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TRADE WARS
Surge in China factory-gate prices fans inflation hopes
by Staff Writers
Beijing (AFP) Feb 14, 2017


China new bank loans surge in January to $300 bn
Beijing (AFP) Feb 14, 2017 - Chinese bank lending surged in January, the central bank said Tuesday, as concerns grow that a flood of credit is increasing financial risks in the world's second-largest economy.

New loans extended by banks rose to 2.03 trillion yuan ($300 billion), nearly twice the 1.04 trillion yuan in December, said the People's Bank of China.

Analysts have been raising the alarm over the surge in China's debt as Beijing has flooded the market with credit to prop up economic growth.

In an attempt to reduce risks, the central bank has rolled out monetary tightening policies in recent weeks, raising short-term borrowing rates for the first time since 2013.

In a separate statement the central bank said total social financing -- an alternative measure of credit in the real economy -- rose dramatically to 3.74 trillion yuan in the month, compared to 1.63 trillion yuan in December.

The growth of long-term residential housing loans to a record 623 billion yuan shows that the red-hot real-estate market has not cooled despite tighter government restrictions, analyst Liu Dongliang of China Merchant's Bank said in a note.

But the data showing strong demand for loans also points to stability for the economy in the first half of the year, Liu added.

Figures released Tuesday showed that consumer and producer prices climbed in January, raising hopes China may begin to export much-needed inflation to the global economy.

Last week data showed that exports and imports surged more than expected, while manufacturing activity also continued to grow.

But there are concerns about possible trade tensions as President Donald Trump settles into the White House. He has threatened to declare China a currency manipulator and slap punitive tariffs on its goods.

Chinese factory-gate prices climbed for a fifth straight month in January, the government said Tuesday, fuelling hopes the world's biggest goods trader can export much-needed inflation to the global economy.

The surge, as well as a pick-up in consumer inflation, is the latest sign a slowdown in the Asian giant could be coming to an end, although the outlook is clouded by concerns that Donald Trump will press ahead with a protectionist agenda.

The producer price index (PPI) hit 6.9 percent, according to the National Bureau of Statistics (NBS), well up from December's 5.5 percent and outstripping forecasts of 6.5 percent in a Bloomberg News survey.

Consumer prices rose 2.5 percent, slightly above estimates.

An increase in global crude prices boosted prices in oil and natural gas exploitation, which contributed to the expansion, NBS analyst Sheng Guoqing said in a statement.

While the increase in commodities prices, as well as Lunar New Year spending, helped the increase, PPI has been rising since September when it snapped a four-year streak of declines.

With China being the world's leading trader, a pick-up in prices would filter through to the global economy, which has been mired in tepid inflation or deflation for years.

Weak inflation is bad for industrial prospects and economic growth because customers delay purchases in hopes of yet-cheaper deals in the future, starving companies of business and funds.

China "will contribute positively to global inflation" this year, Brian Jackson of IHS Global Insight told AFP. But its impact on prices will be blunted by the weakness of the yuan, he added.

The readings were the latest in a positive series of figures for the world's number two economy.

Data showed last week that exports and imports surged more than expected in January, while manufacturing activity also continued to grow.

- 'Financial risks' -

That came after news that economic growth picked up in the final three months of 2016, although over the year the GDP growth rate was the slowest for more than a quarter of a century.

But there are concerns about possible future trade tensions as Trump settles into the White House. He has promised to declare China a currency manipulator and threatened to slap punitive tariffs on its goods.

However, some of those fears eased after Trump told China's President Xi Jinping Friday that he would retain Washington's existing "One China" policy, an about-turn from his previous position that it was up for negotiation.

"Not all is going to be positive news from China this year," said Jackson of IHS. The automotive and real-estate sectors would be "big negatives" due to changing government policies, he added.

Consumer and producer prices are expected to peak soon, as "the base effects that have boosted inflation in recent months are soon going to go into reverse", Julian Evans-Pritchard of Capital Economics said in a note.

Beijing's move to tighten monetary policy and cool down the retail property market would also "keep broader price pressure contained over the medium-term", he added.

The central bank's recent moves to reduce liquidity show that leaders are "mindful of financial risks", particularly in real estate and other sectors, ANZ economist Betty Wang said in a note.

But the economy is not yet solid enough and authorities should be cautious about aggressive tightening, she added.

Infrastructure investment is likely to continue as local officials "are keen to deliver decent growth figures" with a major Communist Party Congress later this year, Zhou Hao of Commerzbank AG said, according to Bloomberg News.


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