MARKET WATCH

MARKET WATCH

TO THE POINT: The econom ic data for October released on November 11 indicate that China’s econom y has steered a steady course of grow th, but inflation remains a loom ing concern. October has w itnessed 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 im ports 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 w ith house price grow th in 70 major cities slow ing 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.

By HU YUE

Figu res fo r Oc tober

CPI and PPI

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 Bu reau o f 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. M eanwhile, 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.

Fo reign 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 Adm inistration of Customs.

The October figure brought the foreign trade volume in the fi rst 10 months to $2.39 trillion, higher than the whole year’s figure of $2.2 trillion for 2009. Exports in the fi rst 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 grow th in the fourth quarter thanks to Christmas orders, said Zuo Xiaolei, chief econom ist 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 investm ent

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

New ly added yuan-denom inated 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 fi rst 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 p rices

House prices in 70 large and mediumsized 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 grow th slackened, said Lu Zhengwei, an analyst at the Industrial Bank Co. Ltd.

However, given the fundamental drivers of property prices—rapid urbanization,income grow th 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 Liquid ity

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 am id grow ing fears about inflation and speculative capital inflow s, especially after the United States announced a second round of quantitative easing policy on November 3.

Zhang Ping, Chairman of the National Development and Reform Comm ission,predicted the CPI for the whole year w ill slightly exceed the government-set target of 3 percent.

By striking the banks’ ability to lend, the reserve requirement ratio hike w ill help mop up excess liquidity and ease the pressure of consumer price inflation, said Zhuang Jian, a senior economist at the Asian Development Bank.

Diesel Sho rtage

China’s top oil refiners are boosting diesel production to address fuel shortages across the nation.

Sinopec, the nation’s largest oil refiner,said it boosted daily processing of crude oil to 4.27 m illion barrels in November, up 9.9 percent from a year ago. It would also import 200,000 tons of diesel in November to supplement the drying diesel storage in parts of China, said the company.

PetroChina, the country’s top oil and gas producer, also pledged to increase its diesel output by 6.3 percent in November from a month ago.

A number of local governments this year ordered blackouts for enterprises as the country gears up to conserve energy and reduce em issions. In response, many factories turned to diesel fuel to generate electricity so they can continue operations during periods of forced power outages.

The China Chamber of Commerce for the Petroleum Industry estimated that more than 2,000 private gas stations in south China have shut down due to a lack of diesel.

Low-Carbon Prog ram

The Climate Group, a global non-profi t non-government organization, launched its Carbon Treasure-China’s Corporate Carbon Strategy program in Beijing on November 5.

The p rogram is designed to help Chinese enterprises embark on a low-carbon path of development, w ith a focus on finance and power sectors and supply chain management. It also seeks to help leading corporations influence other companies to better promote and spread the best lowcarbon practices.

Enterprises are the backbone in lowcarbon business development, said Tony Blair, former Prime M inister of the United Kingdom and co-founder of the Climate Group, at the launch ceremony.

These enterprises play vanguard roles in techno logical innovation and lowcarbon practices, and they should not wait for the government to take action fi rst, he said.