Li Daokui: Real Estate Curb In-place, No Monetary Easing, Sees Inflation At 2.8%31 October, 2011, 17:39. Posted by Zarathustra
Li Daokui, academic advisor and member of the monetary policy committee of the People’s Bank of China, spoke last Saturday on inflation outlook of China as well as the real estate market regulation, according to Xinhua.
Although there have been some noise about easing real estate curb amid recent aggressive price cutting and the protests of price cutting, Li Daokui’s view is consistent with Premier Wen Jiabao’s view that curbs will be firmly in place. He believes that economic growth will slow, and the growth model which relies on real estate development will end.
He also added that inflation in China will probably fall from about 5.5% for this year to just 2.8% next year, as there is a very strongly cyclicality of inflation in China. As 60% of inflation comes from agricultural product this year, and 20% from pork prices, major investments on that front should stabilise the situation.
Curiously though, he also thinks that there will not be any major monetary policy easing for the next 5 to 10 years.
I am not sure what to make of this. Certainly I expect inflation to come down as growth slows, but I am less sure about the exactly rate of inflation next year. An inflation rate of 2.8% could be a good news for investors hoping for monetary easing, but it is curious that he does not seem to believe that major monetary easing will happen. In fact, to say that there’s no major easing for the next 5 to 10 years is a very strong claim, in my view.