Bloomberg
China May Raise Rates ‘Within Weeks’ as Prices, Exports Climb
March 09, 2010, 11:49 AM EST
March 10 (Bloomberg) -- China’s inflation probably accelerated and exports climbed in February, according to surveys of economists, increasing the likelihood of the central bank raising interest rates from a five-year low.
Inflation, property speculation and risks for banks are among Premier Wen Jiabao’s prime concerns after a record 9.59 trillion yuan ($1.4 trillion) of loans jumpstarted growth last year. Central bank Governor Zhou Xiaochuan said March 6 that while stimulus policies must end “sooner or later,” China needs to be cautious in timing an exit because a global recovery “isn’t solid.”
“The biggest danger to the economy is inflation,” said Wang Qian, an economist with JPMorgan Chase & Co. in Hong Kong. “The government needs to manage inflation expectations and may raise interest rates within weeks.”
Wang sees a 0.27 percentage point increase in the one-year lending and deposit rates as early as this month. In January, consumer prices rose 1.5 percent, the third monthly increase after a nine-month run of deflation.
Producer Prices
Baoshan Iron & Steel Co., China’s biggest publicly traded steelmaker, increased prices for March delivery as much as 7.4 percent because of higher demand and raw material costs. Kweichow Moutai Co., China’s biggest producer of spirits by market value, has also pushed up prices.
Wen told the National People’s Congress on March 5 in Beijing he’s targeting inflation of “about 3 percent” for 2010. Last week’s survey of economists indicated that he may miss that goal, with the median estimate coming in at 3.4 percent.
Meantime, trade figures scheduled for release today may show exports rose 38.3 percent from a year earlier, the third monthly increase and the biggest gain in three years, according to the survey median. Imports may have climbed 38 percent, leaving a trade surplus of $7.15 billion.
Trade Surplus
Commerce Minister Chen Deming said March 6 that the trade surplus fell 50.2 percent in January and February combined from a year earlier as demand within China, the world’s fastest- growing major economy, boosted imports.
The nation has held its currency at about 6.8 per dollar since July 2008 to aid exporters, and policy makers have signaled they’re looking for a sustained export recovery before loosening the peg.
“We must be very cautious about the timing of normalizing the policies, and this includes the renminbi rate policy,” Zhou said, using another term for the Chinese currency.
China’s economic data this week may also show an easing in credit growth. New loans may have declined to 600 billion yuan in February from 1.39 trillion yuan in January after the government increased reserve requirements for banks, soaking up cash that could fuel inflation. Officials are aiming to pare loan growth to 7.5 trillion yuan for 2010.
ICBC Lending
Industrial & Commercial Bank of China Ltd., the world’s largest lender by market value, will lend less this year than in 2009, President Yang Kaisheng said at a Beijing briefing March 7.
“The key danger is excess liquidity in the banking system,” said Gardner Yeh, an economist at Jih Sun Securities Co. in Taipei. “The government needs to closely monitor credit creation and manage inflation expectations.” He sees another increase in banks’ reserve requirements as early as April.
Urban fixed-asset investment may have increased 25.6 percent in the first two months of this year from the same period in 2009, the survey showed. Industrial output may have gained 19.5 percent.
Retail sales for January and February combined climbed 18.7 percent and industrial production advanced 19.5 percent, the survey showed. Economists combine January and February numbers to eliminate the distortion from a Lunar New Year holiday, something that likely also affected the consumer-price report.
Analysts are debating the danger of bubbles in the nation’s asset markets as a consequence of the stimulus. Harvard University’s Kenneth Rogoff and Victor Shih of Northwestern University have warned in the past two weeks that a crisis could result in coming years.
At the same time, Stephen Roach, the chairman of Morgan Stanley Asia, said in a note yesterday that he saw a “false alarm” in tales of asset bubbles or an imminent banking crisis. While there are “very real” risks of asset and credit-market excesses, policy makers will act to ease the danger, he said.
“Pro-active Beijing policy makers are about to dispel yet another false alarm over the imminent perils of Chinese credit and asset bubbles,” Roach said.
China May Raise Rates ‘Within Weeks’ as Prices, Exports Climb
March 09, 2010, 11:49 AM EST
March 10 (Bloomberg) -- China’s inflation probably accelerated and exports climbed in February, according to surveys of economists, increasing the likelihood of the central bank raising interest rates from a five-year low.
Inflation, property speculation and risks for banks are among Premier Wen Jiabao’s prime concerns after a record 9.59 trillion yuan ($1.4 trillion) of loans jumpstarted growth last year. Central bank Governor Zhou Xiaochuan said March 6 that while stimulus policies must end “sooner or later,” China needs to be cautious in timing an exit because a global recovery “isn’t solid.”
“The biggest danger to the economy is inflation,” said Wang Qian, an economist with JPMorgan Chase & Co. in Hong Kong. “The government needs to manage inflation expectations and may raise interest rates within weeks.”
Wang sees a 0.27 percentage point increase in the one-year lending and deposit rates as early as this month. In January, consumer prices rose 1.5 percent, the third monthly increase after a nine-month run of deflation.
Producer Prices
Baoshan Iron & Steel Co., China’s biggest publicly traded steelmaker, increased prices for March delivery as much as 7.4 percent because of higher demand and raw material costs. Kweichow Moutai Co., China’s biggest producer of spirits by market value, has also pushed up prices.
Wen told the National People’s Congress on March 5 in Beijing he’s targeting inflation of “about 3 percent” for 2010. Last week’s survey of economists indicated that he may miss that goal, with the median estimate coming in at 3.4 percent.
Meantime, trade figures scheduled for release today may show exports rose 38.3 percent from a year earlier, the third monthly increase and the biggest gain in three years, according to the survey median. Imports may have climbed 38 percent, leaving a trade surplus of $7.15 billion.
Trade Surplus
Commerce Minister Chen Deming said March 6 that the trade surplus fell 50.2 percent in January and February combined from a year earlier as demand within China, the world’s fastest- growing major economy, boosted imports.
The nation has held its currency at about 6.8 per dollar since July 2008 to aid exporters, and policy makers have signaled they’re looking for a sustained export recovery before loosening the peg.
“We must be very cautious about the timing of normalizing the policies, and this includes the renminbi rate policy,” Zhou said, using another term for the Chinese currency.
China’s economic data this week may also show an easing in credit growth. New loans may have declined to 600 billion yuan in February from 1.39 trillion yuan in January after the government increased reserve requirements for banks, soaking up cash that could fuel inflation. Officials are aiming to pare loan growth to 7.5 trillion yuan for 2010.
ICBC Lending
Industrial & Commercial Bank of China Ltd., the world’s largest lender by market value, will lend less this year than in 2009, President Yang Kaisheng said at a Beijing briefing March 7.
“The key danger is excess liquidity in the banking system,” said Gardner Yeh, an economist at Jih Sun Securities Co. in Taipei. “The government needs to closely monitor credit creation and manage inflation expectations.” He sees another increase in banks’ reserve requirements as early as April.
Urban fixed-asset investment may have increased 25.6 percent in the first two months of this year from the same period in 2009, the survey showed. Industrial output may have gained 19.5 percent.
Retail sales for January and February combined climbed 18.7 percent and industrial production advanced 19.5 percent, the survey showed. Economists combine January and February numbers to eliminate the distortion from a Lunar New Year holiday, something that likely also affected the consumer-price report.
Analysts are debating the danger of bubbles in the nation’s asset markets as a consequence of the stimulus. Harvard University’s Kenneth Rogoff and Victor Shih of Northwestern University have warned in the past two weeks that a crisis could result in coming years.
At the same time, Stephen Roach, the chairman of Morgan Stanley Asia, said in a note yesterday that he saw a “false alarm” in tales of asset bubbles or an imminent banking crisis. While there are “very real” risks of asset and credit-market excesses, policy makers will act to ease the danger, he said.
“Pro-active Beijing policy makers are about to dispel yet another false alarm over the imminent perils of Chinese credit and asset bubbles,” Roach said.