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China May Inflation Rises China May Inflation Rises(0)

Consumer prices rose 3.1 percent from a year earlier, up from April’s 2.8 percent rate, the National Bureau of Statistics said Friday. Growth in investment and factory output slowed but still was at double-digit levels.

Rising inflation has prompted concern Beijing might hike interest rates or take other steps to cool growth that hit 11.9 percent in the first quarter. That could affect the United States, Europe and others that look to China to help drive demand for their iron ore, factory machinery and other exports.

Analysts expect China’s rapid expansion to slow as the initial impact of its 4 trillion yuan ($586 billion) stimulus wanes. The World Bank’s forecast for full-year growth is 9.5 percent.

Slower growth could complicate efforts to control prices because the standard tool of rate hikes might further chill economic activity.

May inflation was driven by a 6.1 percent rise in food costs. Wholesale inflation accelerated to 7.1 percent from April’s 6.8 percent rate, suggesting shoppers might face higher prices as retailers pass on rising costs.

May growth in investment in factories and other fixed assets – seen as an indicator of future growth – slipped from April’s 26.1 percent expansion to 25.9 percent, the statistics bureau reported. Growth in industrial output declined for a third month, falling to 16.5 percent from the previous month’s 18.8 percent expansion.

Total lending by Chinese banks in May shrank by 17 percent from April’s level to 639.4 billion yuan, ($93.6 billion), the central bank reported.

Growth in retail sales accelerated slightly in May to 18.7 percent from April’s 18.5 percent rate.

China’s April Inflation China’s April Inflation(0)

Food price inflation accelerated to 5.9 percent over a year earlier, up from March’s 5.2 percent rate, the National Bureau of Statistics announced Tuesday. Overall April inflation was up 0.4 percent from the previous month.

Foreign companies and investors are closely watching China’s inflation because any moves by Beijing to curb price rises might slow economic growth, with repercussions for the global recovery if it hurts demand for imported iron ore and other materials.

Inflation has been driven lately by surges in the cost of food and housing. Food prices are up partly due to shortages caused by dry weather, while housing prices have been driven by a flood of bank lending to support Beijing’s stimulus.

Wholesale prices climbed 6.8 percent in April from a year earlier, a 0.9 percent increase over March’s rise. That can lead to higher consumer prices down the line as retailers pass on higher costs.

The government gave no breakdown of food costs, but the Commerce Ministry said earlier that vegetable prices surged by 32.3 percent over a year earlier between March 29 and April 25. The price of eggs and fish rose 6.6 percent.

Source : Konaxis

Boosting rate-hike case Boosting rate-hike case(0)

The consumer price index rose 2.7% in February from a year earlier, accelerating from a 1.5% increase in January’s CPI, according to the National Bureau of Statistics.

Food prices, which jumped 6.2% during the month, helped drive the price index higher.

J.P Morgan’s Jing Ulrich in Hong Kong said the surge in consumer prices was partly attributed to cold weather conditions and consumer outlays during the Chinese New Year holiday. But Ulirch also said she expects inflation to trend higher for the next few months before peaking around mid-year.

February’s producer price index showed a similar upside surprise, accelerating 5.4% from the year-earlier period, according to data from NBS.

Separately, lending by Chinese banks rose 700.1 billion yuan ($102.5 billion) in February, while money supply as measured by M2 was up 25.5% during the month from a year earlier, the data showed.

Although higher than expected, the lending result was still below the 1.39 trillion yuan in new loans reported for January and was 34.5% below the year-earlier total.

Source : Konaxis

Monetary policy shift Monetary policy shift(0)

Qin Xiao ? chairman of China Merchants Bank, the country?s sixth-biggest ? says that the government should not be afraid of a ?moderate slowdown? in the economy.

?It is urgent that China shifts from a loose monetary policy stance to a neutral one,? he writes.

According to calculations by the Financial Times and independent economists, China?s stimulus measures could amount to 15-17 per cent of GDP this year if government-induced bank lending is taken into account ? by far the largest among major economies.

The State Council, China?s cabinet, gave its first clear hint Wednesday evening that it was considering a tighter monetary policy when it said that policy should focus both on managing inflationary expectations as well as securing stable growth ? the first time it has mentioned inflation since the global economic crisis hit China last year.

Source : Konaxis

China may tighten policy China may tighten policy(0)

?China worries about inflation more than asset market bubbles,? said Shen Minggao, Citigroup?s chief economist for the Greater China region. Rising prices may spook low-to-medium income groups and threaten social stability, he added.

The People?s Bank of China may issue bills to soak up cash or raise its capital reserve ratio when inflation exceeds the government?s 4 percent target, Shen said. Consumer prices in China, which declined for a sixth straight month in July, may start to increase again in the fourth quarter, he said.

Source : Konaxis

Inflation China Inflation China(0)

The decline in the Consumer Price Index, the main gauge of inflation, may reach bottom in the third quarter, the People’s Bank of China said in a 10-page report by its Financial Survey and Statistics Department.

The CPI fell for a fifth month in June, dropping 1.7 percent from a year earlier – the biggest decline since 1999.

Rising commodities prices and ample liquidity will add pressure on inflation in the future, the report said.

The central government has reiterated that it will keep the relatively easing monetary policy despite concerns of possible bad loans due to the rapid growth in credit.

Meanwhile, the China Banking Regulatory Commission has issued rules to curb irregularities in issuing of credit to Fixed-Asset Investment projects, noting that the flow of credit should not be quicker than their construction.

Chinese banks must ensure the loans they issue for FAI projects are actually being put to use in the real economy, the banking regulator said on Monday.

Source : Konaxis

The consumer price index in Chinagg The consumer price index in Chinagg(0)

The CPI dropped for the third straight month since February when it dropped 1.6 percent while the PPI, a major measure of inflation the wholesale level dropped for the fourth month.

Food prices, which is one-third of the CPI, dropped 1.3 percent, pulled down by a 28.6-percent decline in pork prices following the decline in demand mainly due to the global flu outbreak thought to have originated from pigs. Non-food prices also fell, by 1.5 percent.

The consumer price index was down 0.2 percent from a month earlier, and the figure for January-April fell 0.8 percent from the same period last year. The PPI dropped 6.0 percent in March and 4.6-percent fall in the first quarter from the same period last year.

Lian Ping, chief economist with the Bank of Communications, said the weakening reflected the high base of comparison, since the CPI soared by 8.5 percent last April. The consecutive declines did not presage deflation, and the figure was expected to rise starting at mid-year.

Li Huiyong, analyst with the Shenyin & Wanguo Securities said falling iron and steel prices pushed the PPI down.

However, Lian said the figure was expected to rise from May forward, at least in month-on-month terms, as global commodity prices had begun rising again amid signs of economic recovery.

Last month, domestic prices of copper, aluminum and zinc rose by 10 percent to 20 percent on average. Oil product prices also edged up.

The consecutive falls in the CPI and PPI aroused concerns about deflation in the world’s third-largest economy. But analysts said that given the inflationary nature of the government stimulus package and the massive expansion of bank credit in the first quarter, deflation was unlikely.

The country pumped 4.58 trillion yuan ($670 billion) of new loans into the economy in the first quarter to stimulate growth.

Lending in the early months of 2009 has already neared the 5 trillion yuan of new loans targeted for the whole year. In March alone, new loans increased by a record 1.89 trillion yuan.

Actually, the declines in both the PPI and the CPI have been expected by the People’s Bank of China (PBOC, the central bank) and the State Information Center based on their reports before the NBS announcement.

One hundred economists polled by the China Economic Monitoring & Analysis Center under the NBS at the end of March expected the figure for the whole year would range between 0 to 0.2 percent.

Source : Konaxis

Infrastructure in China Infrastructure in China(0)

With inflation no longer a concern, both the central and provincial governments have a large volume of shovel-ready projects already on the books, and a significant portion of the RMB4 trillion stimulus package is going to the projects that were already slated for government funding.

For example, in 2008 the Ministry of Railways had originally planned to invest RMB300 billion in basic construction projects. However, Ministry of Railways Director Zhang Zhongmin told China Business News that in order to stimulate internal demand, the railway decided to add another RMB50 billion in 2008. In 2009, the ministry has nearly doubled its expected investment, allocating RMB600 billion for basic rail construction.

Future railway development will focus mainly on the construction of passenger and regional express rail lines and the reinforcement of heavily used main corridors such as the Beijing-Guangzhou, Beijing-Harbin and Beijing-Shanghai lines.

Director Yang has said the passenger lines between Beijing and the cities of Harbin, Shanghai and Guangzhou, and lines in the South China will be finished in three to five years and will constitute ?China?s express network,? connecting 70 percent of all Chinese cities with a population greater than half a million.

China?s investment in transport infrastructure has also halted declines in cargo traffic in the Yangtze River Delta. Cargonews Asia reported that the major ports along the Yangtze trunkline reported a year-on-year cargo throughput increase of 5.7 percent in January, the first monthly rise since August of 2008. Container throughput increased 19.6 percent to 550,000 TEUs, compared with 8 percent in November and 14 percent in December. According to the report, higher levels of government spending to construct railways, roads, bridge and subways are driving the demand for imported iron ore and steel, two major commodities shipped down the Yangtze.

China imported 443.7 million tons of iron ore in 2008, and that number is expected to increase as infrastructure construction ramps up. In late February, Australia’s third-biggest iron-ore miner, Fortescue Metals Group Ltd, agreed to quadruple its iron ore sales to Xiangtan Steel, an arm of Chinese steel maker Hunan Valin Iron and Steel Group. Fortescue said that, subject to production expansions, it would increase its supply to up to 4 million tons a year from 2010 onwards, up from the current 1 million tons a year.
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