A blog on Chinese economy & society

China’s runaway economy

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First quarter GDP came out to be 11.9%, just like it was leaked earlier. March CPI was 2.4%, below the market consensus of 2.5%. The market is in euphoria over the CPI figure, as the risk of imminent rate hike is now diminished.

However, is the risk of inflation really that far off? For one thing, the pulse of the economy has quickened during the last few months. March electricity consumption, which a decent proxy for measuring China’s industrial activities, surged by 21% YOY! Compared to February’s 10.5% increase, one can clearly see where the economy is heading towards.

Besides the factories churning out stuff that might not be needed in H2 should there be another, ahem, hiccup in global economy, of more concern is the Chinese property market. March prices rose by an average 11% among 70+ major cities, despite repeated efforts by the central government to control it. Given today’s CPI figure, China will be even more tempted by regulatory changes rather than monetary policy in its efforts to tame asset prices. So when the bubble bursts eventually, the bust will just be this much more catastrophic.


Written by Cindy Luk

April 15, 2010 at 2:54 am

Posted in China, Macro

Tagged with , , , ,

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