Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: russwinter who wrote (3284)	12/12/2003 9:14:07 AM
From: MulhollandDrive	Read Replies (1) \| Respond to of 110194

but certainly China raising rates in China, could have an impact. From CI on Chinese inventory builds well of course if china were to raise rates, it would possibly cool demand, but even with this little tidbit on inflation in china, the boc seems loathe to raise rates....just like the u.s., they seem to be more concerned about falling prices in production than any short term blips up in a demand driven commodities price rise. the very speculative nature of the commodity market (stockpiling) should underscore that for you. raising interest rates is simply an excessively blunt instrument that will hurt the chinese "consumer" that above all needs purchasing power. (i put that in quotes because for now i am dubious of the purchasing power that comes from a wage based on something like .33/hr.) (maybe jay will weigh in on exactly which chinese consumers will be buying all those maytags and chevy's..) quote.bloomberg.com China's Inflation Accelerates to 6 1/2-Year High (Update4) Dec. 12 (Bloomberg) -- China's consumer prices rose 3 percent in November from a year ago, the fastest rate of inflation in 6 1/2 years, after wheat and soybean shortages drove food prices higher. The biggest increase since April 1997 followed a 1.8 percent climb in October, the Beijing-based statistics bureau said on its Web site. Food costs, which account for about a third of the index, rose 8.1 percent. Wheat prices last month reached a 14-month high on the Chicago Board of Trade and soybean costs have risen by about a third in the past year. Inflation will probably moderate as food prices stabilize next year, making it unlikely the central bank will respond to today's report by raising interest rates, economists said. Chinese consumer prices excluding food rose 0.3 percent last month, Goldman Sachs Inc. said in a report today. ``Prices of many goods, from autos to electronics, are still falling because of intense competition and oversupply,'' said Chris Leung, an economist at DBS Bank in Hong Kong. ``The government is unlikely to tighten monetary policy by increasing interest rates, which will hit everyone in the economy,'' The government needs to hold interest rates down to stoke demand for the cars, homes and televisions being built in China as factory production booms. Production last month rose a record 18 percent to an all-time high, the government reported Wednesday. This dependence on consumer spending to help the economy may be deterring the central bank from raising borrowing costs amid concern too much investment is pouring into some industries. Bad Loans Standard & Poor's said yesterday there's a risk that too many factories are being built in sectors such as autos and consumer goods, and this may hurt companies' profits and saddle banks with more bad loans. The State Development and Reform Commission, which oversees industrial policy, in October called for restraint in the steel, cement and auto industries. Official figures show that 21 percent of loans extended by the nation's four largest banks were non-performing at the end of September. Standard & Poor's last month estimated the bad-loan ratio of China's state-owned banks' was 45 percent. The authorities have already taken some steps to curb lending and investment. The central bank in June tightened rules governing lending to the property sector and in September raised banks' reserve requirements. Aluminum smelters are barred from getting bank loans and selling shares. ``An interest rate hike hits consumer spending directly,'' said Prakash Sakpal, an economist at ING Bank NV in Hong Kong. ``The government should instead continue to go for higher reserve requirements to tighten money supply.'' Tightening Raising lenders' reserve requirements is being considered, the China Securities Journal reported Monday, citing Wang Yu, an official at the People's Bank of China. M2, the broadest measure of money supply, expanded faster than the central bank's 18 percent targeted growth rate every month this year. The government is also looking at alternative means of stemming investment in targeted industries. A ``massive campaign'' to assess the environmental impact of companies in the steel, aluminum and cement sectors is being considered as a means of damping investment in these areas, the China Daily newspaper reported today, citing Zhang Lijun, director at the State Environmental Protection Administration. The People's Bank of China on Oct. 27 forecast inflation will be about 1 percent through to the end of 2004 and said it intends to keep interest rates steady during that period. Autos were 4.6 percent cheaper in November and home- appliance prices fell 2.3 percent, today's statement showed. The cost of mobile phones and other telecommunications equipment fell 18 percent, it said. ``Manufacturing prices reflect over-investment in the past few years,'' said Tai Hui, an economist at Standard Chartered Bank in Hong Kong. ``Pressure on prices is still trending down.'' Last Updated: December 12, 2003 00:58 EST