Chinese lawmakers face mounting pressure to support economic growth after an unexpectedly large drop in exports last month and the steepest decline in producer prices in almost six years.
China’s producer price index fell 5.4 percent year-on-year last month, according to Chinese National Bureau of Statistics (NBS) data released yesterday.
The decline — the biggest since October 2009 — came on the heels of trade data on Saturday that showed exports last month shrank 8.3 percent from a year earlier, compared with an estimated decline of 1.5 percent.
The data indicate weak domestic and international demand for Chinese factory products and suggest that interest rate cuts and efforts to stabilize local government finances have yet to spark a recovery.
The People’s Bank of China has lowered interest rates four times since November last year to support an economy expected to grow this year at the slowest pace since 1990.
“The goal this year is to sustain growth, so policies will continue to stimulate demand,” Commerzbank AG economist Zhou Hao (周皓) said.
Maintaining an economic expansion of about 7 percent poses a challenge because the financial sector cannot be expected to surge in the second half like it did during the recent stock market boom, Liu Ligang and Louis Lam, analysts at Australia & New Zealand Banking Group Ltd (ANZ) wrote in a note yesterday.
Chinese stocks have lost almost US$4 trillion in market value since their mid-June peak.
“Monetary policy will need to become more supportive,” the ANZ analysts said.
They forecast another interest rate reduction this quarter, as well as a cut of 50 basis points to the portion of deposits that lenders must hold in reserve.
The slump in exports “compounds downward pressure on China’s economy and threatens to bring exchange rate depreciation onto the table as a tool to restore competitiveness,” Bloomberg Intelligence chief Asia economist Tom Orlik wrote in a research note on Saturday.
The Chinese Central Bank has held a vice-like grip on the yuan, allowing it little movement in the onshore market. The currency’s closing levels in Shanghai last week matched the tightest range recorded since a fixed exchange rate ended a decade ago.
In its quarterly monetary policy report released on Friday, the central bank said it would let the market play a bigger role in setting exchange rates while keeping them “at a reasonable equilibrium level.”
Factory-gate prices of excavated oil and natural gas dropped 34.6 percent last month, while those of ferrous metal fell 20.1 percent, according to the NBS. Non-food consumer prices rose 1.1 percent year-on-year, down from 1.2 percent in June.
Overall, the consumer price index increased 1.6 percent from the year-earlier period, as a surge in pork prices offset sluggish growth in the cost of non-food items. The price of meat leaped 16.7 percent last month from a year earlier, according to the NBS.
However, the pork-led pickup is unlikely to cause the central bank to change tactics.
“Monetary policies will not change with the price of individual commodities, but will observe the general price trends,” the central bank said in a policy report.
NO LIVERPOOL TRIP: Taiwan’s Lin Yu-ting, who won a gold medal in the boxing at the Paris Olympics, was embroiled in controversy about her gender at that event Taiwanese boxer Lin Yu-ting (林郁婷) will not attend this year’s World Boxing Championships in Liverpool, England, due to a lack of response regarding her sex tests from the organizer, World Boxing. The national boxing association on Monday said that it had submitted all required tests to World Boxing, but had not received a response as of Monday, the departure day for the championships. It said the decision for Lin to skip the championships was made to protect its athletes, ensuring they would not travel to the UK without a guarantee of participation. Lin, who won a gold medal in the women’s 57kg boxing
RESPONSE: The transit sends a message that China’s alignment with other countries would not deter the West from defending freedom of navigation, an academic said Canadian frigate the Ville de Quebec and Australian guided-missile destroyer the Brisbane transited the Taiwan Strait yesterday morning, the first time the two nations have conducted a joint freedom of navigation operation. The Canadian and Australian militaries did not immediately respond to requests for comment. The Ministry of National Defense declined to confirm the passage, saying only that Taiwan’s armed forces had deployed surveillance and reconnaissance assets, along with warships and combat aircraft, to safeguard security across the Strait. The two vessels were observed transiting northward along the eastern side of the Taiwan Strait’s median line, with Japan being their most likely destination,
‘NOT ALONE’: A Taiwan Strait war would disrupt global trade routes, and could spark a worldwide crisis, so a powerful US presence is needed as a deterrence, a US senator said US Senator Deb Fischer on Thursday urged her colleagues in the US Congress to deepen Washington’s cooperation with Taiwan and other Indo-Pacific partners to contain the global security threat from China. Fischer and other lawmakers recently returned from an official trip to the Indo-Pacific region, where they toured US military bases in Hawaii and Guam, and visited leaders, including President William Lai (賴清德). The trip underscored the reality that the world is undergoing turmoil, and maintaining a free and open Indo-Pacific region is crucial to the security interests of the US and its partners, she said. Her visit to Taiwan demonstrated ways the
The US has revoked Taiwan Semiconductor Manufacturing Co’s (TSMC, 台積電) authorization to freely ship essential gear to its main Chinese chipmaking base, potentially curtailing its production capabilities at that older-generation facility. American officials recently informed TSMC of their decision to end the Taiwanese chipmaker’s so-called validated end user (VEU) status for its Nanjing site. The action mirrors steps the US took to revoke VEU designations for China facilities owned by Samsung Electronics Co and SK Hynix Inc. The waivers are set to expire in about four months. “TSMC has received notification from the US Government that our VEU authorization for TSMC Nanjing
RSS