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Perhaps to no one’s surprise, after a hot CPI reading on Tuesday, China’s central bank lifted the benchmark lending and deposit rates on Friday. The 27 basis points move is the fifth such increase this year by the People’s Bank of China, second in less than 30 days. The PBoC last hiked rates on August 22. One year deposit rate now stands at 3.87 percent from 3.6 percent previously; and one year lending rate is also 27 basis points higher, at 7.29 percent. PBoC governor Zhou Xiaochuan is targeting a positive real interest rate. Real interest is nominal interest rate less inflation. With annual CPI around 4 percent, most economists believe that China will raise interest rate at least once more this year.
With world oil price hitting a record high and closing above USD $80 a barrel for the first time, China is working feverishly to secure a steady stream of cheap alternative supply infrastructure. The latest chapter has several “large” Chinese oil companies talking to South African coal producer SASOL for a joint project to develop coal-to-liquid plants in China. Coal, while significantly cheaper than oil is far more polluting. However, SASOL has mastered technologies to turn solid coal into liquid fuel, and in the process removing heavy pollutants such as sulphur, mercury, ash and carbon dioxide. And the best part, production cost is pegged around $30 per equivalent barrel of oil. SASOL (SSL) closed at $42.44 on the NYSE on Friday, just 30 cents below its 52 week high.
Jay Sheng is Shanghaiist's Business Editor. Email tips, news and gossip about business in Shanghai and China to biz at shanghaiist.com.
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Sooner or later, the world is going to wake-up to the fact that the Chinese economy is a run-away machine, but in fact, it is already too late to stop it and catastrophe cannot be avoided.
I don't think the world is obvlivious to the transformative changes taking place within PRC, and the resulting powerful ramifications both home and abroad. Although, China could do a bit more(ok, a lot more) to improve the transparency underwhich it operates, I guess that applies to not only economic policies.
A soft landing maybe at best a 50-50 proposition, but an all out catastrophe is, at least at this point, only a very remote possiblity.
#2, Okay, according to you, the odds of a soft-landing are only "50-50" which are pretty terrible when you consider the ramifications of any downward trend in China's economy. That said, by your own logic, doesn't that make a not-soft-landing also 50-50? How does catastrophe (ie hard-landing) then become a "very remote possibility?"
Not a soft landing is still quite a ways away from a "catastrophe". The Asian financial crisis, the LTCM debacle, the busrting of the NASDAQ bubble, even 9/11, all contributed to significant dislocation in the world economy. But I wouldn't describe any of them as "catastrophes", at least not in an economic sense. 9/11 is certainly a catastrophic human tragedy.
Economy is a cyclical beast, and China, like every other nation will experience below trend line growth. If and when it does happen, there could be some significant adjustments in China and around the world. But again, I'd reserve the "catastrophe" description only for the most grave circumstances, which at this point is a remote possibility.
I wouldn't describe any of them as "catastrophes" Okay, then you are talking semantics.
Let me rephrase by saying that a major China-related financial crisis within 5 years is a virtual certainty (and I leave it to you to convince me otherwise :)
I don't think by not calling an economic downturn a "catastrophe" qualifies as "talking semantics". I reserve that description for only the most dire circumstances.
Like you, I am not optimistic about where China's economy is headed. There could be some turbulence ahead. But until there are more concrete evidence, I'd rather not throw the "C" word around, be it "crisis" or "catastrophe".
Let's see where China gets the clean water to do coal liquefaction. Nuclear plant construction projects have been indefinitely delayed for this very reason.
As for cheap oil, China's problems are just beginning:
http://news.independent.co.uk/business/news/article2966842.ece
nanheyangrouchuan
nanheyangrouchuan for president
I will run on a platform of flat income taxes, stifling sin taxes on junk foods, booze and smokes and crushing the CCP to liberate E. Turkestan, S. Mongolia and Tibet, perhaps resulting in the peaceful deconstruction of China.
nanheyangrouchuan