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Last week China economy review and analysis (April 28, 2010)

Contributed by Daniel Stewart & Company

By Daniel Stewart & Co

The G20 has come and gone without any further calls on China to revalue and indeed without any further clues from the Chinese themselves. This could well mean that we are days away from an announcement.

Wednesday update: the problems in Europe are grist to the Chinese ‘mill’ of uncertainty over the global recovery, thereby providing justification (if any is wanted) for further delay. This is one of the reasons why the G20 went out of its way to urge a rapid resolution of the Greek crisis.

Meanwhile, the authorities have introduced new rules for property developers that can be varied from area to area. Property prices increased by 11.7% in March in 70 major cities but should be all for the time being. The various measures target at house prices take ‘policy tightening’ to new levels but Mr Zhou, President of the PBoC, is still worried about weaknesses in global demand and is not intending to tighten more widely (another clue that revaluation is imminent). Another angle is that even more money will flow into equities now that property has lost its charms. China is still hot!

Wednesday update: property companies’ fund raising is now to be restricted. The sale of plots in Beijing has been stopped because the bids were too high! This is only possible in a one party state.

Meanwhile, the status-conscious Chinese have now become the third, after the US and Japan, largest shareholder in the IMF. This arises from the first restructuring of shareholder funds for 22 years. It is likely that this is one piece of a complex deal of Sino-American trade-offs ‘consecrated’ on Mr Hu’s visit to the US last week. It is also likely in consequence to be vigorously opposed by the Republicans in Congress!