INFLATION...

[rogerluli]

We've been hearing for sometime now from friends and family in China that prices for everything are going up and up... With that and the sinking dollar it has to make anyone thinking of living in China a little queasy... But it seems inevitable that as China transitions from a third-world economy to a first-world one prices will rise along with the standard of living...

 

China's inflation lingers at 10-year high as Wen calls for stable prices

 

 

BEIJING ¡ª China's inflation lingered at 10-year highs in October, the government said Tuesday, as major state newspapers carried a vow by Premier Wen Jiabao to stabilize prices.

 

The consumer price index was up 6.5 percent last month from a year earlier, compared wth 6.2 percent in September and 6.5 percent in August, the National Bureau of Statistics.

 

China's economy grew by 11.5 percent in the third quarter and seems all but certain to record its fourth consecutive year of double-digit growth in 2007.

 

The release of the data came as state media quoted Wen promising steps to ensure adequate supplies and stable prices of basic consumer commodities amid soaring inflation.

 

"Prices have been on the rise these days and I'm aware that even a one-yuan (13-cent) increase in prices will affect people's lives," Xinhua news agency quoted him as saying.

 

The premier's comments, made when he met with low-income families in Beijing Monday, were reported by most mainstream newspapers, as the government sought to calm its citizen fears over fast growing food and fuel prices.

 

The spike in inflation last month was overwhelmingly led by a rise in food prices, which were up 17.6 percent in October from a year earlier, the bureau said.

 

By contrast, the prices of non-food items saw an increase of a modest 1.1 percent, it said.

 

Analysts say the high rate of inflation is likely to persist in November, meaning that the government would probably implement more interest rate hikes before year-end in an attempt to cool the economy.

 

"We believe the central bank will likely respond with additional tightening measures including strict controls on bank lending and two more rate hikes before the end of this year," Goldman Sachs economist Yu Song wrote in a research note.

 

Li Huiyong, a Shanghai-based economist with Shenyin Wanguo Securities, agreed.

 

"The October data has reinforced the message that follows the release of the September data, that the economy is still relatively overheated," he told AFP.

 

"This makes the implementation of a tightening policy more possible and overall, we believe the central bank will very likely raise the interest rate in the short term."

 

Rising food prices play a large part in the persistently high consumer price index, analysts say, but expect the index to ease next year as the price of pork, which was in short supply earlier this year, stabilises.

 

Mo Qian, economist with Essence Securities in Beijing, believed the consumer price index had approached a peak.

 

"In October, the main reason for the (CPI rise) is still the increase in pork prices. But we believe the rise in pork prices, which is not sustainable, will ease next year after supplies increase. We think it has reached a peak."

 

Sun Fanghong, Shenzhen-based analyst with Ping An Securities, expected inflation to slow in the last quarter and next year.

 

"We believe CPI will ease in the next two months to around six percent and around four or 4.5 percent for 2008 full year."

[chilton747]

I guess we will have to wait and see what really takes place.

[GZBILL]

I guess we will have to wait and see what really takes place.

 

Yes, this will be a good show to watch.

[rogerluli]

For you fence-sitters out there who are thinking about buying a house in China "some day... " between inflation and the drop in the dollar... my advice would be...JUST DO IT... We are now up 45% on our house investments in one year...

[jim_julian]

We are now up 45% on our house investments in one year...

 

 

Uh huh ... just try to liquidate it and get the money out of the country in some useful form ...

[rogerluli]

We are now up 45% on our house investments in one year...

 

 

Uh huh ... just try to liquidate it and get the money out of the country in some useful form ...

 

What's the problem Jim??? I sell, put the money in a HSBC account which is accessible from China or the US... badda-bing... But seriously I have no intention of EVER selling...These are places where we will be living, and eventually go to Laopo's son...

[chilton747]

For you fence-sitters out there who are thinking about buying a house in China "some day... " between inflation and the drop in the dollar... my advice would be...JUST DO IT... We are now up 45% on our house investments in one year...

 

I wish I would have acted more soon then my house would have been 45% cheaper.

As far as inflation goes, any economy can have its problems, even ours. Worrying about it doesn't help matters too much. I agree with Roger, if you are seriously thinking about buying a house in China then now is the time. The prices are going up it seems almost everyday.

So sit back and enjoy the show!!

[DMikeS4321]

For you fence-sitters out there who are thinking about buying a house in China "some day... " between inflation and the drop in the dollar... my advice would be...JUST DO IT... We are now up 45% on our house investments in one year... B)

 

Once again, I'm behind the curve on real estate. The only time I guessed right, I purchased my first home in CA for $129,000 in 1989. It peaked at $595,000 in October of 2006. Unfortunately, I lost it in a divorce in 1998. Faithless woman....

 

The very nice homes I looked at in Nanning, 2005, (3 bedroom, 2 bath [one Chinese, one Western], 1750 square feet, spectacular sunken living room, 2nd floor of 6, beautiful view of the river... 369,000 y. Now selling for 500,000 y.

 

Another opportunity lost (not counting appreciation against the dollar!!).

 

It's still a darned good time to buy in my opinion, it's just going to cost more to get "in the game".

[DMikeS4321]

P.S. In my judgement, inflation in the yuan is nicely offset by the falling dollar.

 

Anyone have an opinion on this?

[david_dawei]

P.S. In my judgement, inflation in the yuan is nicely offset by the falling dollar.

 

Anyone have an opinion on this?

I heard somewhere that US exports were up, due to the lowering dollar... not sure this was how the government wanted exports to rise...

[rogerluli]

P.S. In my judgement, inflation in the yuan is nicely offset by the falling dollar.

 

Anyone have an opinion on this?

 

Ummmm I don't quite get your comment Mike...If I had all my assets in China and was going to collect SS and my pension in RMB instead of dollars then OK... but since I don't, every fall in the dollar means I will have less money to live on in China...

[DMikeS4321]

P.S. In my judgement, inflation in the yuan is nicely offset by the falling dollar.

 

Anyone have an opinion on this?

I heard somewhere that US exports were up, due to the lowering dollar... not sure this was how the government wanted exports to rise...

 

Actually, I think it's part of the plan. Everything our government has been doing is seemingly directed towards weakening the dollar. I think they are getting what they want.

 

Many of the "biggies" have already moved a lot of their assets offshore. Warren Buffet for one, Jim Rogers for another. Rogers was the right-hand man of George Soros; he sold ALL of his U.S. real estate holdings, including his personal home, and moved to Hong Kong. He said something to the effect that 1807 saw the ascendancy of England, 1907 saw the ascendancy of the U.S., now it's 2007 and we're seeing the ascendancy of China.

[david_dawei]

P.S. In my judgement, inflation in the yuan is nicely offset by the falling dollar.

 

Anyone have an opinion on this?

I heard somewhere that US exports were up, due to the lowering dollar... not sure this was how the government wanted exports to rise...

 

Actually, I think it's part of the plan. Everything our government has been doing is seemingly directed towards weakening the dollar. I think they are getting what they want.

So a few questions, do you think these are intentional or part of a plan?... or correct me where my thinking is wrong:

1) Since there has been a desire for the yuan to rise in value, the same effect can be accomplished by (or quickened) by a lowering dollar, yes?

2) A lowering dollar means the US dollar gets less for it's buck; ergo, prices of those [import] items rise and get passed along; ergo, higher prices for items imported from china mean higher prices in the US?

3) A strong dollar means one can buy more for their dollar; so moving stuff overseas (ie: production) makes sense... but a weakening dollar means less for the dollar, thus overseas production is not as advantageous, right?

[Don]

P.S. In my judgement, inflation in the yuan is nicely offset by the falling dollar.

 

Anyone have an opinion on this?

I heard somewhere that US exports were up, due to the lowering dollar... not sure this was how the government wanted exports to rise...

 

Actually, I think it's part of the plan. Everything our government has been doing is seemingly directed towards weakening the dollar. I think they are getting what they want.

So a few questions, do you think these are intentional or part of a plan?... or correct me where my thinking is wrong:

1) Since there has been a desire for the yuan to rise in value, the same effect can be accomplished by (or quickened) by a lowering dollar, yes?

2) A lowering dollar means the US dollar gets less for it's buck; ergo, prices of those [import] items rise and get passed along; ergo, higher prices for items imported from china mean higher prices in the US?

3) A strong dollar means one can buy more for their dollar; so moving stuff overseas (ie: production) makes sense... but a weakening dollar means less for the dollar, thus overseas production is not as advantageous, right?

 

1. China controls the yuan such that it remains pegged to the dollar. If the dollar rises and falls than so does the yuan. The yuan rising vs the dollar is only done when the China governments lets it. The EU has really been pressuring china to drop the binding of their currancy to the dollar. China does allow a narrow trading window vs the dollar, but this window is controlled by China.

 

2. Yes, if china allows the yuan to dollar ratio to change.

 

3. Mostly, correct. Many of these factories are made in areas that peg their currancies to the dollar. It is mainly only USA, EU, Japan and a few other areas that allow free trading of their currancies.

[GZBILL]

We are now up 45% on our house investments in one year...

 

 

Uh huh ... just try to liquidate it and get the money out of the country in some useful form ...

 

It's easy to liquidate and even easier to repatriate the funds.