China watch: it’s not just the property boom grabbing the Chinese government’s attention. Inflation continues to vex it, so much so there have been three separate stories/think pieces on the major Chinese news websites (China Daily, Xinhua) in the past week, arguing that inflation will not be a problem. We get it. In fact, including the heads up in early May, tipping April’s CPI to rise to an annual rate of 2.8%, from 2.4% in March, there have been four articles on the issue in the past month. So, listen, inflation isn’t a concern, OK, just read the articles and trust us, we’re the government!
China watch 2: one of the latest articles quoted Ha Jiming, chief economist at the China International Capital Corp (CICC), the country’s first investment bank. Xinhua quoted him as saying that the possibility of serious inflation is easing and he expected China’s CPI to increase 3.2%, and forecast the CPI would peak at 4% this month and in July, before easing.
China watch 3: another Xinhua article quoted Yao Jingyuan, chief economist of the National Bureau of Statistics (NBS), who said the recent surge in the CPI had come from rising prices for fresh vegetables and meat, helped by speculation on the price of mung beans and garlic, among other items. The article pointed out that China’s CPI jumped 2.8% in April, driven mainly by food price increases, with a 14.9% rise in vegetables prices and 16.4% increase in fruit costs. And the third story, quoting Peng Sen, vice-minister of the National Development and Reform Commission (NDRC), the national economic planner, as saying that the surge in the price of agricultural products such as garlic and mung beans would have a limited impact on China’s overall inflation. “The consumer price index (CPI), major gauge of China’s inflation, would not be much affected by the price surge because the consumption of these agricultural products was relatively low and demand flexible,” Peng told Xinhua.
China watch 4: Peng is the heaviest hitter of those quoted on Xinhua, so it shouldn’t come as too much of a surprise to learn that the commission has started leaning on local authorities to crack down on speculators, vegie speculators, specifically those trying to hoard garlic and mung beans. The commission last week said that local governments should “step up efforts to strengthen market monitoring and clamp down on speculators.” Profiteers’ illicit earnings will be confiscated and they may face fines of up to one million yuan ($US146,000). High vegie prices, mostly due to the long drought in parts of southern and south-western China, have helped push up inflation to 2.8% in April and a forecast 3.0% in May and June, according to Commission projections. The price of green beans and garlic has tripled in the past few weeks, but reports say the prices of other vegetables have eased in the same time.
China watch 5: away from the dark pools of vegie forwards and n-ked garlic shorting, guess who has joined the growing list of countries and companies now dependant on China’s booming economy? Daimler’s Mercedes car division, that’s who. The German luxury car group upped its profit guidance for the second time in six weeks on Friday, but in doing so that China had now become the group’s third most important market after Germany and the US. The chairman of Daimler’s board of management, Dr Dieter Zetsche, said: “China is increasingly becoming the centre of gravity of the automotive industry and has recently become Mercedes-Benz Cars’ third-largest sales market.” The company expects sales of more than 100,000 vehicles in China this year (67,000 last year). China is already the biggest market worldwide for the Mercedes-Benz S-Class and R-Class model series. Is the Merc now the luxury saloon of choice for the vegie speculators?
Euro watch: struggling Europe posted a record 10.1% unemployment rate in April. Unemployment in the wider European Union was unchanged at 9.7%. German jobless fell to 7.7% from 8.1%, but that was the only bit of good news. Unemployment rose in 23 of the 27 EU countries. The EC said more than 23.3 million people were unemployed across the 27 members of the commission, up 2.4 million in the past year. About 15.8 million people were jobless in the eurozone. Spain topped the eurozone list with 19.6%, the Netherlands had a low 4.1%. At the same time, manufacturing growth slowed across the EU and the eurozone, with Germany reporting a “significant slowdown” in May. But there was some good news; German retail sales rose 1.0% in April.
Canada watch: The Bank of Canada overnight went ahead of lifted interest rates for the first time in almost three years. The central bank pushed its target rate up 0.25% to 0.50%, becoming the first Group of Seven central bank to raise interest rates since July 2008. It warned that further increases could be delayed by slower domestic and global growth. The Canadian economy rose 1.5% in the March quarter from December, or an annual rate of 6.1%. Inflation is tipped to breach the bank’s target of 2%, but the bank is worried the European financial problems could hit activity as the year progresses.