The Chinese economy - the view on growth and inflation

15 Aug 2011 CNBC Straight Talk
Here we have a very knowledgeable Chinese economist who is able to apply dynamic thinking to the problem of forecasting economic time series. Basically what this means is that he can construct policy to the best standards possible for his country. Any growth model used at the investment banks (or even at the central banks for that matter) has to be able to take into consideration the local as well as global forces in their scenarios and/or projections. It looks like it was filmed in Beijing. I travelled there about two years ago. There is no question that the world is now standing in the shadow of China.




"We expect growth to decelerate. Actually in the first half GDP growth came in higher than we expected. In the second half we think monetary policy with its lagged effect will have a more powerful impact on the economy, but still for the year as a whole we expect the economy to grow by 9.2%"


[Presenter - The bigger question of course is the debt crisis in Europe and America being bogged down. Can China be the saving grace for the world? Or is that not going to happen? Domestic consumption has suffered lately because of the crackdown on credit that was once free flowing by the PRC]

"The market has been volatile and there is a risk of more economic slowdown. But for the time being we are analysing two scenarios. One is economic growth will be slower and sluggish in the advanced economies without a recession. Another one is a new recession. I think in the first scenario it would work in China's favour in terms of lower international commodity prices, not only for China but for emerging markets in general. I would say China won't be the saviour of the world but of course it will be a stabilizing factor."


[Presenter - What about the Renminbi? We've seen records against the US dollar. Have they given into the inevitable, are they deploying currency strength as perhaps their outsourced tool against inflation? Is there some subtle policy shifts going on?]

"I do not think this is a major policy shift, but if we look at the CPI although it is expected to fall it is still high. The government will stop further policy tightening given the current market turmoil but exchange rate at this point can serve as a policy tool to set inflation expectation. By faster appreciation they will help contain imported inflation [!] The Chinese government has been trying to increase the imports and reduce the trade surplus."


[Presenter - Could China see its own credit crisis?]

"For the time being, the scale of the local government debt problem is not comparable to what is happening in the United States or Europe [!] But it is up to the government to take responsibility for the fallout of the stimulus measures it took."

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[Buntzums]

the real question is how do countries avoid this housing bubble in the future - is it a lending issue? Canada has had this problem as well as the US.

[redwhitedude]

@gettingahandle It's real estate speculation. A real estate bubble in progress. When it pops it's going to make the real estate malaise everywhere else look like child's play. I don't think I've heard or seen anywhere else where an empty city is built purely for speculation or blind building just to pad stats.

[gettingahandle]

What's the story with the 64,000,000 empty aparments? C'mon guys, what about it?