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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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China’s official purchasing managers’ index for non-manufacturing sectors plunged to a one-year low at 46.4 in February from 55.1 a month earlier, the China Federation of Logistics and Purchasing (CFLP) said on Wednesday.

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China’s banking regulators may raise large commercial banks’ capital adequacy ratio to 11.5 percent from an earlier 11 percent level, people familiar with the matter confirmed.(…)

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China’s stats were hurt by the Lunar Year Holidays in February this year (January last year). The decline is not severe and the reading still points to expansion, even during a holiday-impacted month.

China’s government-backed Purchasing Manufacturers Index fell to 52.0 in February from 55.8 in January, the China Federation of Logistics and Purchasing said. HSBC’s China Manufacturing PMI, prepared by Markit, fell to 55.8 from 57.4 over the same period, according to HSBC Holdings PLC.

The only concern is with the decline in export orders.

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On January 25, I published CHINESE CONSUMPTION NEAR TAKE-OFF:

In all, the stage appears set for the next major leg in China’s economic expansion as domestic consumption will greatly benefit from the forthcoming inevitable decline in savings rates. This will provide Chinese authorities with another powerful tool to manage the economy if, as and when infrastructure spending  and, more importantly, export revenues slow down. China will thus further insulate itself from the vagaries of its trading partners.

CLSA’s Andy Rothman recently made the case for China’s coming consumption boom.

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