Wednesday 22 August 2012

PBOC MOVES

Business Spectator

DID CHINA JUST HIT THE PANIC BUTTON?

Stephen Koukoulas

Business Spectator, August 22, 2012

The Chinese economy has slowed and some wise heads are painting yesterday’s intervention in the repo market from the People’s Bank of China (PBoC) as a sign of panic. All key economic indicators from GDP, to inflation, to house prices, to international trade confirm a slowing in economic activity.

The 64-Yuan questions are exactly how much has the economy has slowed. Will it keep slowing or are we getting near a turning point that suggests better economic times in the late 2012 and into 2013? China, already the second largest country in the world, is on track to over take the US as the world’s largest economy in the next few years. This inevitably means that what happens in China is critical for the global economy.

Yesterday, the PBoC unexpectedly injected a record Yuan220 billion (A$33 billion) in to the interest rate repo market as it moved to push interest rates lower. The action suggests all is not well, although this view is not shared the Reserve Bank of Australia.

The RBA, which in recent years has ramped up its China research effort, including opening an office in Beijing, released the minutes from the August Board meeting at about the same time the PBoC was intervening to drive interest rates lower. According to the RBA assessment, in China “there were signs that investment growth had steadied and some early indications that conditions in the housing market had also improved a little in recent months.”

This view sits oddly with a raft of other news and it could be the case that the RBA is looking at developments in China through rose coloured glasses.

(...) [artículo aquí]

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