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The Temperature of Chinese Porridge |
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19 January 2010 |
Justin Urquhart Stewart is one of the most recognisable and trusted market commentators on television, radio, and in the press. Originally trained as a lawyer, he has observed the retail market industry for 20 years whilst at Barclays Stockbrokers and developed a unique understanding of the market's roles and benefits for the private investor.
Justin Urquhart Stewart is one of the most recognisable and trusted market commentators on television, radio, and in the press. Originally trained as a lawyer, he has observed the retail market industry for 20 years whilst at Barclays Stockbrokers and developed a unique understanding of the market's roles and benefits for the private investor. Justin provides financial advice to clients of Kester Cunningham John Financial Planning LLP.
I don't know what the Chinese translation of Goldilocks is but certainly she appears to be much sought after by them. The search for an economy which is neither too hot nor too cold has always been the most Herculean of tasks for any financial authority. The recent Chinese stimulus packages and loose credit facilities have certainly been having their effect to invigorate their economy, and such actions have often caused many of the ripples of reaction around the globe. For example the amount of investment in infrastructure projects has provided a much needed fillip for such overseas suppliers such as Siemens in Germany and Caterpillar in the US.
Now however, there have been some serious concerns raised internally (as opposed to those previously expressed externally) about the possibilities of the Chinese economy potentially overheating. The concerns particularly surround the recent credit binge as illustrated by the growth in lending more than doubling from Rmb 4,200bn ($615bn) in 2008 to Rmb 9,000bn ($1,318 bn) in 2009. The direct result has been for the People's Bank of China to raise the reserve requirements that local banks must keep aside by 0.5% to 15% of their deposits, and also to raise rates on one year notes.
This can really be seen as a warning to banks to rein in their lending which in a command and control economy should be lot easier than in respect of our reckless bankers of the last decade. The question now though is whether this action is enough to be a gentle application of the brake, or if rather something more direct may be necessary |
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