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Last week China economy review and analysis (March 31, 2010)

Contributed by Daniel Stewart & Company

By Daniel Stewart & Co

It was another week without any significant data but the Authorities are clearly worried about asset price ‘bubbles’ and the PBOC has instructed the banks to take more care in lending only to genuine house builders rather than ‘speculators’. However, they are also worried about the effects of raising interest rates and there are hints (emerging in the usual way) that perhaps a renminbi revaluation might after all be a good thing. Some prominent Chinese businessmen have even challenged Premier Wen in saying a weaker currency is not helping them at all and one wonders if they were put up to this as part of the tactical dance with the US. More significantly, PBOC Deputy Governor Zhu Min has said that China ‘can and should’ move towards a freely floating currency but even this is probably a tactical move as, wary of the Japanese experience in 1980s and 1990s, the Authorities will want to manage a gradual rise of the renminbi.