MARKET WATCH

MARKET WATCH

By HU YUE

TO THE POINT:November saw the consumer price index rise to an alarming 5.1 percent, prompting policymakers to mop up excess liquidity. Foreign trade picks up steam, with both exports and imports in November reaching record highs. The property fever cools down a little, with house price growth in 70 major cities slowing to 7.7 percent in November. Hiring activities in China have experienced a surge, making the country the world’s second hottest job market in the third quarter.

November Figures

CPIThe consumer price index (CPI), a barometer of inflation, grew 5.1 percent in November, a 28-month high and 0.7 percentage points higher than in October, said the National Bureau of Statistics (NBS).

The CPI increase was largely driven by food and residential factors, said NBS spokesman Sheng Laiyun. Food prices surged 11.7 percent year on year, contributing 74 percent to the CPI increase.

Consumer prices are expected to drop as the government has spared no effort to ensure food supplies and subsidize low-income residents.

On November 20, the State Council announced 16 measures to rein in rising commodity prices, including boosting agricultural production and enhancing price supervision.

November prices of vegetables dropped 1.9 percent from October while those of grain and edible oil stabilized, said Sheng.

But there may be a time lag before those measures take overall effect.

PPIIn November, the producer price index(PPI), a major measure of inflation at the wholesale level, increased 6.1 percent from the previous year, compared with 5 percent in October.

Retail sales

Retail sales of consumer goods totaled 1.39 trillion yuan ($209 billion) in November, rising 18.7 percent from one year earlier, said the NBS.

Fixed-asset investment

China’s urban investment in fi xed assets soared 24.9 percent in the first 11 months year on year to hit 21.07 trillion yuan ($3.2 trillion), said the NBS.

Investment in the property sector was 4.27 trillion yuan ($642.1 billion) from January to November, an increase of 36.5 percent from a year ago.

Foreign trade

China’s exports soared 34.9 percent in November from a year earlier to $153.33 billion, while imports went up 37.7 percent to $130.43 billion, said the General Administration of Customs. Both exports and imports reached record highs.

The November fi gure brought the foreign trade volume in the fi rst 11 months to$2.68 trillion, higher than the whole year’s figure of $2.2 trillion for 2009. Exports from January to November added up to$1.42 trillion, surging 33 percent year on year. The imports stood at $1.25 trillion,up 40.3 percent from a year ago. The trade surplus was $170.4 billion, down 3.9 percent year on year.

In the first 11 months, mechanical and electrical products accounted for 59.2 percent of the country’s exports.

The increase in exports is attributable to buoyant demands in the run-up to Christmas,said Hu Yanni, a senior analyst at the China Securities Co. Ltd.

Looking ahead, the Ministry of Commerce expects foreign trade to grow, but at a slower pace given uncertainties such as a stronger yuan and simmering trade protectionism.

The November fi gure brings FDI for the first 11 months to $91.7 billion, a year-onyear increase of 17.73 percent. During the period, 24,302 foreign-funded companies were approved, up 17.97 percent from the previous year.

It is necessary to keep a close watch over the capital in fl ows, guide them into the real economy and fend off speculative hot money, said Wang Jian, a senior researcher at the University of International Business and Economics.

House prices

House prices in 70 large and mediumsized cities grew 7.7 percent year on year in October, according to the NBS. The pace has slowed for seven consecutive months from the peak of 12.8 percent in April when the government started measures to cool the redhot markets.

New home prices climbed 9.3 percent from a year ago, while those of second-hand houses climbed 5.6 percent.

The property sales in the fi rst 11 months totaled 4.23 trillion yuan ($636.1 billion),climbing 17.5 percent from the previous year.

In its latest attempt to hit speculation, the government has launched a nationwide inspection to check implementation of existing real estate policies, including raised mortgage rates and enhanced land supplies.

The policies that the Chinese Government has taken to cool growth in the real estate market do appear to have had a meaningful impact and the gaps between fundamentals and implied prices have shrunk in some cities, with the exception of the more af fl uent coastal cities, said a recent IMF report.

It also suggested that China continue to increase interest rates, increase the carrying cost of home-ownership through a signi fi cant property tax, and further develop the fi nancial markets as an alternative to real estate speculation.

Money supply

The broad money supply (M2), which covers cash in circulation and all deposits,stood at 71.03 trillion yuan ($10.7 trillion),at the end of November, a growth of 19.5 percent year on year, said the People’s Bank of China, the central bank.

Bank lending

Newly added yuan-denominated loans dropped to 564 billion yuan ($84.8 billion)in November from 587.7 billion yuan ($88.4 billion) in October, said the central bank.

The November figure brought the total amount in the fi rst 11 months to about 7.454 trillion yuan ($1.12 trillion), nearing the government-set target of 7.5 trillion yuan ($1.13 trillion) for this year.

Credit expansion maintained momentum as enterprises, infrastructure projects and the consumer market have strong demands for financing, said Guo Tianyong, Director of the Research Center of China’s Banking Industry under the Central University of Finance and Economics.

“Meanwhile, commercial banks have rushed out loans before the government further tightens its monetary stance,” he said.

Numbers of the Week

584.1 billion yuan

China’s fi scal revenue added up to 584.1 billion yuan ($87.8 billion) in November, up 16.1 percent from the previous year,said the Ministry of Finance.

13.3%

China’s industrial output grew 13.3 percent year on year in November, compared with 13.1 percent in October, said the National Bureau of Statistics.

SMART MOVE: On December 14, China’s telecom giant ZTE Corp.and Japan’s Softbank Corp. jointly launch their first intellectual Android smart phone, Libero, in the Japanese market

Draining Liquidity

The People’s Bank of China on December 10 ordered the third increase of the reserve requirement ratio (RRR) for banks in a month in a move to siphon excess liquidity that has been fueling inflationary jitters. This was the fifth such hike this year.

Effective as of December 20, commercial banks will have to set aside an additional 0.5 percent of their deposits in reserve, locking about 350 billion yuan ($52.7 billion) that they could otherwise lend.

The hike will also put fl esh on the bones of the government’s recent pledge to switch the “moderately loose” monetary policy to a“prudent” stance.

Although the central bank felt the need to do something to show its determination to tame inflation, it had no intention of killing growth with an aggressive interest rate hike or imposing a lending squeeze,said Lu Ting, an economist at the Bank of America-Merrill Lynch.

“Hiking RRR seems to be the natural choice of the central bank. China wishes to maintain the current pace of growth,” he said.

“There are underlying concerns that growth below 8 percent will not be able to generate enough jobs for new entrants into workforce. So that’s a big dilemma for the government,” Steven Dunaway, adjunct senior fellow for International Economics at the Council on Foreign Relations, toldBeijing Review.

Jobs Boom

Hiring activities in China have increased 12.5 percent in the third quarter from the second quarter, making the country the world’s second hottest job market, only behind Thailand, according to a recent report by Antal International, a global executive recruitment organization.

Pharmaceutical, banking, manufacturing,and professional services were the top four active sectors in recruitment, it said.

“It was a very good sign of quick economic recovery, and Chinese professionals themselves found the job market very robust,” said Tony Goodwin, CEO of the London-based headhunter company.

Rising stars of the developing world continued to lead the way to sustained recovery—both China and India are recording very high levels of demand for professionals and managers, said the report.

$9.7 billion of foreign direct investments (FDI) in November, soaring 38.2 percent from a year ago, said the Ministry of Commerce.