From Bloomberg this morning:
China's banking regulator said it's giving ``guidance'' to banks to cool lending that's already topped its goal of 15 percent growth this year and threatens to overheat the world's fastest-growing major economy.
The China Banking Regulatory Commission denied a Wall Street Journal report today that it had ordered banks to freeze this year's lending at Oct. 31 levels. A 15 percent ceiling on loan growth is ``informal guidance, not a hard target,'' said Lai Xiaomin, the commission's Beijing-based spokesman.
Record trade surpluses have pumped cash into China, threatening to stoke inflation, asset bubbles and investment leading to overcapacity in manufacturing. The central bank has raised the benchmark one-year lending rate by 1.17 percentage points this year to 7.29 percent and ordered commercial lenders to set aside larger reserves.
``Reserve-ratio requirement hikes and rate hikes have not been able to slow bank lending growth this year,'' said Sun Mingchun, an economist at Lehman Brothers Holdings Inc. in Hong Kong. ``Therefore, the government has to rely on this non-market type of monetary policy tool.''
Chinese banks extended 3.5 trillion yuan ($471 billion) of new loans in the first 10 months, a 15.6 percent increase from loans outstanding at the end of last year, according to central bank data.
`Obstacles' for Banks
``Banks that exceed the 15 percent cap will face regulatory obstacles in applying for a new branch opening or new product lines,'' said Li Shanshan, a Shenzhen-based analyst at China Merchants Securities Co. ``Therefore, banks still have an incentive to obey what the government says.''
Lending is biggest early in the year ``so slower lending in the remaining two months won't have a significant impact on their bottom lines,'' said Li. Average loan growth of big state-owned banks this year is about 15 percent versus about 20 percent for small and medium-sized lenders, the analyst said.
The regulator last week told state banks to curb lending, citing the 15 percent target, according to the Shanghai Securities News. Another newspaper, China Business News, reported last week that overseas banks were told to tighten lending to real estate developers.
``We don't subject banks to hard-and-fast lending caps since individual banks have such different business needs,'' said the regulator's Lai. ``What we want is a reasonable pace of loans growth, dependent on each bank's capital-adequacy ratio, and the risk and quality of its loan portfolio.''
Accelerating Inflation
The central bank this month ordered lenders to set aside more money as reserves for the ninth time this year, raising the ratio to 13.5 percent, the highest since at least 1987.
The trade surplus widened to a record $27 billion in October.
Inflation last month jumped to 6.5 percent, matching August's rate, the highest in more than 10 years, on higher food prices. The benchmark CSI 300 Index of stocks has more than tripled in the past year even after declines since mid-October.
Government efforts to guide lending illustrate its reluctance to ``raise rates too much or let the yuan appreciate faster'' to curb liquidity, according to Wang Tao, head of economics and strategy for Greater China at Bank of America Corp. in Beijing.
The Chinese currency has gained more than 11 percent versus the dollar since the end of a fixed exchange rate in July 2005.
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Monday, November 19, 2007
Friday, November 16, 2007
China Factory Spending Up 26% y-o-y
From Bloomberg this morning:
China's growth in factory and property spending unexpectedly accelerated, stoking speculation the central bank will raise interest rates for a sixth time this year to cool the world's fastest-growing major economy.
Fixed-asset investment in urban areas rose 26.9 percent to 8.9 trillion yuan ($1.2 trillion) in the first 10 months of 2007 from a year earlier, the statistics bureau said today. That beat the 26.2 percent median estimate of 21 economists surveyed by Bloomberg News. The pace was 26.4 percent through September.
The central bank may raise the benchmark one-year rate from 7.29 percent as early as today after inflation matched a decade high in October and the trade surplus widened to a record. Surging factory spending increases the risk that China, the biggest contributor to global growth, will be left with idle factories, job losses and a supply glut if export demand slows.
``Macro controls will strengthen because the government wants slower investment,'' said Liao Qun, chief economist at Citic Ka Wah Bank in Hong Kong. ``Add the high inflation number and the chance of an interest-rate increase today or this weekend has got much bigger.'' He expects borrowing costs to rise as many as two times before year's end.
China's key rate, at a nine-year high after climbing 1.17 percentage points this year, compares with 0.5 percent in Japan, 4.5 percent in the U.S., 5 percent in South Korea and 5.75 percent in the U.K.
The yuan was little changed at 7.4233 versus the dollar at 3:57 p.m. in Shanghai. The currency has climbed 11.5 percent since the end of a fixed exchange rate in July 2005. The CSI 300 Index of stocks fell 1.5 percent on speculation that rates will rise, paring the benchmark's gains for the year to 145 percent.
Bigger Than Brazil
Economists calculated the increase in fixed-asset investment for October alone was more than 30 percent.
Spending through October exceeded the gross domestic product of the economies of Russia, Brazil or India. Investment has quadrupled since 1996 when the data was first released. It accounted for 42.5 percent of China's GDP last year.
The nation's projects include a $65 billion facelift for Beijing that includes a new airport terminal, subway lines and roads for next year's Olympic Games.
Spending in the non-ferrous metal industry jumped 33 percent in the first 10 months. Investment in non-metal minerals soared 54 percent. The number of new investment projects was 191,086, an increase of 22,518 from a year earlier.
``The economy risks overheating and more needs to be done in monetary policy tightening,'' said Qu Hongbin, chief China economist at HSBC Holdings Plc in Hong Kong. ``There will be at least one more interest-rate increase this year and the central bank will be tougher in curbing loans.''
Borrowing Costs
The People's Bank of China is boosting this month the proportion of deposits that lenders must set aside as reserves to 13.5 percent, the most since at least 1987.
``A sharper-than-expected slowdown in global growth could curtail China's exports and expose the severity of its overcapacity problem,'' Sun Mingchun, an economist at Lehman Brothers Holdings Inc. in Hong Kong, said in a report this month.
More than two-thirds of Chinese enterprises believe their industries have overcapacity, the state-run Xinhua News Agency reported Nov. 11, citing a government survey. Textile, pharmaceutical and equipment manufacturing were cited as examples.
China's economy may face ``a turning point'' if exports drop abruptly as a result of cooling overseas demand, Sheng Baofu, a Ministry of Commerce researcher, wrote in a Nov. 13 article posted on the ministry's Web site. Exporters mainly targeting the U.S. risk ``continuously shrinking'' orders, Sheng wrote.
Flood of Cash
That contrasts with government efforts now to tame the flood of cash from a trade surplus that reached $27 billion last month, stoking inflation, asset prices and investment.
Money supply grew 18.5 percent from a year earlier, exceeding the central bank's annual target of 16 percent for a ninth straight month. Consumer prices rose 6.5 percent on surging food costs.
China should raise rates and allow more currency appreciation, the World Bank said yesterday. Bigger yuan gains would staunch money inflows by pushing up export prices.
China is the biggest contributor to global growth this year, the International Monetary Fund said last month.
China's growth in factory and property spending unexpectedly accelerated, stoking speculation the central bank will raise interest rates for a sixth time this year to cool the world's fastest-growing major economy.
Fixed-asset investment in urban areas rose 26.9 percent to 8.9 trillion yuan ($1.2 trillion) in the first 10 months of 2007 from a year earlier, the statistics bureau said today. That beat the 26.2 percent median estimate of 21 economists surveyed by Bloomberg News. The pace was 26.4 percent through September.
The central bank may raise the benchmark one-year rate from 7.29 percent as early as today after inflation matched a decade high in October and the trade surplus widened to a record. Surging factory spending increases the risk that China, the biggest contributor to global growth, will be left with idle factories, job losses and a supply glut if export demand slows.
``Macro controls will strengthen because the government wants slower investment,'' said Liao Qun, chief economist at Citic Ka Wah Bank in Hong Kong. ``Add the high inflation number and the chance of an interest-rate increase today or this weekend has got much bigger.'' He expects borrowing costs to rise as many as two times before year's end.
China's key rate, at a nine-year high after climbing 1.17 percentage points this year, compares with 0.5 percent in Japan, 4.5 percent in the U.S., 5 percent in South Korea and 5.75 percent in the U.K.
The yuan was little changed at 7.4233 versus the dollar at 3:57 p.m. in Shanghai. The currency has climbed 11.5 percent since the end of a fixed exchange rate in July 2005. The CSI 300 Index of stocks fell 1.5 percent on speculation that rates will rise, paring the benchmark's gains for the year to 145 percent.
Bigger Than Brazil
Economists calculated the increase in fixed-asset investment for October alone was more than 30 percent.
Spending through October exceeded the gross domestic product of the economies of Russia, Brazil or India. Investment has quadrupled since 1996 when the data was first released. It accounted for 42.5 percent of China's GDP last year.
The nation's projects include a $65 billion facelift for Beijing that includes a new airport terminal, subway lines and roads for next year's Olympic Games.
Spending in the non-ferrous metal industry jumped 33 percent in the first 10 months. Investment in non-metal minerals soared 54 percent. The number of new investment projects was 191,086, an increase of 22,518 from a year earlier.
``The economy risks overheating and more needs to be done in monetary policy tightening,'' said Qu Hongbin, chief China economist at HSBC Holdings Plc in Hong Kong. ``There will be at least one more interest-rate increase this year and the central bank will be tougher in curbing loans.''
Borrowing Costs
The People's Bank of China is boosting this month the proportion of deposits that lenders must set aside as reserves to 13.5 percent, the most since at least 1987.
``A sharper-than-expected slowdown in global growth could curtail China's exports and expose the severity of its overcapacity problem,'' Sun Mingchun, an economist at Lehman Brothers Holdings Inc. in Hong Kong, said in a report this month.
More than two-thirds of Chinese enterprises believe their industries have overcapacity, the state-run Xinhua News Agency reported Nov. 11, citing a government survey. Textile, pharmaceutical and equipment manufacturing were cited as examples.
China's economy may face ``a turning point'' if exports drop abruptly as a result of cooling overseas demand, Sheng Baofu, a Ministry of Commerce researcher, wrote in a Nov. 13 article posted on the ministry's Web site. Exporters mainly targeting the U.S. risk ``continuously shrinking'' orders, Sheng wrote.
Flood of Cash
That contrasts with government efforts now to tame the flood of cash from a trade surplus that reached $27 billion last month, stoking inflation, asset prices and investment.
Money supply grew 18.5 percent from a year earlier, exceeding the central bank's annual target of 16 percent for a ninth straight month. Consumer prices rose 6.5 percent on surging food costs.
China should raise rates and allow more currency appreciation, the World Bank said yesterday. Bigger yuan gains would staunch money inflows by pushing up export prices.
China is the biggest contributor to global growth this year, the International Monetary Fund said last month.
Global Slowdown and Chinese Exports
From the FT this morning:
China’s commerce ministry warned on Thursday that a slowing US economy would trigger a drop in Chinese exports that would mark a “turning point” for China’s rapid economic growth.
A global economic slowdown stemming from problems in the US subprime mortgage market and the resulting credit squeeze “will be the biggest challenge to China’s economy next year”, a report from the ministry’s policy research department said.
The report is Beijing’s first public comment on what repercussions it expects from the global credit crisis and a sign that the government does not support the view that Asian growth has “decoupled” from the US. “If demand in the US drops further, Chinese exporters will be devastated by a rapid and continuous fall in orders,” the report said.
Exports account for more than a third of China’s economic growth and 10 per cent of overall GDP, a radically different situation from just four years ago, when exports contributed nothing to headline growth figures.
Huang Yiping, chief Asia economist for Citigroup, said: “I agree with the government that a marked slowdown in the US would be very bad for China.
“We haven’t seen overcapacity or a so-called hard landing in China because it has been able to export all its excess capacity until now.”
The ministry’s report was pessimistic about the chances of avoiding a US and global slowdown, pointing out that although central banks in the US, Europe and Japan had taken numerous steps to alleviate the credit crisis, the situation had continued to deteriorate and “panic in the credit market remains”.
The US receives a fifth of all Chinese exports, making it the second-largest destination for Chinese-made goods after the European Union.
China’s central bank estimates that every 1 per cent drop in US economic growth translates into a 6 per cent fall in Chinese exports.
Exports to the US have slowed significantly since the start of the year, dropping from a 20.4 per cent year-on-year rise in the first quarter to a 15.6 per cent increase in the second. Growth fell to 12.4 per cent in the third quarter following the eruption of subprime loan problems.
The ministry said a combination of falling US interest rates and rising Chinese rates was limiting Beijing’s ability to rein in soaring property and stock market prices and inflation was running at its highest level in a decade. It also noted that continued turmoil in global financial markets could encourage greater capital inflows to China, straining the country’s financial and regulatory system and increasing inflationary pressure.
While potentially devastating for Chinese exports, a US slowdown could help reduce China’s soaring trade surplus, which hit a monthly high of $27bn in October, having increased more than 59 per cent to $212.4bn in the first 10 months from a year earlier.
China’s commerce ministry warned on Thursday that a slowing US economy would trigger a drop in Chinese exports that would mark a “turning point” for China’s rapid economic growth.
A global economic slowdown stemming from problems in the US subprime mortgage market and the resulting credit squeeze “will be the biggest challenge to China’s economy next year”, a report from the ministry’s policy research department said.
The report is Beijing’s first public comment on what repercussions it expects from the global credit crisis and a sign that the government does not support the view that Asian growth has “decoupled” from the US. “If demand in the US drops further, Chinese exporters will be devastated by a rapid and continuous fall in orders,” the report said.
Exports account for more than a third of China’s economic growth and 10 per cent of overall GDP, a radically different situation from just four years ago, when exports contributed nothing to headline growth figures.
Huang Yiping, chief Asia economist for Citigroup, said: “I agree with the government that a marked slowdown in the US would be very bad for China.
“We haven’t seen overcapacity or a so-called hard landing in China because it has been able to export all its excess capacity until now.”
The ministry’s report was pessimistic about the chances of avoiding a US and global slowdown, pointing out that although central banks in the US, Europe and Japan had taken numerous steps to alleviate the credit crisis, the situation had continued to deteriorate and “panic in the credit market remains”.
The US receives a fifth of all Chinese exports, making it the second-largest destination for Chinese-made goods after the European Union.
China’s central bank estimates that every 1 per cent drop in US economic growth translates into a 6 per cent fall in Chinese exports.
Exports to the US have slowed significantly since the start of the year, dropping from a 20.4 per cent year-on-year rise in the first quarter to a 15.6 per cent increase in the second. Growth fell to 12.4 per cent in the third quarter following the eruption of subprime loan problems.
The ministry said a combination of falling US interest rates and rising Chinese rates was limiting Beijing’s ability to rein in soaring property and stock market prices and inflation was running at its highest level in a decade. It also noted that continued turmoil in global financial markets could encourage greater capital inflows to China, straining the country’s financial and regulatory system and increasing inflationary pressure.
While potentially devastating for Chinese exports, a US slowdown could help reduce China’s soaring trade surplus, which hit a monthly high of $27bn in October, having increased more than 59 per cent to $212.4bn in the first 10 months from a year earlier.
Investment in China Accelerates
From Reuters this morning:
Chinese capital spending in October rose at the briskest pace in over a year, rounding out a strong batch of monthly economic data and cementing expectations of a fresh rise in interest rates, possibly as early as Friday.
Capital spending in urban areas on fixed assets such as factories and power plants increased 26.9 percent between January and October compared with the same period last year, the National Bureau of Statistics said.
It was the fastest year-to-date pace since September 2006, eclipsing forecasts of a 26.3 percent rise and the 26.4 percent increase in the first nine months.
Economists calculated that investment spending in October alone was up 30.7 percent from a year earlier. JPMorgan Chase said that was the quickest monthly clip since June 2006.
"That makes an interest rate rise more likely today. Everybody in the market is now expecting it," Qiu Gaoqing, an analyst with Bank of Communications in Shanghai, said.
Shanghai stocks and the yuan eased on Friday as investors focused on the potential for higher interest rates.
The People's Bank of China (PBOC), the central bank, has already raised interest rates five times so far this year and ordered banks on nine occasions to hold more of their deposits in reserve instead of lending them out.
Mingchun Sun, an economist with Lehman Brothers in Hong Kong, agreed that a rate rise was on the cards.
"We expect one 27 basis-point hike by the end of this year, and it's possible that it could even happen today or tomorrow," he said.
China shifts its interest rates in increments such as 0.27 that are divisible by nine to make it easier for banks, which levy interest based on a 360-day year, to calculate the new payment changes.
A HOT ECONOMY
Chinese policy makers have been trying to cool over-investment for fear that excess supply will drive down profit margins and leave companies unable to service their debts.
"I'm pretty worried about this strong number because we think that the overcapacity issue is already a big problem, and this number is definitely making this more severe," Sun said.
The government has tightened land-conversion and environmental-protection rules, taking particular aim at industries that consume a lot of energy and spew out pollution.
Slightly softer factory output and export growth in October had prompted some economists to conclude that these measures might be biting. The investment report suggested they are not.
Capital spending accelerated in real estate, in smelting and pressing of non-ferrous metals such as copper, aluminium and zinc, and in non-metal minerals including cement.
Moreover, investment in new projects increased by 26.5 percent in the January-October period, up from 24.2 percent in the first nine months and just 6.4 percent in the first half.
Even after five rate rises, the one-year lending rate of 7.29 percent remains attractive given China's strong economic growth and fast-rising profits. Moreover, companies finance more than half of their investment from retained earnings, not bank loans.
The pick-up in investment follows figures earlier this week showing a record trade surplus in October; the sharpest rise in retail sales since the government started issuing the data in 1999; faster money and credit growth; and a rebound in consumer price inflation (CPI) to a nearly 11-year high of 6.5 percent.
Taken together, they leave the world's fourth-largest economy on track to grow by more than 11 percent for all of 2007, the fifth straight year of double-digit expansion.
"This higher investment number, plus a rebound in headline CPI and accelerating credit growth, should give the PBOC more than enough reasons for taking immediate tightening actions," said Qu Hongbin, HSBC's chief China economist.
He said he expected a rise of at least 0.27 percentage point as early as this week.
JP Morgan is also in the pack expecting an increase, but the bank struck a note of caution on the timing.
The rationale for a rise is to lift inflation-adjusted deposit rates -- now 3.87 percent for one year -- out of negative territory quickly to discourage people from investing their bank savings in the frothy stock market, economist Qian Wang noted.
"But with the domestic equity market already in correction mode, the urgency of an aggressive rate hike has been reduced," she said in a note to clients.
The stock market <.SSEC> was down more than 2 percent in early afternoon, partly in anticipation of higher borrowing costs, and is now 14 percent off its peak, scaled on Oct. 16.
The yuan eased a touch to 7.4230 per dollar, as the central bank set a lower reference point for the day's trading, which traders said may be aimed at keeping the currency stable before raising rates.
Chinese capital spending in October rose at the briskest pace in over a year, rounding out a strong batch of monthly economic data and cementing expectations of a fresh rise in interest rates, possibly as early as Friday.
Capital spending in urban areas on fixed assets such as factories and power plants increased 26.9 percent between January and October compared with the same period last year, the National Bureau of Statistics said.
It was the fastest year-to-date pace since September 2006, eclipsing forecasts of a 26.3 percent rise and the 26.4 percent increase in the first nine months.
Economists calculated that investment spending in October alone was up 30.7 percent from a year earlier. JPMorgan Chase said that was the quickest monthly clip since June 2006.
"That makes an interest rate rise more likely today. Everybody in the market is now expecting it," Qiu Gaoqing, an analyst with Bank of Communications in Shanghai, said.
Shanghai stocks and the yuan eased on Friday as investors focused on the potential for higher interest rates.
The People's Bank of China (PBOC), the central bank, has already raised interest rates five times so far this year and ordered banks on nine occasions to hold more of their deposits in reserve instead of lending them out.
Mingchun Sun, an economist with Lehman Brothers in Hong Kong, agreed that a rate rise was on the cards.
"We expect one 27 basis-point hike by the end of this year, and it's possible that it could even happen today or tomorrow," he said.
China shifts its interest rates in increments such as 0.27 that are divisible by nine to make it easier for banks, which levy interest based on a 360-day year, to calculate the new payment changes.
A HOT ECONOMY
Chinese policy makers have been trying to cool over-investment for fear that excess supply will drive down profit margins and leave companies unable to service their debts.
"I'm pretty worried about this strong number because we think that the overcapacity issue is already a big problem, and this number is definitely making this more severe," Sun said.
The government has tightened land-conversion and environmental-protection rules, taking particular aim at industries that consume a lot of energy and spew out pollution.
Slightly softer factory output and export growth in October had prompted some economists to conclude that these measures might be biting. The investment report suggested they are not.
Capital spending accelerated in real estate, in smelting and pressing of non-ferrous metals such as copper, aluminium and zinc, and in non-metal minerals including cement.
Moreover, investment in new projects increased by 26.5 percent in the January-October period, up from 24.2 percent in the first nine months and just 6.4 percent in the first half.
Even after five rate rises, the one-year lending rate of 7.29 percent remains attractive given China's strong economic growth and fast-rising profits. Moreover, companies finance more than half of their investment from retained earnings, not bank loans.
The pick-up in investment follows figures earlier this week showing a record trade surplus in October; the sharpest rise in retail sales since the government started issuing the data in 1999; faster money and credit growth; and a rebound in consumer price inflation (CPI) to a nearly 11-year high of 6.5 percent.
Taken together, they leave the world's fourth-largest economy on track to grow by more than 11 percent for all of 2007, the fifth straight year of double-digit expansion.
"This higher investment number, plus a rebound in headline CPI and accelerating credit growth, should give the PBOC more than enough reasons for taking immediate tightening actions," said Qu Hongbin, HSBC's chief China economist.
He said he expected a rise of at least 0.27 percentage point as early as this week.
JP Morgan is also in the pack expecting an increase, but the bank struck a note of caution on the timing.
The rationale for a rise is to lift inflation-adjusted deposit rates -- now 3.87 percent for one year -- out of negative territory quickly to discourage people from investing their bank savings in the frothy stock market, economist Qian Wang noted.
"But with the domestic equity market already in correction mode, the urgency of an aggressive rate hike has been reduced," she said in a note to clients.
The stock market <.SSEC> was down more than 2 percent in early afternoon, partly in anticipation of higher borrowing costs, and is now 14 percent off its peak, scaled on Oct. 16.
The yuan
Thursday, November 15, 2007
China’s industrial output slows in October
From the FT this morning, via Reuters.
China’s industrial output growth slowed a little in October under the weight of government policy curbs, but its tempo was still so high that economists said a further rise in interest rates was just a matter of time.
Factories churned out 17.9 per cent more goods than a year earlier, weaker than September’s 18.9 per cent pace of expansion and undershooting forecasts of an 18.3 per cent rise.
“We expect further moderation in industrial growth towards end of the year, given continued monetary tightening and sector-specific administrative measures aiming at putting a brake on investment spending,” Qian Wang, an economist at JPMorgan Chase in Hong Kong, said in a note to clients.
The government has taken particular aim at low-end industries that guzzle energy or pollute the environment by ending tax breaks and withholding planning permission. The real estate sector has also been in the crosshairs.
Thursday’s report provided further evidence, on top of slower export growth in recent months, that Beijing’s policies are starting to bite.
Output of non-metal minerals, ferrous metals, cast iron and steel was slower in October than in the first nine months, while growth in coal and cement production slowed abruptly to 4.0 per cent and 9.8 per cent, respectively, from a year earlier.
“As cement is used as a major building material, slower production could signal a slower property market ahead,” economists at BNP Paribas said in a report.
Still, the dip in growth was modest and from a breakneck pace. Output in the first 10 months of 2007 was up a prodigious 18.5 per cent from a year earlier, by far the fastest rate of growth in any major economy.
Chris Leung, an economist with DBS in Hong Kong, noted that October’s dip came after a super-sized gain in September. A week-long national holiday in early October had an impact, too.
“But even if I discount this factor, the trend is still very robust,” Mr Leung said.
The World Bank forecast on Thursday that China’s gross domestic product would grow 11.3 per cent this year and 10.8 per cent in 2008, which would mark the sixth straight year of double-digit expansion.
The sustained growth has fanned worries that the world’s fourth largest economy could boil over.
The State Council, China’s cabinet, said on Wednesday that inflationary pressure was quite strong, while Zhou Xiaochuan, central bank governor, has voiced concern that prices will keep ratcheting higher if people become accustomed to inflation.
After consumer price inflation rebounded in October to a nearly 11-year high of 6.5 per cent, economists expect Mr Zhou will try to contain inflationary expectations by raising interest rates before long for the sixth time this year.
Indeed, Yu Song and Hong Liang at Goldman Sachs told clients to be ready for two 0.27 percentage point increases before the end of the year.
They also expect the central bank to take further steps to withdraw cash from the banking system and to let the yuan rise faster – a key demand of US and European policy makers.
and Bloomberg:
China's industrial production grew 17.9 percent in October as automobile and electronics output accelerated, underscoring government concern that the world's fastest-growing major economy risks overheating.
The increase was less than September's 18.9 percent, according to figures released by the statistics bureau today, and compares with the 18.5 percent median estimate of 22 economists surveyed by Bloomberg News.
The slowdown may be insufficient to deter the central bank from raising a one-year lending rate that's already climbed 1.17 percentage points this year to a nine-year high of 7.29 percent. Premier Wen Jiabao yesterday pledged to tighten economic controls after inflation accelerated to the fastest in a decade and the trade surplus widened to a record.
``Beijing knows that we are on the verge of overheating and interest rates need to rise very soon,'' said Stephen Green, senior economist at Standard Chartered Bank Plc in Shanghai.
The key rate compares with 4.5 percent in the U.S., 5.75 percent in the U.K. and 0.5 percent in Japan.
China should raise interest rates and allow more currency appreciation, the World Bank said today. Bigger yuan gains would staunch money inflows by pushing up export prices. The currency has climbed 11 percent versus the dollar since a fixed exchange rate ended in July 2007.
Production growth was higher than the 14.7 percent gain a year earlier and the 16.6 percent expansion for all of 2006. Output rose 18.5 percent for the year through October.
Automobiles, Computers
Automobile output rose 24.3 percent in October from a year earlier. Computer, telecommunications and electronic equipment production climbed 18.9 percent.
SAIC Motor Corp., China's largest carmaker, plans a 12 percent increase in production this year to 1.5 million vehicles, Chairman Hu Maoyuan said Oct. 16.
China's economy, the world's fourth largest, expanded 11.5 percent in the third quarter from a year earlier. Inflation accelerated to 6.5 percent in October, matching August's rate. The monthly trade surplus was $27 billion.
Spending on factories and property probably climbed 26.2 percent in the first 10 months, according to a Bloomberg News survey of economists. That figure, the last in this round of data, is due at 10 a.m. tomorrow.
``Data released this week has shown increased risks of overheating and the central bank has little excuse not to raise interest rates,'' said Wang Tao, head of economics and strategy for Greater China at Bank of America Corp. in Beijing.
Pollution, Energy
China is trying to curb investment in industries that have overcapacity, consume too much energy and produce excessive pollution. The premier said last month that the government will limit land use, tighten investment-project approvals and guide bank lending.
``Policy tightening'' has cooled factory output, said Ben Simpfendorfer, a strategist at Royal Bank of Scotland Plc in Hong Kong. ``It will moderate further in the early part of next year as exports slow on weaker global demand.''
While the trade surplus reached a record on Christmas shipments, the 22.3 percent gain in exports from a year earlier was the smallest increase in seven months. Retail sales in the U.S. rose 0.2 percent in October from the previous month after gaining 0.7 percent in September, the Commerce Department said yesterday.
Export Demand
Weaker growth in demand for exports ``may be a factor behind the moderation in industrial production growth,'' said Liang Hong, senior economist at Goldman Sachs Group Inc in Hong Kong. Inflation leaves the government ``with little choice but to tighten monetary policy further,'' she said.
Besides rate increases, the People's Bank of China is boosting the proportion of deposits that lenders must set aside as reserves to 13.5 percent, the highest level since at least 1987, from Nov. 26. That's up from 9 percent at the start of the year.
China's banking regulator met with the five biggest state- owned banks on Nov. 13, asking them to slow lending, the official Shanghai Securities News reported.
In India, the world's second-fastest growing major economy, industrial production grew 6.4 percent in September.
China’s industrial output growth slowed a little in October under the weight of government policy curbs, but its tempo was still so high that economists said a further rise in interest rates was just a matter of time.
Factories churned out 17.9 per cent more goods than a year earlier, weaker than September’s 18.9 per cent pace of expansion and undershooting forecasts of an 18.3 per cent rise.
“We expect further moderation in industrial growth towards end of the year, given continued monetary tightening and sector-specific administrative measures aiming at putting a brake on investment spending,” Qian Wang, an economist at JPMorgan Chase in Hong Kong, said in a note to clients.
The government has taken particular aim at low-end industries that guzzle energy or pollute the environment by ending tax breaks and withholding planning permission. The real estate sector has also been in the crosshairs.
Thursday’s report provided further evidence, on top of slower export growth in recent months, that Beijing’s policies are starting to bite.
Output of non-metal minerals, ferrous metals, cast iron and steel was slower in October than in the first nine months, while growth in coal and cement production slowed abruptly to 4.0 per cent and 9.8 per cent, respectively, from a year earlier.
“As cement is used as a major building material, slower production could signal a slower property market ahead,” economists at BNP Paribas said in a report.
Still, the dip in growth was modest and from a breakneck pace. Output in the first 10 months of 2007 was up a prodigious 18.5 per cent from a year earlier, by far the fastest rate of growth in any major economy.
Chris Leung, an economist with DBS in Hong Kong, noted that October’s dip came after a super-sized gain in September. A week-long national holiday in early October had an impact, too.
“But even if I discount this factor, the trend is still very robust,” Mr Leung said.
The World Bank forecast on Thursday that China’s gross domestic product would grow 11.3 per cent this year and 10.8 per cent in 2008, which would mark the sixth straight year of double-digit expansion.
The sustained growth has fanned worries that the world’s fourth largest economy could boil over.
The State Council, China’s cabinet, said on Wednesday that inflationary pressure was quite strong, while Zhou Xiaochuan, central bank governor, has voiced concern that prices will keep ratcheting higher if people become accustomed to inflation.
After consumer price inflation rebounded in October to a nearly 11-year high of 6.5 per cent, economists expect Mr Zhou will try to contain inflationary expectations by raising interest rates before long for the sixth time this year.
Indeed, Yu Song and Hong Liang at Goldman Sachs told clients to be ready for two 0.27 percentage point increases before the end of the year.
They also expect the central bank to take further steps to withdraw cash from the banking system and to let the yuan rise faster – a key demand of US and European policy makers.
and Bloomberg:
China's industrial production grew 17.9 percent in October as automobile and electronics output accelerated, underscoring government concern that the world's fastest-growing major economy risks overheating.
The increase was less than September's 18.9 percent, according to figures released by the statistics bureau today, and compares with the 18.5 percent median estimate of 22 economists surveyed by Bloomberg News.
The slowdown may be insufficient to deter the central bank from raising a one-year lending rate that's already climbed 1.17 percentage points this year to a nine-year high of 7.29 percent. Premier Wen Jiabao yesterday pledged to tighten economic controls after inflation accelerated to the fastest in a decade and the trade surplus widened to a record.
``Beijing knows that we are on the verge of overheating and interest rates need to rise very soon,'' said Stephen Green, senior economist at Standard Chartered Bank Plc in Shanghai.
The key rate compares with 4.5 percent in the U.S., 5.75 percent in the U.K. and 0.5 percent in Japan.
China should raise interest rates and allow more currency appreciation, the World Bank said today. Bigger yuan gains would staunch money inflows by pushing up export prices. The currency has climbed 11 percent versus the dollar since a fixed exchange rate ended in July 2007.
Production growth was higher than the 14.7 percent gain a year earlier and the 16.6 percent expansion for all of 2006. Output rose 18.5 percent for the year through October.
Automobiles, Computers
Automobile output rose 24.3 percent in October from a year earlier. Computer, telecommunications and electronic equipment production climbed 18.9 percent.
SAIC Motor Corp., China's largest carmaker, plans a 12 percent increase in production this year to 1.5 million vehicles, Chairman Hu Maoyuan said Oct. 16.
China's economy, the world's fourth largest, expanded 11.5 percent in the third quarter from a year earlier. Inflation accelerated to 6.5 percent in October, matching August's rate. The monthly trade surplus was $27 billion.
Spending on factories and property probably climbed 26.2 percent in the first 10 months, according to a Bloomberg News survey of economists. That figure, the last in this round of data, is due at 10 a.m. tomorrow.
``Data released this week has shown increased risks of overheating and the central bank has little excuse not to raise interest rates,'' said Wang Tao, head of economics and strategy for Greater China at Bank of America Corp. in Beijing.
Pollution, Energy
China is trying to curb investment in industries that have overcapacity, consume too much energy and produce excessive pollution. The premier said last month that the government will limit land use, tighten investment-project approvals and guide bank lending.
``Policy tightening'' has cooled factory output, said Ben Simpfendorfer, a strategist at Royal Bank of Scotland Plc in Hong Kong. ``It will moderate further in the early part of next year as exports slow on weaker global demand.''
While the trade surplus reached a record on Christmas shipments, the 22.3 percent gain in exports from a year earlier was the smallest increase in seven months. Retail sales in the U.S. rose 0.2 percent in October from the previous month after gaining 0.7 percent in September, the Commerce Department said yesterday.
Export Demand
Weaker growth in demand for exports ``may be a factor behind the moderation in industrial production growth,'' said Liang Hong, senior economist at Goldman Sachs Group Inc in Hong Kong. Inflation leaves the government ``with little choice but to tighten monetary policy further,'' she said.
Besides rate increases, the People's Bank of China is boosting the proportion of deposits that lenders must set aside as reserves to 13.5 percent, the highest level since at least 1987, from Nov. 26. That's up from 9 percent at the start of the year.
China's banking regulator met with the five biggest state- owned banks on Nov. 13, asking them to slow lending, the official Shanghai Securities News reported.
In India, the world's second-fastest growing major economy, industrial production grew 6.4 percent in September.
Thursday, October 25, 2007
China GDP Growth Maintains its pace.
China’s economy maintained its rapid growth in the third quarter, expanding by 11.5 per cent, leaving it on track to grow by its fastest annual rate since the 13.1 per cent pace achieved in 1993.The third quarter represented a slightly slower pace than the second quarter, when output rose by 11.9 per cent.
The marginally slower pace was largely due to a series of government tightening measures, including successive interest rate rises, directives to state banks to cool lending and tighter enforcement of environmental rules.
Even with the slower pace in the third quarter, the central government’s tightening measures are expected to continue until at least the end of this year.
The National Bureau of Statistics, which released the growth figures on Thursday, confirmed a disclosure by a senior official last week that annual consumer inflation slowed to 6.2 per cent in September from 6.5 per cent in August. Inflation is still more than double the central bank's annual target of 3 percent and higher than the key one-year deposit rate of 3.87 percent, encouraging speculation in stocks and property.
The benchmark CSI 300 Index of stocks fell the most in six weeks on speculation that the central bank will raise interest rates for the sixth time this year, curbing company earnings. President Hu Jintao is trying to tame the flow of cash into the economy from record exports without triggering a sudden slowdown.
The yuan rose to as much as 7.4834 versus the dollar from 7.4926 yesterday, heading for the biggest weekly gain in five weeks. It has climbed more than 10 percent versus the U.S. currency since the end of a fixed exchange rate in July 2005 and fallen 7 percent against the euro.
China's trade surplus surged 69 percent in the first nine months from a year earlier to $185.7 billion, topping the record total for all of 2006 and fueling investment. Factory and property spending in urban areas climbed 26.4 percent, the statistics bureau said today. That's up from the 24.5 percent pace for all of 2006.
Investment accounted for 42 percent of GDP growth in the first nine months, versus the 37 percent share for domestic consumption, the statistics bureau said, while ``External demand'' accounted for 21 percent.
Industrial production increased 18.9 percent in September from a year earlier, the fastest pace in three months and up from 17.5 percent in August. Retail sales climbed 17 percent after gaining 17.1 percent.
A spokesman for the National Bureau of Statistics said at a press conference announcing the latest growth figures that the “institutional, systemic and structural problems existing in economic performance are still pronounced.”
“These problems include rapid economic growth, price rises, high pressure on energy consumption and pollutant emission reduction, and the uncertainty of world economic growth.”
According to the office,China has taken six years to achieve 40 percent of a 20-year target of quadrupling per-capita GDP by 2020, with an increase to 16,084 yuan this year.
The marginally slower pace was largely due to a series of government tightening measures, including successive interest rate rises, directives to state banks to cool lending and tighter enforcement of environmental rules.
Even with the slower pace in the third quarter, the central government’s tightening measures are expected to continue until at least the end of this year.
The National Bureau of Statistics, which released the growth figures on Thursday, confirmed a disclosure by a senior official last week that annual consumer inflation slowed to 6.2 per cent in September from 6.5 per cent in August. Inflation is still more than double the central bank's annual target of 3 percent and higher than the key one-year deposit rate of 3.87 percent, encouraging speculation in stocks and property.
The benchmark CSI 300 Index of stocks fell the most in six weeks on speculation that the central bank will raise interest rates for the sixth time this year, curbing company earnings. President Hu Jintao is trying to tame the flow of cash into the economy from record exports without triggering a sudden slowdown.
The yuan rose to as much as 7.4834 versus the dollar from 7.4926 yesterday, heading for the biggest weekly gain in five weeks. It has climbed more than 10 percent versus the U.S. currency since the end of a fixed exchange rate in July 2005 and fallen 7 percent against the euro.
China's trade surplus surged 69 percent in the first nine months from a year earlier to $185.7 billion, topping the record total for all of 2006 and fueling investment. Factory and property spending in urban areas climbed 26.4 percent, the statistics bureau said today. That's up from the 24.5 percent pace for all of 2006.
Investment accounted for 42 percent of GDP growth in the first nine months, versus the 37 percent share for domestic consumption, the statistics bureau said, while ``External demand'' accounted for 21 percent.
Industrial production increased 18.9 percent in September from a year earlier, the fastest pace in three months and up from 17.5 percent in August. Retail sales climbed 17 percent after gaining 17.1 percent.
A spokesman for the National Bureau of Statistics said at a press conference announcing the latest growth figures that the “institutional, systemic and structural problems existing in economic performance are still pronounced.”
“These problems include rapid economic growth, price rises, high pressure on energy consumption and pollutant emission reduction, and the uncertainty of world economic growth.”
According to the office,China has taken six years to achieve 40 percent of a 20-year target of quadrupling per-capita GDP by 2020, with an increase to 16,084 yuan this year.
Tuesday, October 23, 2007
Ali Baba IPO
Chinese e-commerce portal Alibaba.com could raise up to $1.5 billion (€1 billion) in its Hong Kong listing next month, the company said Monday, describing it as the biggest Internet IPO since Google.
Alibaba Group, the company that controls the business-to-business commerce Web site, said it plans to sell 858.9 million shares at an indicative price range of 12 to 13.50 Hong Kong dollars each, up from an earlier initial price of HK$10-HK$12.
Alibaba's charismatic founder Jack Ma, a former English teacher who set up the company in 1999, told reporters the profits would help build a "world-class infrastructure and ecosystem for e-commerce, which will contribute to the sustained growth of the Chinese economy."
Ma was speaking by video phone from the United States where he is drumming up support for the IPO.
Alibaba -- which allows companies in both China and overseas to trade with one another online -- is one of China's fastest growing Internet companies.
It has seen its registered members soar from 6 million in 2004 to 24.6 million in 2007. Paying members increased from 77,000 in 2004 to 255,000 by June 2007.
The company recorded a net profit of 295.2 million Chinese yuan ($39.2 million; € 27.5 million) in the six months ended June 2007.
It expects its net profit to more than triple to 622 million yuan ($83 million; €58 million) from 219.9 million yuan, on strong growth in revenue from both its international and Chinese Web sites.
Unlike other offerings in which most of the shares on offer are newly issued shares, nearly three-quarters of the shares in the IPO are existing shares held by Alibaba.com's parent, Alibaba Group.
About 85 percent of the shares are marked for institutional investors with the rest open to retail investors.
Already, the shares are in high demand, with the South China Morning Post newspaper reporting the institutional tranche was already 50 percent subscribed before the price was raised Yahoo! Inc., which holds a 39 percent stake in Alibaba.com's parent, Alibaba Group, had already agreed to subscribe to about $100 million worth of shares.
Alibaba said another seven "strategic" investors had agreed to take a stake, representing in total about HK$2.3 billion ($296 million; € 207 million)or 20 percent of the offering.
They include Cisco Systems International B.V., AIG Global Investment Corporation (Asia) Ltd., FoxConn (Far East) Ltd. and Industrial and Commercial Bank of China Ltd., as well as investment companies held by Wharf Holdings Ltd. Chairman Peter Woo, Malaysian tycoon Robert Kuok and the Kwok family of Sun Hung Kai Properties Ltd., the company said.
Strong demand from the public -- which can start buying the shares from Tuesday -- is also expected to trigger an extra allocation of 113.67 million shares to raise a total of $1.7 billion (€ 1.19 billion).
Net proceeds from the listing were expected to be about HK$2 billion ($335 million; € 234.46 million), the company said, which would be spent on strategic acquisitions and development initiatives to grow the company's business both in China and overseas.
Shares of the company, which claims to be the largest business-to-business e-trading site in China, will begin trading on Nov. 6
Alibaba Group, the company that controls the business-to-business commerce Web site, said it plans to sell 858.9 million shares at an indicative price range of 12 to 13.50 Hong Kong dollars each, up from an earlier initial price of HK$10-HK$12.
Alibaba's charismatic founder Jack Ma, a former English teacher who set up the company in 1999, told reporters the profits would help build a "world-class infrastructure and ecosystem for e-commerce, which will contribute to the sustained growth of the Chinese economy."
Ma was speaking by video phone from the United States where he is drumming up support for the IPO.
Alibaba -- which allows companies in both China and overseas to trade with one another online -- is one of China's fastest growing Internet companies.
It has seen its registered members soar from 6 million in 2004 to 24.6 million in 2007. Paying members increased from 77,000 in 2004 to 255,000 by June 2007.
The company recorded a net profit of 295.2 million Chinese yuan ($39.2 million; € 27.5 million) in the six months ended June 2007.
It expects its net profit to more than triple to 622 million yuan ($83 million; €58 million) from 219.9 million yuan, on strong growth in revenue from both its international and Chinese Web sites.
Unlike other offerings in which most of the shares on offer are newly issued shares, nearly three-quarters of the shares in the IPO are existing shares held by Alibaba.com's parent, Alibaba Group.
About 85 percent of the shares are marked for institutional investors with the rest open to retail investors.
Already, the shares are in high demand, with the South China Morning Post newspaper reporting the institutional tranche was already 50 percent subscribed before the price was raised Yahoo! Inc., which holds a 39 percent stake in Alibaba.com's parent, Alibaba Group, had already agreed to subscribe to about $100 million worth of shares.
Alibaba said another seven "strategic" investors had agreed to take a stake, representing in total about HK$2.3 billion ($296 million; € 207 million)or 20 percent of the offering.
They include Cisco Systems International B.V., AIG Global Investment Corporation (Asia) Ltd., FoxConn (Far East) Ltd. and Industrial and Commercial Bank of China Ltd., as well as investment companies held by Wharf Holdings Ltd. Chairman Peter Woo, Malaysian tycoon Robert Kuok and the Kwok family of Sun Hung Kai Properties Ltd., the company said.
Strong demand from the public -- which can start buying the shares from Tuesday -- is also expected to trigger an extra allocation of 113.67 million shares to raise a total of $1.7 billion (€ 1.19 billion).
Net proceeds from the listing were expected to be about HK$2 billion ($335 million; € 234.46 million), the company said, which would be spent on strategic acquisitions and development initiatives to grow the company's business both in China and overseas.
Shares of the company, which claims to be the largest business-to-business e-trading site in China, will begin trading on Nov. 6
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