Wen Jiabao: Yes We Can24 June, 2011, 14:54. Posted by Zarathustra
Tags: Economy, Wen Jiabao
Wen Jiabao, the Premier of China, wrote on Financial Times ahead of his European trip with his optimistic tone which sends stocks higher.
In the piece titled How China plans to reinforce the global recovery (sounds like very Gordon Brownesque, as Brown was keen to save the world), he wrote that he believes that China can control prices at the level they want, while at the same time maintain rapid economic growth. That is, he believes that hard landing is out of the question.
Here, I quote:
China has made capping price rises the priority of macroeconomic regulation and introduced a host of targeted policies. These have worked. The overall price level is within a controllable range and is expected to drop steadily. The output of grain, of which there is now an abundant supply, has increased for seven years in a row. There is an oversupply of main industrial products. Imports are growing fast. We are confident price rises will be firmly under control this year.
Apparently his comment has triggered rallies in Hong Kong and China equities market, probably as investors hope that the tightening is over because price level is “controllable”. So far, however, the data suggests the otherwise. Inflation remains high and is expected to go higher before it subsides, possibly in the latter part of the year. It is true that growth, while slowing, is still relative robust, but that means that the growth rate is not quite slow enough to bring down prices.
I do believe that price level will drop later, but before it drop enough, it is still unlikely to see Beijing loosening policy.