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Market Watch
Business> Market Watch
UPDATED: November 12, 2010 NO. 46 NOVEMBER 18, 2010

GOLDEN RUSH: Customers pick up gold jewelry in the coastal city of Lianyunguang, Jiangsu Province. Gold prices have been on the rise as investors seek a safe haven amid inflationary jitters (WANG CHUN)

Numbers of the Week

13.1 %

China's industrial value-added output grew 13.1 percent in October year on year, 0.2 percentage points slower than that in September, said the National Bureau of Statistics.

529.8 billion yuan

China's export tax rebates had totaled 529.8 billion yuan ($79.1 billion) by the end of September, nearly 75 percent of the government's target of 707 billion yuan ($105.5 billion) for the entire year, said the State Administration of Taxation.

TO THE POINT: The economic data for October released on November 11 indicate that China's economy has steered a steady course of growth, but inflation remains a looming concern. October has witnessed the CPI rise to a 24-month high of 4.4 percent, while the PPI has climbed from last month's 4.3 percent to 5 percent. Investment and consumption maintain momentum. Foreign trade regains strength as well. Exports and imports of the first 10 months, amounting to $2.39 trillion, have exceeded the total volume of last year, which was $2.2 trillion. The property fever continues to cool with house price growth in 70 major cities slowing to 8.6 percent. In its latest move to absorb excess liquidity, the central bank raised the reserve requirement ratio by 0.5 percentage points. China's oil refiners bolster diesel output in response to diesel shortages across the country.


Figures for October


The consumer price index (CPI), a barometer of inflation, grew 4.4 percent in October, a 24-month high and 0.8 percentage points higher than in September, according to the National Bureau of Statistics (NBS).

The CPI increase was largely driven by food and residential factors, which went up 10.1 percent and 4.9 percent year on year, respectively, said Sheng Laiyun, an NBS spokesman, at a press conference.

Prices of agricultural products surged in overseas markets, feeding into China through trade links. Meanwhile, domestic natural disasters such as the October rainstorm in Hainan, also forced up food prices, he said.

In September, the producer price index (PPI), a major measure of inflation at the wholesale level, increased 5 percent from the previous year, compared with 4.3 percent in September.

Foreign trade

China's exports rose 22.9 percent in October from a year earlier to $135.98 billion, while imports went up 25.3 percent to $108.83 billion, said the General Administration of Customs.

The October figure brought the foreign trade volume in the first 10 months to $2.39 trillion, higher than the whole year's figure of $2.2 trillion for 2009. Exports in the first 10 months totaled $1.27 trillion, surging 32.7 percent year on year. The imports from January to October totaled $1.12 trillion, up 40.5 percent from a year ago. The trade surplus was $147.8 billion, down 6.7 percent year on year.

China's exports are expected to maintain steady growth in the fourth quarter thanks to Christmas orders, said Zuo Xiaolei, chief economist at the China Galaxy Securities Co. Ltd.

Meanwhile, imports have been outpacing exports, a signal that the economy is rebalancing to rely more on domestic demands, she said.

Retail sales

Retail sales of consumer goods totaled 1.43 trillion yuan ($213.4 billion) in October, rising 18.6 percent from one year earlier, said the NBS.

Fixed-asset investment

China's urban investment in fixed assets soared 24.4 percent in the first 10 months year on year to hit 18.76 trillion yuan ($2.83 trillion), said the NBS.

Bank loans

Newly added yuan-denominated loans dropped to 587.7 billion yuan ($87.7 billion) in October from 595.5 billion yuan ($88.9 billion) last month, said the central bank.

The October figure brought the total amount in the first 10 months to about 6.89 trillion yuan ($1 trillion), accounting for nearly 92 percent of the government-set target of 7.5 trillion yuan ($1.1 trillion) for this year.

House prices

House prices in 70 large and medium-sized cities grew 8.6 percent year on year in October, according to the NBS. The pace has slowed for six consecutive months from the peak of 12.8 percent in April when the government started measures to cool the burning-hot markets.

New home prices climbed 10.6 percent from a year ago, while those of second-hand houses climbed 5.9 percent.

The property sales volume fell 7.7 percent from September to 507.6 billion yuan ($75.8 billion) in October.

In its latest attempt to hit speculation, the government on November 3 ordered to raise the mortgage rate of public housing fund by 10 percent for second-home buyers.

It seems that those austerity measures have taken root as house price growth slackened, said Lu Zhengwei, an analyst at the Industrial Bank Co. Ltd.

However, given the fundamental drivers of property prices—rapid urbanization, income growth and low interest rates—China's house prices are unlikely to remain flat for long, said Ardo Hansson, lead economist for the World Bank China Office.

Freezing Liquidity

The People's Bank of China, the central bank, raised the reserve requirement ratio by 0.5 percentage points for all financial institutions that accept deposits.

This is the fourth time this year the central bank raised the ratio, and it is expected to freeze liquidity of more than 300 billion yuan ($45 billion).

This move comes amid growing fears about inflation and speculative capital inflows, especially after the United States announced a second round of quantitative easing policy on November 3.

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