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杂谈

Prof. Michael Pettis will move his blog to www.chinastakes.com. All readers can get latest articles through http://www.chinastakes.com/BlogArticle.aspx?id=22.

Have Good Time Reading!!
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Another terrible day on the stock market saw the SSE Composite, led kicking and screaming by energy and financial companies, trade more or less straight down by 3.2% to close the day at 2203.  The brilliant autumn weather in Beijing (and the best week for air quality I have seen in seven years of living here) seems to have bypassed the market altogether.  

 

Away from the weather there is plenty of bad news for those looking for it.  Yesterday Reuters cited a Lehman Brothers report on declining August car sales:

 

China's passenger car sales fell 10 percent in August from a year earlier, preliminary data showed, due to the impact of the Olympics and weakening consumer confidence, Lehman Brothers said in a research report on Thursday.

The report said auto sales in China, the world's second-largest car market, were
expected to remain lacklustre for the rest of 2008 and possibly into early 2009.

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On Friday the Chinese stock markets had their second up day in a row (a rare occurrence this year), with the SSE Composite trading up 2.0%.  Today, however, the markets reverted to form, and the SSE Composite dropped 2.9% to close at 2327 which is, I think, the lowest point they have reached since February of last year.

 

What seemed to drive the market down today was a confluence of events suggesting that government fears of an economic slowdown may be reasonable.  Today the China Federation of Logistics and Purchasing released its calculation of August PMI (purchasing managers’ index).  It registered a seasonally adjusted 48.4, the same as in July, and the second month in a row that it came in at contractionary levels (anything below 50).  At the same time CLSA released its own PMI calculations, which also came in below 50 – the first time this has happened since the survey began nearly three years ago.

 

I th

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I was in Shanghai for the past two days and so wasn’t able to write anything on my blog, although it doesn’t seem like a whole lot has happened recently to add to our understanding of the Chinese economy.  The stock market continues to behave poorly, with the SSE Composite dropping 2.6% on Tuesday and 0.3% Wednesday before reversing Wednesday’s losses to close up 0.3% today at 2350. 

 

The weak rally was driven by higher-than-expected profits among consumer-related companies, although I wonder how much of that increase was caused by a one-off jump in Olympic-related spending.  At any rate once again we are close to the 2300 level, although during my meetings in Shanghai some of the fund managers spoke of 2250 as being the level at which we were expected to see government support.  Who knows?  At any rate they weren’t a particularly enthusiastic bunch.

 

I am not allowed to be too specif

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Those who believe the fight against inflation has only just started will argue that a relaxation of food prices is not unexpected given the huge and clearly distorted run-up earlier in the year.  The question is whether inflation will spread to the non-food sector or whether there will be further interruptions in food supply that create another round of food-led inflation.  My understanding is that there is little room for any disruption in food production and there are significant shortages in energy – which both suggest a bigger probability of an upside surprise than of a downside surprise.

 

Xinhua, by the way, had a very different take on Zhu’s press conference.  They stressed his continued worries about inflation.  In today’s “Chinese official: curbing inflation a priority after Games” Xinhua says:

 

The Chinese

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The Olympics are finally over, and with a spectacular ending that reportedly had Jimmy Page performing “Whole Lotta Love”.  I didn’t see the performance – I was in a part just south of the Olympic Stadium with three friends, trying to get a glimpse of the fireworks – but I am definitely curious to know what the very prim leadership were thinking as the guitar chords crashed about and as someone (presumably) screamed out “Wanna give you every inch of my love” (although perhaps in deference to the local leaders they skipped the vocals). 

 

Whatever the fate of the Olympics, the up-and-down struggling in the stock markets that characterized the Olympic period is certainly not over.  On Friday, the last trading day of the Olympic period, the SSE Composite declined by 1.1% to close at 2405, which brings a net loss of just over 11.8% for the SSE Composite since August 8, the day of the Opening Ceremonies.

 

Tod

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Yesterday for the first time I attended the Bird’s nest and the Olympic complex.  It is beautifully designed, well laid out, and very easy to maneuver.  I hope that they leave everything open after the Olympics, although it is hard to know what kind of events can draw the kinds of crowds in Beijing needed to keep the Bird’s Nest even partially filled.  It is truly huge.  Of course I was hoping for an American win in the 200-meter race, the most important event of the day for me (and for most of the audience, judging from the sound) but it was hard not to root for Jamaica’s Usain Bolt, who put on an amazing performance.

 

One criticism I have is that I couldn’t find any even marginally edible food at the stadium.  Still, perhaps food is becoming a luxury.  Food inflation may be stabilizing, according to the CPI index, but beginning Monday, KFC, one of the most popular fast food outlets in China, is raising its prices fo

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The stock market had its best day in a long time, with the SSE Composite rising 7.6% on the day to close at 2522.  Most of the run-up came in the morning, and several financial sector firms, which were the best performers, had to stop trading when they hit their 10% price-change limit, suggesting that tomorrow there will be early upward momentum.  Add today’s rise to yesterday’s 1.1% gain, and since Monday the market has recovered more than half of the 14.9% drop it suffered since the beginning of the Olympics.

 

There is less here than meets the eye, I think.  Two things seemed to have driven the market up today.  First there are a lot of rumors going around that the securities regulators are planning an important meeting with China’s major stock brokers tomorrow, to discuss market-boosting measures.  Regulators actually made announcements over the weekend about steps they were taking to support the market, but these had al

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Xinhua reports today that the first half of 2008 saw a slowdown in the growth rate of loans to real estate developers and buyers.  According to the article:

 

Chinese bankers held loans totaling 5.2 trillion yuan (about 580 billion U.S. dollars) to real estate developers and housing buyers by the end of June, up 22.5 percent year-on-year, the People's Bank of China (PBOC) said Friday.

 

The central bank said the growth rate was two percentage points lower than the same period last year, representing a decline for seven consecutive months since last December.  Loans to real estate development stood at 1.9 trillion yuan by June, up 17.7 percent year on year. The growth rate was eight percentage points lower than the same period last year.

 

The country's lenders granted 3.3 trillion yuan to housing buyers buy June, represe

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On a related note I got an interesting email today from one of my former students.  He says (with some editing on my part):

 

I just talked to a friend in a city in the south.  Interestingly, he tried to pay back his mortgage loan last week, and get another 3 year loan again (many entrepreneur there rely heavily on this kind of financing as working capital, sometimes, from informal banks of course).  However, he was told that the term of next loan had to be just 1 year instead of the usual 3 yrs, and he has to go through the application process again every year.


Collapsing property and other assets prices in some cities like Shenzhen seem to have made banks cautious of a probable rise in default risk, and the tightening will hurt these small enterprises further.

 

I don’t know how widespread this shortening of maturities is, but a common problem in banking is that when risks are perceived to have ris

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