China Inflation, Industrial Production Accelerate (Update1)
2010-03-11 02:24:58.278 GMT
(Adds lending data in fifth paragraph.)
By Bloomberg News
March 11 (Bloomberg) -- China's inflation reached a 16-
month high, industrial output climbed and new loans exceeded
forecasts, adding to the case for the government to pare back
stimulus measures.
Consumer prices rose 2.7 percent from a year earlier, the
National Bureau of Statistics said in Beijing today, compared
with the 2.5 percent median estimate of 29 economists surveyed
by Bloomberg News. A weeklong holiday may have boosted prices.
Production expanded 20.7 percent in the first two months of the
year after an 18.5 percent gain in December.
Premier Wen Jiabao aims to hold full-year inflation around
3 percent after banks flooded the financial system with money to
drive a rebound from the global recession. Gross domestic
product grew 10.7 percent last quarter and central bank Governor
Zhou Xiaochuan said March 6 that anti-crisis policies, including
the yuan's peg to the dollar, must end "sooner or later."
"With economic growth quickening to more than 10 percent
and record lending flowing through the financial system,
economic overheating is a high possibility," Qu Hongbin, chief
China economist at HSBC Holdings Plc in Hong Kong, said before
today's release. "The government will stay very proactive this
year and an inflation rate approaching 3 percent or topping the
target may trigger an interest-rate increase."
Lending Growth
Banks extended 700 billion yuan ($103 billion) of new loans
in February, central bank data showed today. That compared with
1.39 trillion yuan in the previous month and 1.07 trillion yuan
a year earlier. The median estimate was for 600 billion.
Stocks held gains after the data, with the Shanghai
Composite Index rising 0.4 percent as of 10:16 a.m. local time,
and the MSCI Asia Pacific index advancing 0.5 percent.
M2, a measure of money supply, rose 25.5 percent, compared
with a 26 percent gain. The government targets 17 percent M2
growth for this year.
Retail sales rose 17.9 percent in the first two months from
a year earlier, and urban fixed-asset investment gained 26.6
percent. Retail sales grew 22.1 percent in February, the bureau
said.
Economists often look at January and February numbers
together to eliminate distortions caused by a one-week Lunar New
Holiday. China's 2010 data is also boosted by comparisons with
year-ago levels depressed by the financial crisis.
'Entire Toolkit'
The government "will need to use the entire toolkit,
including higher policy rates and a stronger currency" to
achieve Wen's inflation target, Brian Jackson, an emerging-
market strategist at Royal Bank of Canada in Hong Kong, said
ahead of today's numbers.
Trade data yesterday showed exports rebounding faster than
economists forecast, while a property market report showed
prices climbing by the most in almost two years.
Commodity costs, reforms of China's energy and resource
pricing, and the effects of last year's expansion of credit may
add inflation pressures this year, China's top planning agency
told lawmakers last week. Baoshan Iron & Steel Co. and spirits
manufacturer Kweichow Moutai Co. are among companies to have
pushed up prices this year.
Producer-price inflation climbed to 5.4 percent in February
from 4.3 percent in January, the statistics bureau said today.
Yuan Peg
The central bank hasn't raised benchmark interest rates
since December 2007, before the financial crisis deepened. The
one-year lending rate is at 5.31 percent and deposit rate is at
2.25 percent. China has also effectively pegged the yuan at
about 6.83 per dollar since July 2008 to help exporters.
The central bank has twice raised lenders' reserve
requirements this year. Deputy Governor Su Ning said this week
that those moves were to prevent monetary conditions becoming
"excessively loose" as the government continues to implement
what it describes as a "moderately loose" stance.
Policy makers are targeting lending of 7.5 trillion yuan,
22 percent less than last year's actual figure, and pledging to
crack down on property speculation. The government has tightened
second-home mortgages and banks have scaled back favorable home
loan rates.
For Related News and Information:
Most-read stories on China: MNI CHINA 1W <GO>
Most-read China economy stories: TNI CHECO MOSTREAD BN <GO>
For top economic news: TOP ECO <GO>
For top China news: TOP CHINA <GO>
Credit crunch page: WCC <GO>
Government relief programs: GGRP <GO>
--Li Yanping. Editors: Paul Panckhurst, Chris Anstey.
To contact Bloomberg News staff for this story:
Li Yanping in Beijing at +86-10-6649-7568 or
yli16@bloomberg.net
To contact the editor responsible for this story:
Chris Anstey at +81-3-3201-7553 or
canstey@bloomberg.net
2010-03-11 02:24:58.278 GMT
(Adds lending data in fifth paragraph.)
By Bloomberg News
March 11 (Bloomberg) -- China's inflation reached a 16-
month high, industrial output climbed and new loans exceeded
forecasts, adding to the case for the government to pare back
stimulus measures.
Consumer prices rose 2.7 percent from a year earlier, the
National Bureau of Statistics said in Beijing today, compared
with the 2.5 percent median estimate of 29 economists surveyed
by Bloomberg News. A weeklong holiday may have boosted prices.
Production expanded 20.7 percent in the first two months of the
year after an 18.5 percent gain in December.
Premier Wen Jiabao aims to hold full-year inflation around
3 percent after banks flooded the financial system with money to
drive a rebound from the global recession. Gross domestic
product grew 10.7 percent last quarter and central bank Governor
Zhou Xiaochuan said March 6 that anti-crisis policies, including
the yuan's peg to the dollar, must end "sooner or later."
"With economic growth quickening to more than 10 percent
and record lending flowing through the financial system,
economic overheating is a high possibility," Qu Hongbin, chief
China economist at HSBC Holdings Plc in Hong Kong, said before
today's release. "The government will stay very proactive this
year and an inflation rate approaching 3 percent or topping the
target may trigger an interest-rate increase."
Lending Growth
Banks extended 700 billion yuan ($103 billion) of new loans
in February, central bank data showed today. That compared with
1.39 trillion yuan in the previous month and 1.07 trillion yuan
a year earlier. The median estimate was for 600 billion.
Stocks held gains after the data, with the Shanghai
Composite Index rising 0.4 percent as of 10:16 a.m. local time,
and the MSCI Asia Pacific index advancing 0.5 percent.
M2, a measure of money supply, rose 25.5 percent, compared
with a 26 percent gain. The government targets 17 percent M2
growth for this year.
Retail sales rose 17.9 percent in the first two months from
a year earlier, and urban fixed-asset investment gained 26.6
percent. Retail sales grew 22.1 percent in February, the bureau
said.
Economists often look at January and February numbers
together to eliminate distortions caused by a one-week Lunar New
Holiday. China's 2010 data is also boosted by comparisons with
year-ago levels depressed by the financial crisis.
'Entire Toolkit'
The government "will need to use the entire toolkit,
including higher policy rates and a stronger currency" to
achieve Wen's inflation target, Brian Jackson, an emerging-
market strategist at Royal Bank of Canada in Hong Kong, said
ahead of today's numbers.
Trade data yesterday showed exports rebounding faster than
economists forecast, while a property market report showed
prices climbing by the most in almost two years.
Commodity costs, reforms of China's energy and resource
pricing, and the effects of last year's expansion of credit may
add inflation pressures this year, China's top planning agency
told lawmakers last week. Baoshan Iron & Steel Co. and spirits
manufacturer Kweichow Moutai Co. are among companies to have
pushed up prices this year.
Producer-price inflation climbed to 5.4 percent in February
from 4.3 percent in January, the statistics bureau said today.
Yuan Peg
The central bank hasn't raised benchmark interest rates
since December 2007, before the financial crisis deepened. The
one-year lending rate is at 5.31 percent and deposit rate is at
2.25 percent. China has also effectively pegged the yuan at
about 6.83 per dollar since July 2008 to help exporters.
The central bank has twice raised lenders' reserve
requirements this year. Deputy Governor Su Ning said this week
that those moves were to prevent monetary conditions becoming
"excessively loose" as the government continues to implement
what it describes as a "moderately loose" stance.
Policy makers are targeting lending of 7.5 trillion yuan,
22 percent less than last year's actual figure, and pledging to
crack down on property speculation. The government has tightened
second-home mortgages and banks have scaled back favorable home
loan rates.
For Related News and Information:
Most-read stories on China: MNI CHINA 1W <GO>
Most-read China economy stories: TNI CHECO MOSTREAD BN <GO>
For top economic news: TOP ECO <GO>
For top China news: TOP CHINA <GO>
Credit crunch page: WCC <GO>
Government relief programs: GGRP <GO>
--Li Yanping. Editors: Paul Panckhurst, Chris Anstey.
To contact Bloomberg News staff for this story:
Li Yanping in Beijing at +86-10-6649-7568 or
yli16@bloomberg.net
To contact the editor responsible for this story:
Chris Anstey at +81-3-3201-7553 or
canstey@bloomberg.net
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