China: Not Ready Yet
In a previous blog entry, "Baseball Season of Frustration 2," I suggested some potential "villains" and "heroes" for the ending of the current capital market drama. China is confidently penciled on the hero side of the ledger. The current monetary and fiscal tightening measures being enacted by the People's Bank of China will end in the second half of 2011. When those measures do end, reacceleration in China's contribution to global growth will occur; however, Chinese reacceleration is "not ready yet."
Last week's data was consistent with continued tightening equal to "not ready yet:"
- Exports growth slowed, from 29.9% to 19.4%
- Trade surplus rose, from $11.42 billion to $13.05 billion
The upcoming week provides the release of the following economic data from China:
- CPI expected to rise, to 5.5% from 5.3% (government target is 4.7%)
- Industrial production expected to fall, from 13.4% to 13.1%
- Retail sales expected to fall, from 17.1% to 17.0%
- Fixed asset investments expected to fall, from 25.4% to 25.2%
China: A potential "hero" but "not ready yet"
Fig. 1.1 China 10-Year Government Bond vs. U.S. 10-Year Government Bond
Fig 1.2 China Currency, 1/16/09 - 06/10/11