Monday 19 February 2007

Boom in Beijing hurts 125

Some people have been burnt even before the start of the Year of the Fire Pig. From Xinhua Online:

A total of 125 people were wounded in Beijing as citizens set off fireworks on Saturday to celebrate the eve of the Spring Festival, according to the capital's fireworks administration authorities.

Three were seriously wounded, including a person whose eyeballs had to be removed by doctors, said a spokesman with the Beijing Fireworks Administration Office.

There have also been fireworks recently in Chinese stock markets. From Shanghai Daily:

The Shanghai Composite Index, which tracks yuan-backed A shares and hard-currency B shares, jumped 0.18 percent to end the day at 2,998.47, the best close since the bourse started trading in 1990.

Stock prices are not the only ones that may be going up. From Xinhua Online:

China's central bank has warned that although last year's consumer price index was a moderate 1.5 percent, there is increased pressure on price hikes in the coming year.

A recent report by the People's Bank of China said...that there is considerable pressure on the rebound of investment and credit demands, and enterprises will see higher cost in labor, raw materials, energy, land, water and other resources products, largely due to the state's tightened control on environment protection, social security and work safety.

The hike in the reserve ratio announced on Friday may help to curb the rise in prices. Or it may not. From Shanghai Daily:

The reserve ratio...will increase 0.5 percentage points to 10 percent on yuan deposits starting on February 25, the People's Bank of China said...

"The hike has delivered a strong tightening signal right before the Chinese New Year," said Liang Hong, a Goldman Sachs economist. "This surprise move by the PBOC could have been triggered by the strong credit growth in January."

China's M2, the broadest measure of money supply which includes cash and all deposits, grew 15.9 percent in January, against a 16.9 percent in December.

Despite the M2 growth dip, M1, or cash plus current accounts, rose 20.1 percent year on year, the fastest in some 3 1/2 years. It triggers concerns that bank lending is off to a strong start again...

"Chinese New Year usually involves everyone giving out cash bonuses," said Stephen Green, a Standard Chartered Bank senior economist. "Today, the PBOC decided to reverse tradition with the hike."

Green expects a 50-basis-point increase on the reserve once a quarter this year as an effective and cheap tool to cut liquidity in the banking system...

Economists believe the latest ratio increase will have a limited effect.

"In the short run, the reserve requirement hike will likely push up market interest rates and the yield curve modestly in China," said Liang. "However, we do not expect this tightening measure to have much impact on the real economy or the financial markets."

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