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China home slump spurs cash injection
CHINA loosened monetary policy in a surprise move over the weekend, taking precautionary action to shore up the economy after a slew of weak data.
China's central bank, the People's Bank of China, cut the reserve ratio for big banks by half a percentage point to 20.5 per cent, boosting lending capacity by about 400 billion yuan.
It is the second time the authorities have relaxed loan curbs since jamming on the brakes last year to cool property speculation.
Average home prices fell for a fourth month in January, according to the National Bureau of Statistics. None of the country's top 70 cities saw price rises. Housing starts have fallen by 25 per cent and inventories have reached 30 per cent.
Yao Wei from Societe Generale said the downturn was likely to send ''shock waves'' through the industry chain. Power generation, infrastructure investment, as well as property, all contracted more deeply than expected in January, even adjusted for the timing of the Lunar New Year. Imports contracted by 22.5 per cent, and total money supply growth fell to 12.4 per cent.
Data from China Securities Journal shows that electricity consumption fell 7.5 per cent in January from a year earlier, a steeper decline than during the outset of the global financial crisis (GFC). Zhiwei Zhang from Nomura described the fall as ''alarming'', reflecting a sharp slowdown in industry.
Xi Jinping, the man likely to take over this year as China's new leader, said the carefully calibrated slowdown was on track. ''There will be no so-called hard landing,'' he said on a trip to the US.
Chinese authorities face a delicate task as they try to deflate the property bubble gently, a challenge that has defeated governments worldwide over the years.
The property sector accounts for 13 per cent of GDP, comparable with Spain at the peak of its bubble. Credit in China has increased by almost 100 per cent of GDP over the past five years, largely due to the lending blitz unleashed after the Lehman Brothers collapse.
The credit boom already exceeds the pace of loan growth during the US subprime bubble.
Communist officials now believe the country overreacted in 2008-09, flooding the economy with indiscriminate credit. The policy led to surging inequality between rich and poor. They are wary of repeating the exercise despite signs that Europe's recession is squeezing Chinese exporters.
The central bank's room for manoeuvre is limited since inflation jumped to 4.5 per cent in January.
The economy has reached a point in the cycle where the trade-off between growth and rising prices has turned less friendly.
Read more: China home slump spurs cash injection
China surprises markets with early bid to boost growth | Investing | Financial Post
China's unofficial lending falters, savers protest - Houston Chronicle
CHINA loosened monetary policy in a surprise move over the weekend, taking precautionary action to shore up the economy after a slew of weak data.
China's central bank, the People's Bank of China, cut the reserve ratio for big banks by half a percentage point to 20.5 per cent, boosting lending capacity by about 400 billion yuan.
It is the second time the authorities have relaxed loan curbs since jamming on the brakes last year to cool property speculation.
Average home prices fell for a fourth month in January, according to the National Bureau of Statistics. None of the country's top 70 cities saw price rises. Housing starts have fallen by 25 per cent and inventories have reached 30 per cent.
Yao Wei from Societe Generale said the downturn was likely to send ''shock waves'' through the industry chain. Power generation, infrastructure investment, as well as property, all contracted more deeply than expected in January, even adjusted for the timing of the Lunar New Year. Imports contracted by 22.5 per cent, and total money supply growth fell to 12.4 per cent.
Data from China Securities Journal shows that electricity consumption fell 7.5 per cent in January from a year earlier, a steeper decline than during the outset of the global financial crisis (GFC). Zhiwei Zhang from Nomura described the fall as ''alarming'', reflecting a sharp slowdown in industry.
Xi Jinping, the man likely to take over this year as China's new leader, said the carefully calibrated slowdown was on track. ''There will be no so-called hard landing,'' he said on a trip to the US.
Chinese authorities face a delicate task as they try to deflate the property bubble gently, a challenge that has defeated governments worldwide over the years.
The property sector accounts for 13 per cent of GDP, comparable with Spain at the peak of its bubble. Credit in China has increased by almost 100 per cent of GDP over the past five years, largely due to the lending blitz unleashed after the Lehman Brothers collapse.
The credit boom already exceeds the pace of loan growth during the US subprime bubble.
Communist officials now believe the country overreacted in 2008-09, flooding the economy with indiscriminate credit. The policy led to surging inequality between rich and poor. They are wary of repeating the exercise despite signs that Europe's recession is squeezing Chinese exporters.
The central bank's room for manoeuvre is limited since inflation jumped to 4.5 per cent in January.
The economy has reached a point in the cycle where the trade-off between growth and rising prices has turned less friendly.
Read more: China home slump spurs cash injection
China surprises markets with early bid to boost growth | Investing | Financial Post
China's unofficial lending falters, savers protest - Houston Chronicle
