I mentioned in last week’s blog entry that during my trips to New York, Washington and Hangzhou in the past two weeks one of the common themes was concern about rising debt levels and weaknesses in the banking sector. Another theme – one which I want to discuss in this entry – was the possible …
Read More…Category: Interest rates
QE2 and the Titanic
China reported an October trade surplus of $27 billion Wednesday. This is a very big number and not one likely to soothe anger directed at China. It will be very hard for China credibly to argue that it is trying to contribute to global growth while pulling in more and more foreign demand. Here is …
Read More…PBoC rate hike announced
The PBoC has just announced that it is hiking the one-year lending and deposit rates by 25 basis points. Here is what Bloomberg says: China raised its benchmark lending and deposit rates for the first time since 2007 after inflation accelerated to the fastest pace in 22 months. The one-year deposit rate will increase to …
Read More…What happens if the RMB is forced to revalue?
Because of US and European pressure Beijing may allow much faster appreciation of the renminbi than it likes over the next year, but this will almost certainly be accompanied with policies that reduce the adverse employment impact. In my opinion the most likely such policy involves credit. If Beijing expands cheap credit, however, it may …
Read More…Rumors on the PBoC deregulating Chinese bank deposit rates
After three weeks of traveling it is good to be back in Beijing, even though now I have to work through the mountain of very fattening mooncakes my very kind students have given me for Mid-Autumn Festival Day. While I was away it seems that there were a lot of rumors in the market about …
Read More…The PBoC can’t easily raise interest rates
A lot of people have asked me to write about the recently “leaked” CBRC report on dodgy local government debt. Here is what the article in Monday’s Bloomberg had to say about it (and note especially that delicious second paragraph): Mainland banks may struggle to recoup about 23 per cent of the 7.7 trillion yuan …
Read More…Repairing China’s financial system
The stock market had a bad day today, with the SSE Composite down 3.62%, mainly on rumors that banks will be seeking to raise equity capital next year in response to their loan surge this year. On Tuesday Bloomberg reported that the five largest banks were supposed to have submitted plans to regulators for raising …
Read More…October CPI inflation rose to 6.5%
Finally the numbers are in. China’s CPI was up 6.5% in October, up from 6.2% in September. This matches CPI inflation for August and, with that exception, is the highest monthly CPI inflation number since the 7.0% recorded in December 1996. On the one hand October inflation slightly exceeded the consensus forecast of 6.3-6.4%, …
Read More…