China is Feeling the Heat
According to Asia Times, A record surge in Chinese property prices has added new tension to China’s high-wire act of maintaining the economic growth required for social stability while warding off overheating and at the same snubbing demands from the United States that the government allow the Chinese currency to appreciate.
Property prices rose at a record pace in March, up almost 12% from a year earlier, according to the National Bureau of Statistics on Wednesday. This represents a considerable short-term acceleration after housing prices in 70 major cities rose only 1.5% in 2009, according to official data.
Prices for homes and other assets such as stocks have surged since the government announced a 4 trillion yuan (US$562 billion) financial crisis November 2008 to head off the impact of the financial crisis then spreading around the world from the US. The money was targeted mostly at building infrastructure to take up the slack of lost jobs on declining overseas demand for Chinese-made products. In the event, cash has been diverted to the property and stock markets, driving up valuations.
since the government announced a 4 trillion yuan (US$562 billion) stimulus package in November 2008 to head off the impact of the financial crisis then spreading around the world from the US. The money was targeted mostly at building infrastructure to take up the slack of lost jobs on declining overseas demand for Chinese-made products. In the event, cash has been diverted to the property and stock markets, driving up valuations.
At the same time, the stimulus measures have boosted demand for imports, notably commodities such as iron. Combined with rising global commodity prices, this has turned the country’s usual trade surplus into a deficit.
China’s trade balance for March registered its largest deficit in over six years, as imports rose by two-thirds in comparison with March 2009, while exports were up only one-quarter. The deficit’s absolute level came in at over US$7.2 billion following a surplus slightly larger than that the previous month.
Any appreciation of the yuan is likely to be gradual to avoid undue traumatic effects on the economy and especially upon factory output and jobs, say analysts. A one-step yuan appreciation is unlikely to happen though a widening of the daily trading band is possible, an official with China’s monetary authorities said in comments published Monday in China Business News.
Even so, internal pressure to revalue the yuan to help cool the economy may grow amid estimates from economists polled by Bloomberg that GDP may have expanded as much as 11.7% in the first quarter from a year earlier, the fastest pace in almost three years. The gain was10.7% in the previous three months. The statistics bureau will release the data in Beijing on Thursday.