China's inflation rate accelerates, bank lending surges, housing prices soar

Discussion in 'China' started by Armand2REP, May 12, 2010.

  1. Armand2REP

    Armand2REP CHINI EXPERT Veteran Member

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    China's inflation rate accelerates, bank lending surges, housing prices soar

    By Chris Oliver, MarketWatch

    HONG KONG (MarketWatch) -- China's inflation rate accelerated in April, as consumer and producer prices beat estimates, while bank lending rose nearly 30% faster than expected.

    Analysts said the data, including figures released the same day showing accelerating property prices, would renew policy makers' concerns about emerging bubbles.

    "Odds are rising fast that a rate hike will be announced by June, and that yuan appreciation will resume in May," said Dariusz Kowalczyk, chief investment strategist at SJS Markets in Hong Kong.
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    China's consumer prices were 2.8% higher in April than a year earlier, the National Bureau of Statistics said Tuesday, while producer prices were up 6.8%.

    Separate surveys of economists by Dow Jones Newswires and Reuters had both expected a consumer price index gain of 2.7% and a producer price index rise of 6.5%.

    The data showed price pressures heating up from March, when CPI rose 2.4% year-on-year, while the PPI had gained 5.9%.

    "The rate hike is imminent, we just need one more data point supporting," said Dong Tao, Credit Suisse's chief regional economist in Hong Kong, adding that the central bank will be watching to see if annual consumer price inflation exceeds fixed-term savings deposit rates.

    The People's Bank of China could tolerate a temporary bout of negative real interest rates, even as signs appear that savers have begun to liquidate their holdings as monthly inflation outpaces one-fixed deposit rates, currently at 2.25%.


    Real-estate prices in China's 70 biggest cities rose 12.8% in April from a year earlier, accelerating from an 11.7% rise in March, figures released separately Tuesday by the National Bureau of Statistics showed.


    Despite the price gains, Tao said that indications are policy measures designed to cool the housing market have been effective in tamping down sales volumes. Still, Tao said, the PBOC will likely hike interest rates if the monthly CPI reading rises above the government's 3% upper target.

    Such an event appears a near certainty, as consumer prices are poised to trend higher in the next three months, affected by the low comparison base from a year earlier, according to reports Tuesday citing Yao Jingyuan, chief economist of China's National Bureau of Statistics.


    Meanwhile, Chinese banks extended 774 billion yuan ($113.5 billion) worth of new local-currency loans in April, up from 510.7 billion yuan in March, according to central bank data released separately Tuesday.


    That was well above expectations. A Reuters survey of analysts tipped bank lending of 570 billion yuan for the month, while one by Dow Jones Newswires predicted 600 billion yuan.

    The April lending data means Chinese banks have extended 45% of their lending quota for 2010 in just four months, adding to the risks that credit could overshoot the government's 7.5 trillion yuan target.

    "Without an increase in lending rates, meeting this target will be difficult," said RBC Capital Market's analysts in note to clients Tuesday.

    Money supply as measured by M2 rose 21.5% at the end of April, compared to a 22% rise at the end of March. Urban fixed-asset investment gained 26.1% during the January-April period, above a 26.0% Dow Jones Newswires forecast.

    http://www.marketwatch.com/story/ch...e-forecasts-2010-05-10-222500?dist=beforebell
     
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  3. badguy2000

    badguy2000 Respected Member Senior Member

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    MR. armand's logic.

    1.if China's inflation rate accelerates, bank lending surges, housing prices soar CHina is to collapse.

    2. if china's deflation rate accelerates,bank lending reduced, housing prices sucks, China's economy is also to collapse.
     
  4. Armand2REP

    Armand2REP CHINI EXPERT Veteran Member

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    Monsieur Armand's logic consists of one simple fact... bubbles go pop. After all this talk we have heard about China reining in lending and dropping housing prices look at the result of CCP efforts. Lending has surged 30%, property prices have risen 13% and it is 15% for residential. M2 money supply has expanded 22% in the first quarter. Fixed asset investment has increased 26% in the first quarter. The real kicker is these are CCP figures, so we know the truth is far worse. CCP has said they had the situation under control since January and every month it gets worse. So much for control over Centrally planned economies.
     
    Last edited: May 12, 2010
  5. badguy2000

    badguy2000 Respected Member Senior Member

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    yes,one economist started predicting USA economy was to collapsed in 1920.

    After keeping predicting the collapse for 9 years, USA economy finally collapse in 1929... good job.

    MR. Gordon Chang started predicting CHina was to collapse in 2000 and he has kepting predicting "china to collapse" for 10 years. but CHina still has not collapsed, bad job.

    thus, MR Armand, how long are you going to keep predicting "china to collapse"? 10 years?
     
    Last edited: May 12, 2010
  6. Iamanidiot

    Iamanidiot Elite Member Elite Member

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    BG how part of the purchase price is given as loan to the individual.What is the collateral the individual provides to the bank to get the loan sanctioned
     
  7. Iamanidiot

    Iamanidiot Elite Member Elite Member

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    Aramnd no economy can regulate greed no matter what sort of governance it is.Any ideas what sort of investments the chinese can invest in apart from stocks and housing flats?.Can they invest in farm lands and invidual land as property.Can an individual chinese invest overseas?
     
  8. mattster

    mattster Respected Member Senior Member

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    According to Marketwatch article - urban fixed asset investment gained 26% in 1 quarter. you dont have to be an economist to know that means that some housing areas are almost doubling in price, even if it is only 15% per quarter, then the price is more than doubling in 2 years.

    With that kind of property bubble, that means that all goods and services from groceries to manual labor prices are going to go up. It also means that rents will also go up.
    Eventually the business people living in these cities will have to raise prices to keep up with the cost of living and property.

    As for me, I am going to check my retirement mutual funds investment choices and reduce my exposure to China to almost zero !!
     
  9. thakur_ritesh

    thakur_ritesh Administrator Administrator

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    a rate hike is certainly on the cards, the best indicator of which is 45% of the lending quota of chinese banks being consumed in just 4 months and with that huge upsurge in lending the chances of bad debts increases that much more, but inflation figures are not all that alarming where cpi rose at 2.4% year-on-year, and the PPI rose by 5.9% y-o-y, but yes they do need to provide a bank deposit rate which is higher than this, only if i could lay my hand on that cheep money, man!

    now where the author says:

    it does not reveal much because what is not being revealed there is the base on which this growth is happening for both the months march and april and secondly and very conveniently the successive m-o-m figures have been hidden, where in there is no data for the % increase in the prices in the month april '10 over the base of march '10.

    mattster,

    can you share the article you are referring to in the marketwatch, now that is where the real situation has been reveled and seriously for those who like to take huge risks and make short term investments, china's "urban fixed asset" market is the place to be in. anyways, other than real estate what else could be a part of "urban fixed asset investments"?
     
  10. Armand2REP

    Armand2REP CHINI EXPERT Veteran Member

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    That is contrary to the popular belief Centrally planned economies can regulate lending and state owned enterprises. It is turning out to be true, CCP has no control over its asset market and the state organs that fuel it. It isn't by fact however, CCP could reign in lending and speculation with one simple action, increase interest rates. People will stop dumping money into property and deposit into the bank. This is an action PBOC is afraid to use. China is addicted to construction, plain and simple. With the loss of their export markets it is the only thing left to drive growth.
     
  11. amoy

    amoy Senior Member Senior Member

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    Unlike the West or India, China is a developing country (or under developed in many ways/areas). Therefore there's a ample room for contruction / investment in infrastructures . and it proves an effective means of stimulating economic growth and createing demand and job opportunities.
    Wondering what folks in your countries (india/france) would normally invest in. Here in China, frankly not many options other than asset or stock.
     
  12. Armand2REP

    Armand2REP CHINI EXPERT Veteran Member

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    But their isn't ample room for construction. You already have vacany rates of 30% throughout the country for residential and 50% for urban commercial. You are about to complete enough office space for a 5x5 cubicle for every man, woman, and child in China. 50,000 skyscrapers are being completed in the next 5 years, that is 273 New York Cities. The population isn't even growing half a percent. Universities are closing down because there are not enough students to enroll. 73 year old women are given jobs because there are no young people to take the work. People are no longer flocking to cities, they are running away from high property prices. The only way to get villagers to move is to demolish their house and set them up in an urban area. Thanks to the One-Child policy your vast population potential is drying up and your high property prices are driving the rest away.

    As far as infrastructure, there are regional airports with only one flight. There are 10 times more roads than there are cars on them comparable to the West. CCP is so desperate to create construction jobs they demolish perfectly good bridges they just built a few years before. For every dollar spent on infrastructure, China only receives one cent in GDP growth, that is how overdeveloped Chinese infrastructure is for its demand. It will take you twenty years to grow into what you have at your currently inflated growth rates. You don't have the demand for these services and you won't for a very long time. When the asset bubble pops, it will be an even greater length of time.
     
  13. nandu

    nandu Senior Member Senior Member

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    China consumer price rise picks up pace

    Chinese inflation and housing prices continued to accelerate last month, underlining the difficult judgments the Chinese authorities face as they try to engineer a modest cooling in economic activity.

    [video]http://video.ft.com/v/84594520001/May-Chinese-inflation-picks-up-pace[/video]

    Consumer price inflation increased to 2.8 per cent in April from 2.4 per cent the month before, its highest level in 18 months although still below the government’s target of 3 per cent. Factory gate inflation jumped to 6.8 per cent from 5.9 per cent.

    Adding to the fears of overheating, house prices increased by 12.8 per cent in April from a year earlier, the fastest rate of increase since records began five years ago, although sales volumes in many cities have already slowed dramatically in recent weeks as a result of government policies aimed at discouraging property speculation.

    While the government has taken steps to slow the housing market, the authorities have so far avoided raising interest rates or appreciating the currency in order to tighten policy for the broader economy, preferring more modest tools such as lifting bank reserve requirements.

    The new data, which also recorded slowdowns in the rate of increase in the money supply and fixed asset investment, prompted different responses from private sector economists.

    “Virtually everything is on the rise in China, from wages to grain and vegetables and we expect inflation above 5 per cent by the end of the year,” said Dong Tao at Credit Suisse. “Inflation will be the biggest worry in the second half of this year and everybody in China except government economists seems to have realised inflation won’t peak in the middle of the year.”

    Liu Ligang at ANZ in Hong Kong said the April figures “vindicated our views that China’s economy has already overheated.”

    However, Ha Jiming at China International Capital Corporation reduced his estimate for 2010 growth from 10.5 per cent to 9.5 per cent on the grounds that property investment would slow, while exports would be weaker than expected because of the fallout from the Greek crisis. More muted growth overseas would also reduce inflation pressures from raw materials costs, he said.

    Sheng Laiyun, a spokesman at the National Bureau of Statistics, said that consumer price inflation would be kept below 3 per cent, despite near-term pressures.

    http://www.ft.com/cms/s/0/d9b0a424-5cb0-11df-bb38-00144feab49a.html
     
  14. badguy2000

    badguy2000 Respected Member Senior Member

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    guy, you can not understand China just by reading Gordon Chang's articles in Internet.

    Inland China still is serously short of infrastructure. Infact, even coastal China still have ample room for infrastructres construction. it is foolish to use india criterion and EU criterion to measure the infrastructure construction of CHina.

    infrastructre projects in CHina ,especially highways, railways and ports in China, are stil most profitable projects in the eyes of Chinese banks.
     
  15. thakur_ritesh

    thakur_ritesh Administrator Administrator

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    I get a feel here, china is specifically trying to move the focus from export driven economy to one based on consumption, something they have been talking for quite some time now, and with that huge flow of cheep money in the market that is certainly helping the cause which is indicative from 45% of the supposed money to be lend by the banks this fiscal being consumed in just 4 months, and the thing to be noticed is inflation figures are certainly not alarming in any which way, real estate yes but even that does not come across as a case of out and out overheating (atleast from the two articles that have been posted here, though mattster suggests otherwise), which is a reflection of adequate supply in the market from all ends.

    Now if that is what they are trying to do, then in no way will they increase the bank interests rates over and above the inflation rate, because then a average chinese would start looking at parking the money back in the bank and that is something the chinese would not like to happen but will this cut down the savings rate of the country, I suspect the answer is yes.

    The need for a more consumption based economy increases further because of the debt crises emerging in EU, but with this huge surge in lending are the chinese ready for a surge in bad debts that could be a possible out come, let us not forget back in the 90s they had a terrible record of bad debts when the NPAs for certain banks were as high as 20% and more.
     
    Last edited: May 12, 2010
  16. Armand2REP

    Armand2REP CHINI EXPERT Veteran Member

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    Guy, I don't read Gordon Chang. I never heard of him until you dropped the name and really couldn't care less about him.

    China isn't short on infrastructure for the demand it has for infrastructure. It would be different if you had French per capita GDP, demand would be much higher, but you don't and your population could never generate that much wealth per person. You are going to run out of water long before that happens.

    China has so many toll roads people are going to take the train than travelling great distance by automobile. So highspeed rail cuts into that profitability. Now that air routes are being cancelled to get people on highspeed rail it is again undermining your infrastructure profitability. Legacy train routes being cancelled for HSR to again undercut profitability. China had plenty of port capacity at the height of trade, now they build more even during the down low. So much excess capacity doesn't make money, it costs money and we know what that turns into... NPLs.
     
    Pintu and Daredevil like this.
  17. badguy2000

    badguy2000 Respected Member Senior Member

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    guy, most guys like you really know little about how Chinese economy works.

    the real problem of CHinese economy is how to crush the local_government-banks-real_asset_developers complex without harming the development of economy.

    In China, local governments,banks and real-asset developers have formed a convenient evil complex ,which is chasing for a higher house price crazely. Local government needs higher house price for more land-granting fees, banks need higher house price to lending more house loans and real_asset developers want higher house price for more profits.

    Beijing has realized that the convinent evil complex harms the long-term development of CHina and trys to crush it without harsh impact on Chinesse economy...Beiing wants a "soft landing" .


    IMHO, if Beijing really wants to crush the evil complex, Beijing should first make Chinese local governments get out of the reliance on land-granting fees.
    Last year,Chinese local governments earned over 1.6 trillion RMB( about 230 billion USD) land-granting fees,which is almost 1/3 of total revenue of Chinese local governments and almost equal to the total yearly revenue of India government.
    http://www.baidu.com/s?wd=2009%C4%EA%C8%AB%B9%FA%CD%C1%B5%D8%B3%F6%C8%C3%BD%F0
     
    Last edited: May 12, 2010
  18. badguy2000

    badguy2000 Respected Member Senior Member

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    even if measurd by per capital nominal GDP, Chinese per capital wealth will catch up full-industrialized economies such as France in 2020s-2030s.
    Of course, there are two ways how Chinese per capitacl weatlh is to catch up with france's.

    1. Chinese per capital wealth is to increase;
    2.French per capital wealth is to decrease.

    In the coming two decades, two ways will go on at the same time. That is to say, CHinese are to become richer while industrialized world including France are to become poorer.

    When Chinese are as rich as people in current industrilized world , the the new balance will appear and the tide of "made in China" will fade gradually..

    I am sure that the kids of MR. Armand will have a lower life quality than Mr Armand while My kids will have a higher life quality than me.


    In fact, the unemployed workers in EU and USA are also the losers in the competiton against Chinese workers.
    the collapse of PIGs and appearance of "700 Euro class" in EU just prove how industrialized economies such as EU and USA now are becoming the loser in the competition against CHina.
    it is doomed that the kids of losers will have a lower life quality due to the failure of their parents.


    guy, pls come to visit CHina, before you draw you clueless conclusion ,ok?

    the construction trans-China high-speed railway net is a new milestone and can bring Chinese society into another epoch ,just like construction of Yankee's trans-continent raiway-net in 19th century and tran-states expressway net in 1950s.

    Suddenly, People can visit one city 500KM aways in 1-2 hours,which used to take 6-7 hours. It attracts more and more capital and labour to flow into inland CHina from costal China,due to much lower product cost in inland china. It makes inland CHina much more attractive to investers than lower-labour-cost Vietnam,India and other poorer countries.

    Before the construction of highspeed railway net, I onced thought that some factories in costal China might move to Vietnam and other poorer countries for lower labour cost.But the construction of trans-China highspeed railway net reduces the chance of industry moving out out China very much.

    In a word, duirng the next industry shift, poorer countries such as India and Vietnam have no chance to attract more factories than inland China armed with highspeed railway net ,although they have cheaper labour cost.
     
    Last edited: May 12, 2010
  19. Armand2REP

    Armand2REP CHINI EXPERT Veteran Member

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    Hate to burst your bubble but there is zero chance of that happening. Once you are an advanced economy you don't revert to a developing one. French economy is strong because we have high consumer spending. Your economy is driven by exports and construction. Consumer spending in China has dropped to an all time low of 35% GDP. It should be 50-60%. China will never be able to consume a per capita as high as France for one simple reason, there are not enough resources to sustain it. Unless you plan on starving off the population like Mao. Your Gini score doesn't help, unequal distribution of wealth in China is at 3rd world levels, you can't increase consumer spending if it is held by a hundred billionares.

    The "Made in China" stamp is a symbol across the world associated with cheap junk. You will not lose that to mean quality until you stop making junk and make quality products that beat the West in innovation. China has no innovation, you mimic what we do. If we don't invent it, you certainly won't and you will never be an advanced economy until you do.

    Les enfants de Monsieur Armand will have a much better quality of life than a country that lacks social safety nets. We have free comprehensive healthcare while the best you can hope to get is a free clinic. We have affordable housing while the best medium income Chinese can afford is a used shipping container or a hole in the wall. Our pensions actually keep us out of poverty while a Chinese pension isn't worth a roll of dimes. We have high consumer spending because we do not have to fear that we cannot pay the doctor, afford the mortgage or worry about retirement. We receive quality educations while your children are pumped out of mass produced cheating and mimicry. We are covered, your children have next to nothing and they will continue to have nothing. It is impossible to afford social protection for 1.4 billion people. Your large population may be your saving grace now, but you will find in the end it is your curse that holds you back from Western living standards.

    Already been there, done that and have the veteran T-shirt. After working in China for any length of time you quickly realise there is no place like home.

    Not even close, it is more like Europe's early flirtation with the TGV and having a bunch of mounting NPLs. Difference is we were smart enough to shut down the failing lines and only operate profitable ones.

    Investors don't care if you have HSR unless you are relying on a tourism investment. China already has all the infrastructure it needs for investor imputs. What you need now is a decent education system instead of the cheat and mimic factory you call Chinese schools. The reason you attract screwdriver industries is because your labour pool is under educated who don't think for themselves. The only reason you have any success is because Chinese flock to Western schools by the millions.

    HSR doesn't reduce the cost of labour, nor does it reduce the cost of shipping. It increases it. Low cost operations have been shipping out to Vietnam for a while now and will continue to do so.

    HSR is more expensive to ship than traditional rail. HSR freight doesn't travel much faster than traditional rail anyway, the speed is cut in half.
     
  20. Armand2REP

    Armand2REP CHINI EXPERT Veteran Member

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    House hunting in China's Property Bubble...

     
    Last edited by a moderator: May 10, 2015
  21. badguy2000

    badguy2000 Respected Member Senior Member

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    you may raise thousands of reasons,but the reality will crush any of your reasons.
    BTW, resource all over the world is not the chunk of meat for west exclusive consumption.
    whoever would privide higher offer can get the resource.France will simply be deprived of the chance to import resource,if France can not provide higher offer than China.
    I don't think China is the one who can not afford more expensive resource.
    case is that once France can not produce whatever resource-exporter wants,France could afford importing resource had to lower his life quality.

    I am very happy to see how french companies such as Alcatel is being ass-kicked by Huawei and French highspeed railways tech is also being ass-kicked by Chinese one all over the world.

    the huge national debit of France send a greet to you. you have ate up the bread for your kids,guy!

    BTW, greece also was very proud of their social safety net once.




    European TGV is just a peanuts compared with CHinese highspeed railway net. it is not a "net" at all, but several lines.
    Besides, UK built railways first in 19th century,but it was USA that built biggest and most useful railway net of humankind.
    Europe and Japan built HSR first,but it is China that built the biggest and most useful HSR net of humankind.


    enough? it may be enough to a nation who just wants to live on the fat left by their parents and has no desire to do better .

    To the people who always work hard and chase for a better life such as Chinese, it is not enough by far.

    Besides, I have a higer IQ superiortity complex to Frenchmen,after talking and discussing with you.


    HSR reduces freight cost and taveling time. it also makes cheaper resource in inland China availabe . HSR also frees the freigh capacity of traditional railway net.
     
    Last edited: May 13, 2010

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