Chillin' out till it needs to be funded
China has become a nation of statistics. There are of course the usual connotations very popular in literature when the word Statistics is mentioned in context, but we’ll treat the subject seriously. After all till yesterday China’s inflation was expected to be 5.4% in May and keep going up from there, it coming in control never having been discussed.
As things stand tonight, Inflation in China has come to 5.5% for May as expected and none happy for the speed at which it has come Food inflation alone is nearly 12% at 11.7%. That should serve as a warning for China watchers and even China baiters. The inflation basis could never be the commodities and the transmission to the economy then could still be a very fast and unhealthy one.
No one expects Chinese inflation to tick down from here, forecasts heading to 6% for June and expected results of monetary tightening being the ones responsible for its growth to only 5.5% as it could have been even higher in June.
Property prices have not burst and PBOC will continue rate hikes in June while trying to manage the upcoming 1 in 5 (conservative) default on local government loans. As loans were made to governments, seemingly no collateral was issued. That default alone would be for $200 million on a conservative basis, nearly 1/3rd of PBOC target for new loans for the Big Four this year. ICBC, CCB and ABC continue to be the largest banks by assets and profits.
(Reuters) China’s trend is expected to be underlined by the May industrial output figures. A Reuters poll forecast annual growth would slow to 13.2 percent, which would be the weakest pace since October last year. January and February output figures were combined and showed a rise of 14.1 percent over a year earlier.
China’s money growth slowed to a 30-month low in May and banks extended fewer new loans than expected, data on Monday showed.
China’s HSBC MarkIt PMI came to a low of 54 and government figures to 52.8 last week and a hard landing is expected only because of the monetary tightening. Though despite the power struggles as droughts dry up reservoirs and overcapacities showing up as of the GDP growth is a healthy 9.7% and will likely continue above 8% thru 2011. Loans in may ticked up to $8.3 tln outstanding $85 bln added in May much beloew market expectations. Property downticks would be playing ‘truant’ in the coming months but not enough to break the inflation uptick
Reserve Ratios were post facto further increased by PBOC to 21.5% for the Largest 15 banks while ECB is also in line to increase rates in July and UK’s coninuing tryst wih 4.5% – 5% inflation keeps pressure on BoE to reverse its current 7-2 split to keep interest rates in the growth mode and the Sterling and the Aussie continued their upward journey while the Yen broke its climb at 80.5