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Last week China economy review and analysis (April 20, 2010)

Contributed by Daniel Stewart & Company

By Daniel Stewart & Co

It seems clear that the surprise revaluation of the Singapore dollar was partly intended by the MAS as a nudge to China to do the same with the renminbi. This is quite helpful as the artificially low renminbi causes trouble far beyond Sino-American relations. However, the imminence of a move by the Chinese is causing problems for the Japanese as for some reason the yen is being bid up in sympathy. In fact, the global jitters on Friday resulted in euro and pound weakness and dollar and yen strength.

While they ponder the right moment to revalue, the authorities are wasting no time in implementing policies to curb house price inflation. Banks have been ordered not to grant mortgages to non-residents in a city unless they can prove they have paid taxes there for at least one year. Larger deposits (30%) are required for houses of 90 square meters or more. Mortgage rates on second homes are to be hiked (to 1.1 times benchmark rates) and larger deposits (50%) required. Mortgages on third or more homes are banned in cities with excessive price rises. That’s one asset bubble pricked!

After leaving Washington, Mr Hu’s visit to Latin America has been curtailed to enable him to return home to deal with the earthquake in Qinghai province.