Macroeconomic indicators - Yuan rise to play role in big China economic shift

Saturday, 05 Mar 2011

Reuters reported that China is in the early stages of an economic rebalancing act that makes a stronger currency an almost inevitable part of the mix and a sustained yuan rise may come far sooner than many foreign players are expecting.

Beijing has started taking broad steps to wean itself off exports and promote greater domestic spending while trying to cope with what appears to be a sustained rise in inflation all of which point to yuan appreciation. While higher inflation in China compared with major trading partners will lead to a stronger real trade weighted exchange rate, traders believe that authorities certainly don't want inflation alone to be the driver meaning that nominal appreciation is part of the equation.

Several FX traders on the mainland think that this change is just starting to take shape, underscored by the yuan march to record highs and should reaffirm the consensus expectations for 5% to 6% appreciation this year contrary to the cautious pricing in the dollar/yuan NDFs.

A senior trader at a Chinese commercial bank in Shenzhen said "China has already started a process to adjust its economic structure and the previous strategy to keep the yuan value at a relatively low level so as to help boost exports will gradually phase out."

The trader said "The yuan will thus increasingly move in line with China economic fundamentals and the most important factor in the fundamentals this year will be high inflation. So the yuan exchange rate will be used in the anti-inflation campaign."

Traders have become more convinced that the People Bank of China will allow more currency strength thanks to calming currency tensions with the United States, especially after the US Treasury declined to name China a currency manipulator in a report last month.

Those currency tensions appear to have prevented China, always loath to be seen bowing to foreign pressure, from allowing as much yuan appreciation as it might have. Now that the hot button yuan has slipped off the diplomatic radar screen, Beijing is more comfortable letting the currency rise.

The PBOC's own actions have also given traders more confidence that further currency strength is in store with the central bank guiding the Chinese currency to a slew of record highs this year.

(sourced:Reuters)

Macroeconomic indicators - Index of six core industries for January 2011

Wednesday, 02 Mar 2011
The Index of Six core industries having a combined weight of 26.7% in the Index of Industrial Production with base 1993-94 stood at 295.6 (provisional) in January 2011 and registered a growth of 7.1% (provisional) compared to 9.8% registered in January 2010. During April-January 2010-11, six core industries registered a growth of 5.6% (provisional) as against 5.5% during the corresponding period of the previous year.
Crude Oil
Crude Oil production (weight of 4.17% in the IIP) registered a growth of 10.8% (provisional) in January 2011 compared to a growth rate of 9.8% in January 2010. The Crude Oil production registered a growth of 11.9% (provisional) during April to January 2010-11 compared to (-) 0.1% during the same period of 2009-10.
Petroleum Refinery Products
Petroleum refinery production (weight of 2.00% in the IIP) registered a growth of 8.7% (provisional) in January 2011 compared to growth of 3.8% in January 2010. The Petroleum refinery production registered a growth of 2.4% (provisional) during April to January 2010-11 compared to (-) 0.5% during the same period of 2009-10.
Coal
Coal production (weight of 3.2% in the IIP) registered a growth of (-) 1.2% (provisional) in January 2011 compared to growth rate of 5.4% in January 2010. Coal production grew by 0.8% (provisional) during April to January 2010-11 compared to an increase of 8.0% during the same period of 2009-10.
Electricity
Electricity generation (weight of 10.17% in the IIP) registered a growth of 9.3 % (provisional) in January 2011 compared to growth rate of 6.4% in January 2010. Electricity generation grew by 5.0% (provisional) during April to January 2010-11 compared to 5.9% during the same period of 2009-10.
Cement
Cement production (weight of 1.99% in the IIP) registered a growth of 1.8% (provisional) in January 2011 compared to 12.4% in January 2010. Cement Production grew by 4.1% (provisional) during April-January 2010-11 compared to an increase of 11.1% during the same period of 2009-10.
Finished (carbon) steel
Finished (carbon) Steel production (weight of 5.13% in the IIP) registered a growth of 8.2% (provisional) in January 2011 compared to 16.8% (estimated) in January 2010. Finished (carbon) Steel production grew by 7.8% (provisional) during April-January 2010-11 compared to an increase of 5.7% during the same period of 2009-10.

Macroeconomic indicators - Hong Kong CPI in Jan up by 4 pct YoY

Sunday, 27 Feb 2011 China Knowledge

China Knowledge quoted report released by the Census and Statistics Department said the consumer price index in the Hong Kong Special Administrative Region rose 3.6%YoY in January after increasing 3.1% in December.

Excluding the effects of the government one off relief measures, the composite CPI increased 3.5% from the same period in 2010 a growth higher than the 2.8% rise in December mainly due to the enlarged increases in the prices of food, private housing rentals as well as the charges for package tours.

Food prices in Hong Kong which took up one-third of the total CPI climbed 8.2% in January. Meanwhile a 3% increase was seen in the prices of housing compared with the same period in 2010. There were a YoY increase of 7% in the prices of electricity, gas and water and 5% increase in the prices of clothing and footwear.

A spokesman said that that the local economy will continue to face higher price pressures in the coming months, due to sustained rises in global food and commodity prices, higher inflation in the import sources, and also the strong local economic conditions.

Macroeconomic indicators - Chinese manufacturing growth slows in January amid tightening measures

Wednesday, 09 Feb 2011
Xinhua reported that growth in China manufacturing sector slowed in January amid the government efforts to cool price pressures.
China Federation of Logistics and Purchasing said China manufacturing sector purchasing manager index fell to a five month low of 52.9% in January compared with 53.9% in December. The January figure means the benchmark index for economic expansion has remained above the boom or bust line of 50% for 23 consecutive months.
Analysts said authorities' moves to cool prices prompted the PMI decline and the economic outlook remained unclear.

Mr Zhang Liqun a research fellow with China top government think tank the Development Research Center of the State Council said the continued slowdown in the January PMI data showed economic uncertainty remained and the data would likely drop further in months to come. He said that "This showed manufacturing enterprises are facing greater pressure and more difficulty with increasing costs and shrinking orders.”
Mr He Yifeng a senior researcher who had kept tracing PMI figures with Hongyuan Securities said the January PMI data was a good sign that the economy was slowing remarkably.

China consumer price index a main gauge of inflation rose 4.6%YoY in December and the full year CPI climbed 3.3% in 2010 exceeding the central government official target of 3%. Mounting inflation pressure prompted the People Bank of China the central bank to adopt more tightening measures, including a hike in the bank reserve requirement ratio by 50 basis points on January 20.

The central government imposed tougher measures in cities where home prices are skyrocketing, such as restrictions on home purchases and an increase in the minimum down payment requirement for the purchase of a second home to 60% of the property's value.

Mr Cai Jin vice-president of CFLP said "The drop of PMI in January was remarkable, but the decline also had a positive meaning. Because the 10.3% of economic growth last year was a little too high a fall in PMI data in January was closely related to the government's macro control measures and it was helpful to tame inflation."
The HSBC China Manufacturing Purchasing Managers Index, another survey released recently however edged up to 54.5 last month from a three month low of 54.4 in December.(sourced:Xinhua)