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China putting the brakes on while other countries have yet to see meaningful recovery in final demand. Caution! In case you wonder whether Chinese authorities will seriously fight inflation, read Wen Links Inflation to Communist Party Future. The Ft editorial team thinks the inflation fight is already on.

(…) To be fair, the Chinese authorities have often been more skilful than their western counterparts in balancing growth with price control. This year already, authorities have raised the bank reserve requirement twice and increased the required down payment on land purchases. But such tinkering, effective though it sometimes is, may no longer be enough. One reason is that stimulus money is leaking into the economy. Too much liquidity is chasing too few assets. More structurally, it looks like China’s seemingly endless supply of young, cheap labour is coming to an end. China’s population will begin to age from 2015. Factories in places like Guangdong are fighting to attract workers. The upshot is wage inflation.

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Pretty clearly stated: controlling inflation is the Communist Party’s top priority.

Wen Jiabao, the Chinese premier, put tackling inflation at the top of the policy agenda on Sunday and suggested that the survival of Communist party rule might depend upon it.

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China sales of automobiles totaled 2.876 million units for the first 2 months of 2010, a spectacular jump of 84% on last year’s sales during the same 2 months.

January and February are normally the two weakest sales months due to the Chinese New Year festivities and winter. Some economists now extrapolate that car sales could exceed 21 million units in 2010, a 54% jump over strong 2009 sales.

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Northwestern’s Shih Interview on China Loans, Economy March 12 (Bloomberg) — Victor Shih, a professor at Northwestern University,  talks with Bloomberg’s Susan Li in Hong Kong about the possibility of a financial crisis arising in China and the outlook for the nation’s economy.

Watch

Full Bloomberg article

Related post: CHINA: ARE THE BEARS OUT TO LUNCH?

China’s real estate prices in February rose at the fastest pace in almost two years. Prices in 70 major cities rose 10.7 percent year-on-year in February, the National Bureau of Statistics said on Wednesday.

To cool speculation, the government in January re-imposed a tax on homes sold within five years of their purchase, after having cut the taxable period to two years in January 2009 to bolster a then-flagging market.

But run-away prices appear to be gradually losing momentum. Though the year-on-year growth rate in February is 1.2 percentage points higher than January, the month-on-month increase is down 0.4 percentage points, according to the NBS.

But, as the WSJ reports:

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Many important stats from China today. The inflation data are particularly worrisome as they could force China to raise interest rates. Unlikely in the short term since most of the inflation pressures stem from higher food prices.

Fixed-asset investment in urban areas rose 26.6% in the January-February period from a year earlier. That’s the slowest growth rate in a year, and down from the 30.5% expansion for all of 2009.

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The combined auto sales in January and February surged

84 percent from a year earlier to 2.9 million units, with February’s figures alone reaching 1.2 million units, up 46 percent year-on-year, according to the China Association of Auto Manufactures (CAAM) Tuesday.

China, the world’s largest auto market, adjusted the auto tax-cut policy and old-for-new program in January this year, to boost domestic consumption.

China Daily

There is a bit of controversy on the recent Chinese export data. Here are the facts:

China’s foreign trade posted a 45.2 percent year-on-year growth in February.

Exports in February stood at $94.52 billion, up 45.7 percent, in a new indication of a rebound in global demand, while imports rose 44.7 percent to $86.91 billion, reflecting continued strong domestic demand.

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Excerpts of FT Alphaville post:

Unlike policy circles in the West, where there is no appetite to pre-empt bubbles and crises, China views these risks very differently. In the depths of the Asian financial crisis of the late 1990s, the Chinese leadership first adopted a “pro-active” policy strategy—a forward-looking approach that relies on the combination of fiscal, monetary, and regulatory tools to lean against bubbles and financial crises.

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Premier Wen Jiabao delivered his annual address to the National People’s Congress in Beijing, a ten-day meeting that is the focal point of the country’s political calendar. Here are excerpts from the FT, the WSJ and China Daily.

Opinion in China is sharply divided between officials who warn of the risks of rising property prices, inflation and overheating, partly as a result of the massive monetary stimulus last year, and others who believe the economy remains fragile despite the high headline growth.

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