rate hikes also couldn't be ruled out, he said.
Among the latest indications of the tightening environment were reports Thursday that China's banking regulator plans to introduce credit quotas for banks as well as administrative caps on how much they can lend each month.
The state-run China Daily, which broke the story, citing an unnamed source, said that policy being drafted will limit new loan issuance by Chinese banks to around 900 billion yuan ($131.8 billion) a month. See story on China loan issuance.
Chris Oliver is MarketWatch's Asia bureau chief, based in Hong Kong.