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POLITICAL ECONOMY
Chinese output growth slows to five-year low in August
by Staff Writers
Beijing (AFP) Sept 13, 2014


Britain plans first yuan bond outside China
London (AFP) Sept 12, 2014 - Britain on Friday said it would be the first country outside China to issue yuan-denominated bonds, as London seeks to become a Western hub for trading in the Chinese currency.

The UK Treasury said the government plans to issue the bond in the coming weeks, subject to market conditions, without giving an exact amount or other details.

"This will be the first non-Chinese issuance of sovereign RMB (yuan) debt and will be used to finance Britain's reserves," it said in a statement.

"Up to now, Britain has only held reserves in US dollars, euros, yen and Canadian dollars, so today's announcement signals the RMB's potential as a future reserve currency."

British politicians have been scrambling to make London China's Western financial hub as Beijing loosens its tight regulations on international trading in the yuan.

Last year the yuan overtook the euro as the world's second-largest trade currency after the dollar, and analysts predict its role is set to grow as China's economy, already the world's second-largest, expands.

In response, British authorities have embarked on a charm offensive to attract Chinese capital in the City of London, with yuan volumes more than doubling in the year to July 2014.

China bank loans nearly double in August: govt
Beijing (AFP) Sept 12, 2014 - China's bank lending nearly doubled in August from the previous month, central bank data showed Friday, rebounding towards what analysts described as a normal level.

Chinese banks granted 702.5 billion yuan ($114.5 billion) in new loans last month, the People's Bank of China (PBoC) said in a statement, nearly twice July's 385.2 billion yuan.

But it was still lower than June's 1.08 trillion yuan and 10.3 billion yuan less than the amount recorded a year ago, PBoC data showed.

Shen Jianguang, a Hong Kong-based economist, said August's figure, although still "relatively low" represented a "close-to-standard" monthly level given analysts' consensus that the government wants to see 10 trillion yuan lent this year.

"It reflected limited relaxing of monetary policy, which was targeted and not aggressive," he told AFP.

Premier Li Keqiang has said that the government would not seek to boost economic growth by pumping up credit growth.

"There is already a large amount of money in the pool. It's impossible for us to continue to rely on issuing new bank notes to stimulate economic growth," Li said this week, according to an earlier report by the state-run Securities Daily.

Julian Evans-Pritchard, an analyst with research firm Capital Economics, welcomed the slower credit growth.

"It is necessary to put China's growth on a more sustainable long-run trajectory," he wrote in a research note.

Shen said August's lending figure also showed soft demand for loans as the property market remained sluggish, which was among the reasons for the slump in new loans in July.

"The economy's major problem is weakness in the property sector," he said.

Real estate is a key driver of economic growth and a major source of revenues for local government, but China's new home prices fell for the fourth consecutive month in August.

Total social financing, a broader gauge of credit in the overall economy, reached 957.4 billion yuan in August, the PBoC said, more than tripling the 273.1 billion yuan in July. wf/slb/ac

China's industrial production growth slowed sharply in August to its lowest level for more than five years at 6.9 percent, official data showed Saturday, intensifying concerns for the world's second-largest economy.

The key indicator, which measures output at factories, workshops and mines, slumped from a 9.0 percent year-on-year expansion in July and was the worst since 5.7 percent in December 2008, during the global financial crisis.

It also fell far short of the 8.7 percent median increase in a survey of 15 economists by The Wall Street Journal.

The abrupt slowdown and other data released Saturday are certain to compound growing worries over the strength of China's economy -- a key driver of world commerce -- following recent indicators suggesting growth is weakening even after authorities took limited stimulatory measures.

Retail sales, a key indicator of consumer spending, rose 11.9 percent in the same month on-year, the National Bureau of Statistics (NBS) said -- also down from 12.2 percent in July.

Fixed asset investment, a measure of government spending on infrastructure, expanded 16.5 percent on-year in the first eight months of 2014. The figure is only released as a cumulative change.

It was below the 17.0 percent reading for the first seven months of the year, and also below the 16.9 percent forecast.

China's Communist Party government is targeting expansion of about 7.5 percent in gross domestic product (GDP) this year, the same as last year's objective, as it tries to steer the country's growth model towards consumer spending and away from the export- and investment-fuelled double-digit economic expansion regime of the past.

ANZ Bank economists Liu Li-Gang and Zhou Hao said that the August data put the government's scenario in danger and showed the need for prompt action.

"Past experience suggests that China needs to maintain around 9.0 percent industrial production growth to deliver 7.5 percent GDP growth," they wrote in an analysis.

"In our view, short of outright policy easing, China will likely miss the 7.5 percent growth target this year, and a sharp economic slowdown will endanger the undergoing structural reforms," they added.

"Chinese authorities should further relax monetary policy as soon as possible to prevent the growth momentum from decelerating further."

How they will react, however, is unclear.

Premier Li Keqiang, addressing a World Economic Forum meeting in China on Wednesday, appeared far from concerned.

"When observing the Chinese economy, one should not just focus on its short-term performance or the performance of a particular sector," he said.

"Rather, one should look at the overall trend, the bigger picture and the total score."

- Property problems -

Since April, authorities have deployed measures to boost growth, including small business tax breaks, targeted infrastructure spending and incentives to spur lending in rural areas and to small companies.

NBS data released Thursday showed that inflation eased to a four-month low of 2.0 percent in August, leaving leaders with room to take further stimulatory steps.

Li stressed that the government has chosen not to adopt "strong economic stimulus or easing monetary policy", focussing instead on reforms and readjustments.

But he also said that authorities have unused ammunition in the form of "a full range of tools of macro-control at our disposal".

He did not elaborate, but possible steps include lowering requirements for how much cash banks must keep on hand, aimed at spurring lending, and cutting interest rates to reduce borrowing costs.

China's GDP grew at a higher-than-expected 7.5 percent in the second quarter from 7.4 percent in the first three months of the year, which was the worst since a similar 7.4 percent result in July-September 2012.

Recent concerns have centred on fallout for the economy from a potentially damaging knockdown in China's huge property sector, where new home prices have fallen for four straight months, as well as waning effects from limited doses of government stimulus.

A plunge in bank lending in July had also raised fears of slowing economic growth, though figures for August showed a strong rebound to what analysts described as approaching a normal level.

Chinese banks granted 702.5 billion yuan ($114.5 billion) in new loans last month, the People's Bank of China said Friday, nearly twice July's 385.2 billion yuan though still below June's 1.08 trillion yuan and lower than the amount recorded in August 2013.

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China August inflation eases to 2.0% on-year: govt
Beijing (AFP) Sept 11, 2014
Chinese inflation eased to a four-month low of 2.0 percent in August, official data showed Thursday, with analysts saying the data could allow leaders to further ease monetary policy in the world's number-two economy. The National Bureau of Statistics also said in a statement that over the first eight months of the year the consumer price index - a main gauge of inflation - rose 2.2 percen ... read more


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