By Bloomberg News - Dec 9, 2011 1:33 PM GMT+0700
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Food prices climbed 8.8 percent in November from a year earlier, less than the 11.9 percent gain in October, today’s report showed. Photographer: Nelson Ching/Bloomberg
Dec. 9 (Bloomberg) -- Nigel Chalk, the International Monetary Fund's Washington-based China mission chief, talks about the risks Hong Kong's economy faces from a possible global economic slowdown triggered by Europe's debt crisis. The IMF said Hong Kong must be ready to provide "significant and immediate" fiscal stimulus should a worsening crisis threaten to drive the city into recession. Chalk speaks with John Dawson on Bloomberg Television's "On the Move Asia." (Source: Bloomberg)
China’s inflation reached a 14-month low and industrial production rose less than forecast, bolstering the case for more stimulus measures to shore up growth in the world’s second-largest economy.
Consumer prices rose 4.2 percent from a year earlier, the statistics bureau said on its website. Output gained 12.4 percent, the least since August 2009 and below a median forecast of 12.6 percent. A separate report showed passenger-car sales rose the least in six months.
Premier Wen Jiabao’s government may telegraph at an annual economic works conference in coming days that growth is now a greater concern than inflation, given risks posed by Europe’s crisis and a domestic property-market slowdown. Investors have been paring back expectations for gains in the yuan as China slows, with 12-month non-deliverable forwards today suggesting a 0.8 percent decline against the dollar.
“Curbing inflation is a good thing, but the reason why inflation is slowing is because the global economy is slowing,” said Koji Toda, chief fund manager at Resona Bank Ltd. in Tokyo, which oversees the equivalent of $68 billion. “If you see that fact, you can’t be so optimistic.”
Yuan forwards fell 0.2 percent to 6.4140 per dollar as of 1:09 p.m. in Hong Kong.
Australia & New Zealand Banking Group Ltd. (ANZ) said the nation’s economy is cooling more quickly than expected, with a rebound possible in the second quarter after more easing. Passenger-car sales rose 0.3 percent to 1.34 million units, the China Association of Automobile Manufacturers said.
Retail Sales, Investment
Producer prices gained 2.7 percent, the least in almost two years, the statistics bureau reports showed. Retail sales rose a more-than-estimated 17.3 percent. Fixed-asset investment excluding rural areas climbed 24.5 percent in the first 11 months from a year earlier compared with 24.9 percent in the first 10 months, today’s releases showed.
The MSCI Asia Pacific Index dropped 2 percent as of 2:59 p.m. in Tokyo after leaders meeting in Brussels said European nations will channel as much as 200 billion euros ($267 billion) to the International Monetary Fund to tackle the region’s debt crisis.
In South Korea, the central bank may cut its economic growth forecast for next year if Europe’s crisis worsens beyond the first quarter, which currrently seems unlikely, Lee Sang Woo, director-general of its research department, said today. The monetary authority sees a 3.7 percent expansion.
Hong Kong, Japan
Hong Kong may have to stand behind banks and deposits should the global economy slump, Nigel Chalk, the International Monetary Fund’s China mission chief, told Bloomberg Television today. An IMF report said that the city needs to be ready to add “significant and immediate” fiscal stimulus.
Japan’s growth rebound in the aftermath of the March earthquake was less than initially estimated, a government report showed today, underscoring the case for the Bank of Japan (8301) to add stimulus. Gross domestic product increased an annualized 5.6 percent last quarter, compared with a preliminary figure of 6 percent.
A slowdown in Japan’s growth is “unavoidable” for now, Kiyohiko Nishimura, deputy governor of the central bank, said in Tokyo today.
Also due today is a U.S. trade report that may show the nation’s deficit rose to $44 billion in October from $43.1 billion in September, according to the median forecast in a Bloomberg News survey of analysts.
In China, officials due to meet for the Central Economic Work Conference to set the policy framework for next year may consider further stimulus. The Economic Observer has reported that the meeting will be from Dec. 12 to 14.
‘Prudent’ Policies
In December last year, the Politburo said the nation would shift its monetary stance to “prudent” from “moderately loose.” At that point, the government had already raised interest rates and reserve requirements, showing how changes in the official description of policy can lag behind the implementation.
Today’s data showed inflation moderating on smaller gains in food prices, which climbed 8.8 percent from a year earlier, less than the 11.9 percent gain in October.
“The policy wind is going to increasingly blow in the direction of easing,” Yao Wei, a Hong Kong-based economist at Societe Generale SA, wrote this week. Officials may decide at the work meeting that “stabilizing growth” will replace “stabilizing prices” as the policy priority, she said.
Interest Rates
Nomura Holdings Inc. says China’s central bank may cut interest rates in the first quarter as growth reaches a “trough.” The Shanghai stock index (SHCOMP), China’s benchmark, has declined more than 17 percent this year on concern growth will falter, damping company earnings and boosting banks’ bad debts.
The property market is cooling after a government crackdown on speculation. Nomura estimates economic growth may slow to 7.5 percent in the January-March period, the least since the global financial crisis, from an estimated 8.6 percent this quarter.
Inflation may average about 4 percent in 2012, Zheng Jingping, the statistics bureau’s chief engineer, wrote this week. Consumer-price gains reached a three-year high of 6.5 percent in July and have exceeded the government’s full-year target of 4 percent every month this year.
The People’s Bank of China cut the amount of cash lenders must set aside as reserves for the first time in three years this month, adding cash to the financial system to support growth. An official manufacturing index contracted for the first time since February 2009 as export orders and new orders slumped, adding to evidence that growth is ebbing.
Statistics bureau data show nationwide housing transactions declined 25 percent by value in October from the previous month. China Vanke Co. (000002), the nation’s biggest listed property developer, said November sales fell 36 percent from a year earlier.
China’s expansion slowed to 9.1 percent in the third quarter, the least in two years, after the government raised interest rates, tightened credit and expanded property-market curbs.
To contact Bloomberg News staff for this story: Li Yanping in Beijing at yli16@bloomberg.net
To contact the editor responsible for this story: Paul Panckhurst at ppanckhurst@bloomberg.net
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