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China Economic Releases

07/11/2011

Over the weekend of July 9, several monthly economic reports were released from China. This follows a week in which the People's Bank of China (PBOC) raised interest rates for the third time this year. Within this weekend's release, food inflation remains elevated at +14.4% year on year. Non-food CPI held steady at +3.0% year on year.
 
For the second half of 2011, there are two critical themes for investors to focus on.  First, when will the PBOC end its tightening cycle? Second, will the yuan continue to appreciate (Figure 1.1)?
 
I expect the past week's PBOC interest rate hike may be the last for 2011 and the yuan will continue to appreciate modestly. Both of those conditions are favorable and suggest a fall acceleration in China's contribution to global growth.  
 
Key China economic numbers released the weekend of July 8: 

  • CPI +6.4%, fastest pace since June 2008 (Figure 1.2)
  • Food costs +14%, pork prices +57%, non-food costs +3.0%
  • PPI +7.1%, up from the previous month's +6.8% (Figure 1.3)
  • China trade surplus widened to $22.3 billion, indicating capital continues to flow into China
  • Exports rose +17.9% year on year, the weakest pace this year
  • Imports rose +19.3% year on year, the weakest reading since the fall of 2009 (Figure 1.4)
  • Imports of oil fell +10% month on month as multiple refineries closed for maintenance in June, limiting demand for oil
  • Imports of copper rose +10 month on month, reversing three months of declines

Figure 1.1 China Yuan, July 2010 to July 2011

Source: Bloomberg
 
Figure 1.2 China CPI, August 2001 to June 2011

Source: Bloomberg
 
Figure 1.3 China PPI, January 1999 to June 2011

Source: Bloomberg
 
Figure 1.4 China Imports, August 2008 to June 2011

Source: Bloomberg

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