For the sixth time this year the People’s Bank of China raised interest rates, which was not a surprise. The PBoC raised its 1-year benchmark lending rates by 18 bps to 7.47%. Changes in deposit rates were a little more complex. The 1-year benchmark deposit rate went up by 27 bps to 4.14%, the 6-month …
Read More…Archive for December, 2007
Currency swapping does nothing to improve Chinese liquidity
Friends of mine who try to keep track of monetary conditions by tracking central bank reserves – like Logan Wright and Brad Setser – have not always had an easy time of figuring out what is happening in China. Since August, however, things have gotten more difficult. At $20-25 billion a month, growth in reserves …
Read More…The value of the RMB DOES matter, but not for the obvious reasons
According to the Commerce Department, the U.S. current account deficit fell to $178.5 billion in the third quarter, the equivalent of 5.1% of GDP. This is happening at the same time that Europe’s trade deficit is surging. Part of this reduction in the trade deficit may be caused by a slowdown in the growth of …
Read More…Don’t turn the shower faucet to hot too quickly
Yesterday the State-owned Assets Supervision and Administration Commission (SASAC) announced they would require dividend payments from after-tax earnings for state owned enterprises. Although commercial-bank lending constraints seem to be partially working, there has been no real reduction in fixed asset investment in China as of yet (the November reduction seems to have been more of …
Read More…Foreign companies can raise money in China
Mainland Chinese subsidiaries of foreign companies will soon be permitted, at least in theory, to issue stocks and bonds on the mainland markets. I say “at least in theory” because companies, whether Chinese or foreign, still have to jump through a confusing number of hoops before they are allowed to list, and it is pretty …
Read More…Weak RMB? No! Weak dollar!
It looks like the Third Sino-US Strategic Economic Dialogue isn’t turning out to be much fun, although I think it is good for both sides to put their problems squarely on the table. Chen Deming, China’s Vice Minister of Commerce, formerly Vice Chairman of the NDRC and expected to become Minister of Commerce in March, …
Read More…Slower loan growth does not necessarily equal lower FAI
Does the market believe the declared loan tightening measures? After the announcement Saturday afternoon that the PBoC was raising the reserve ratio 1% to 14.5%, Shanghai opened down Monday (my assistant told me that it opened more than 1% down, but I am not smart enough to get the intra-day info off the SSE website) …
Read More…Minimum reserves hit 14.5%
Two nights ago just as I was about to go on Dialogue, the CCTV9 show, to discuss whether the PBoC would be able to shift its monetary policy from “prudent” to “tight” as proscribed in the leadership conference this week, my assistant called me up to say that the PBoC had raised the minimum reserve requirement …
Read More…Two out of three “prevents” ain’t bad
The mainland stock markets are down 19% from their highs in October, although Shanghai and Shenzhen both traded up this week, and there is a growing concern it seems, at least judging by the amount of ink spilled, that future IPO first-day-of-trading performances are less and less likely to achieve the eye-popping results that they …
Read More…Is Zhou Xiaochuan a Minskyite?
I have just read a speech by Zhou Xiaochuan, Governor of the People’s Bank of China, that was posted on the PBoC website yesterday entitled “Instability and Evolution of the Financial System”. In the speech he argues about the inevitability of financial turbulence and its usefulness in forcing necessary reforms. I was struck by a …
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