China aims to contain bubble economy

Holding down real estate, consumer goods prices will be key to achieving stable growth

BEIJING–The decisive factor in China’s efforts to guide its fast-growing economy toward sustainable expansion will be whether the nation can hold down soaring prices in real estate and consumer goods through such measures as the interest rate hike implemented earlier this week, analysts have said.

China’s economy grew 9.6 percent in the July-September quarter compared with a year earlier, posting slower year-on-year growth for the second consecutive quarter but still expanding at a rapid clip.

“The Chinese economy has begun exhibiting stability. It’s in an important phase of transition from a rapid recovery to stable growth,” Sheng Laiyun, a spokesperson for the National Bureau of Statistics of China, said at a press conference Thursday.

Sheng’s remarks suggest China’s rapid recovery following the so-called Lehman shock has ended and the economy has entered a phase aimed at stable growth.

China’s economy posted 11.9 percent growth in the January-March period, but its expansion pace slowed to 10.3 percent in April-June.

While there was widespread concern over a sharp economic slowdown for the July-September quarter, the downturn was limited to only a 0.7 percentage point drop from the previous quarter.

“The Chinese government was confident the economic slowdown would be more moderate than the 9.38 percent growth the market had expected,” said Takamoto Suzuki, a senior economist at Mizuho Research Institute.

These factors are believed to be behind the surprise interest rate hike implemented Wednesday.

The People’s Bank of China arranged the latest interest hike so the longer the term of the time deposit, the greater the extent of the rate hike. By enhancing the appeal of longer-term time deposits, the central bank is apparently trying to guide money invested in real estate to deposits instead.

The bank also raised the rate on loans of more than one year by 0.2 percentage point, while raising the rate on one-year loans by 0.25 percentage point.

By making the rate on shorter-term loans higher, the central bank is apparently trying to hold down the volume of speculative funds.

The pace of the rise in real estate prices in China slowed due to tighter regulations adopted since April. But the volume of transactions has gradually recovered, posting a month-on-month increase in September for the first time in four months, creating strong anxiety over the bubble economy of artificially inflated real estate prices.

With a meeting of finance and central bank chiefs of the Group of 20 leading economies scheduled for the weekend in South Korea, some observers believe the rate hike was meant to demonstrate China’s acceptance of the yuan’s appreciation.

On the other hand, however, the yuan’s reference rate, which the central bank releases every morning to guide the currency’s exchange rate, was set Wednesday 0.3 percent lower against the dollar from the previous day, in line with the global trend of buying back the dollar.

As Beijing moved in two different directions–the rate hike that will lead to the yuan’s rise and the cut in the yuan’s reference rate that will lead to the currency’s depreciation–the prevailing view among the market players is that the rate hike does not mean Beijing will allow the yuan’s appreciation.

“The regulations implemented by the government on real estate since spring have failed. The latest rate hike was implemented primarily as a measure to deal with [soaring] real estate prices,” said Yuan Gangming, a researcher at Tsinghua Unviersity’s Center for China in the World Economy.

Yuan’s remarks suggest the latest rate hike was aimed more at calming the overheated domestic economy than considering the calls for the appreciation of the yuan from the United States and other countries.

By: Yasushi Kouchi



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Pubblicato il 24 ottobre 2010, in Stampa Internazionale - International Press con tag , , , , , , , . Aggiungi il permalink ai segnalibri. 1 Commento.

  1. Il ritmo di crescita della Cina fa paura da anni. Sempre a due cifre anche nel pieno di una recessione economica planetaria. I primi campanelli d’allarme però arrivano proprio da lontano: dalla crescita della ricchezza e della spesa, che ha portato ad un incremento generalizzato dei prezzi di beni di consumo e degli immobili. La Cina corre subito ai ripari e oltre alla “guerra valutaria” a cui si assiste (la Cina detiene larga parte del debito pubblico americano e quindi ben regola il valore del dollaro), in casa propria gioca la carta dei tassi che aumentano per la seconda volta consecutiva per disincentivare gli acquisti e regolamentare una corsa rialzista dei prezzi.

    Andrea Russo

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