Booms, Busts, and Recoveries Message Board

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Strategies & Market Trends : Booms, Busts, and Recoveries

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To: energyplay who wrote (59440)	1/26/2005 5:01:31 AM
From: elmatador	Read Replies (1) of 74559

hard land won't be possible: China Published: January 25 2005 13:28 \| Last updated: January 25 2005 13:28 If China's idea of tempered economic growth is 9.5 per cent, does the world need to worry? Japan, South Korea and other nations counting on China for export growth can breath a sigh of relief. Beijing too is smug, claiming success in its war on inflation - a battle fought with credit curbs and interest rate hikes (as well as the natural advantages of massive manufacturing over-capacity, surplus labour and lower grain prices). But this is only a breather at best: cooling measures will continue this year. China's basic problems persist. While money supply growth has contracted, money still floods into the system, both from overseas and domestically. Projects refused credit from banks often find “kerbside” cash from savers hungry for returns. Foreign funds also pour in, largely betting on revaluation of the renminbi. The central bank last quarter bought around $30bn a month of US dollars - and is paying the price via higher sterilisation costs. That strengthens the case for more interest rate rises, as well as a revaluation. Of course Beijing, mindful of its domestic agenda - which this year includes the restructuring and multi-billion-dollar listing of its big banks - may opt for more administrative measures. Indeed, it may be encouraged by some success with the latter: economic growth has rebalanced slightly away from fixed asset investment and towards consumption. Whichever tools it uses, it is too early for China's Asian trading partners to relax.

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