Shock horror, China’s consumer inflation is now running at 2.7% and ‘house prices boom, bubble, boom and bust’ yell the western analysts.
It was the 4th successive monthly increase in inflation, but followed eight months of falling prices.
But the government is worried about property price inflation: yesterday they revealed home buyers will have to put up a 50% deposit when buying land and banned the sale of land for villas.
People buying land at auction will have to put up a 20% deposit.
That was after residential and commercial real-estate prices in 70 cities climbed 10.7% in the year to February, up from the 9.5% rate in January.
Also in January, the government reintroduced a tax on the sale of houses made within five years of their purchase to slow speculative purchases and so-called "flipping".
The government said that consumer prices increased 2.1% in January and February, from the same period in 2009.
There will be a lot more of this boom and bust commentary in coming months until China brings inflation under control.
But in the meantime Australian taxpayers, shareholders and companies (such as BHP and Rio) will have a vested interest in cheering on inflation because they will be riding it for every last dollar; after all they have a vested interest, and are part of the cause.
Producer-price inflation climbed to 5.4% in February from 4.3% in January.
Banks extended 700 billion Yang ($US112 billion) of new loans in February, down from 1.39 trillion Yang in the previous month and 1.07 trillion Yang in February of last year.
Retail sales rose 17.9% in the first two months from a year earlier, and urban fixed-asset investment gained 26.6%.
Retail sales grew 22.1% in February, but that was boosted by the Lunar New Year holiday.
Production grew 20.7% in the first two months of the year after an 18.5% rise in December.
Crude steel production jumped 22.5% in January and February to 102.89 million tonnes, with February’s figure up 22% at 50.36 million tonnes (meaning January’s figure was a much higher than expected 52.53 million tonnes).
Iron ore imports rose 5.6% to 49.38 million tonnes.
Over the first two months of the year ore imports rose 21% to more than 96 million tonnes.
No wonder iron ore prices are around record levels, and no wonder the Brazilian exporter, Vale, is asking for a 90% price rise.
So after these figures, watch for a rate rise; the last rate rise was in December 2007. One will happen in coming months.
The central bank has lifted the asset reserve ratio twice and also engineered two small increases in money market rates, while it and the banking regulator have ordered banks to cut lending and to redirect loans to more productive parts of the economy.
The one-year lending rate is at 5.31% and deposit rate is at 2.25%.
China has pegged the Yang at about 6.83 per US dollar since July 2008 to help exporters.
Last weekend, Premier Wen Jiabao pledged to hold full-year inflation around 3% and GDP growth was again set at the standard 8% a year (10.7% annual rate in the 4th quarter of 2009).
Australian companies and taxpayers will be beneficiaries of this inflation and growth..
BHP Billion won price rises of 55% for coking coal this week from major buyers in Asia and Europe.
Chinese steel mills will pay this, and thermal coal buyers will as well when the price rise triggers a rise in steaming coal prices.
Iron ore prices in China could rise by 50% or more after BHP, Rio Tinto and Vale of Brazil win big price increases from Japanese and Korean mills, and then tell China they will have to pay.
By some estimates, this could boost steel prices in Asia by 30% over the next year.
That will lift the cost of cars, building, whitegoods and other products at a time when the government is trying to stimulate domestic demand.
So while the price rises will be music to the balance sheets of Australian and other global resource companies, there will be a danger in the price rises boosting inflation further.
Chinese spending will fall over the year from last year’s frenetic levels. But from the government’s point of view it will be a steady as she goes year.
Apart from the economic reasons, there’s a political reason for this as well.
Complicating these pronouncements to the annual National People’s Congress in Beijing is the knowledge that at sometime in the next year, the replacements for the changeover of power in 2012 will be made known.
President Hu Jintao and Premier Wen Jiaboa are both to retire in 2012.
We have seen the start of campaigns from other senior officials for advancement, but so far the likely successors to the two leaders are not known.
