A few thoughts on a few things that Wen Jiabao said15 March, 2012, 16:35. Posted by Zarathustra
So all these meetings of the leaders of China came to an end, with the Shanghai stock market celebrated that with a 2.6% drop yesterday, I would like to give a few quick thoughts on what some of the things that our dear Premier Wen Jiabao has said.
As mentioned early on, Wen Jiabao has made it clear that GDP growth target for the year would be 7.5% instead of 8%. And just to recap, the inflation target is 4% yoy, and the M2 target is 14% yoy. Curiously, even though we have long known that the growth target will be lowered, the market did not like this. Bear in mind that 7.5%, if achieved, would be a very decent growth.
There is a possibility that China is already growing less than 8% (some might even say that China is already in a hard landing), and I believe that there is a good possibility that China will undershoot the inflation and money supply growth target as the economy continues to slow. I also hold the view that cutting RRR is not real easing, and the probability of significant interest rate cuts on both lending and deposit sides is small for the moment (I do have a view that lending rate might be cut more than deposit rate if rate cuts do happen).
Yesterday, Wen Jiabao said the real estate market regulations will have to be continued because real estate prices are still far from reasonable. That really spooked the market, with Shanghai composite closing down 2.6% yesterday. But again, I trust that most people should understand that this is all well known that real estate prices are ridiculous, and the government is determined to crush the market, so I do not understand where the market expectation of “easing” actually came from.
On the whole, Wen Jiabao has said a few things that everyone should have known. So perish the thought that that there will be or has been easing in monetary policy and/or real estate market regulation.