Hard Landing For China: “Off The Table”
According to a CNBC report:
A senior International Monetary Fund official said on Monday that China was taking steps to reduce property bubble risks and said it has room to add fiscal stimulus if conditions worsen. “China can move away from its reliance on external demand and needs to build up domestic demand,” said Anoop Singh, the IMF director for Asia and the Pacific at a news conference. He said Beijing was working on measures to stimulate demand. “We don’t see (a) hard-landing risk as likely,” Singh added, noting property prices were moderating and sales volumes declining. “Our sense is that these risks are being addressed and our prediction is clear: that growth will remain above 8 percent at the baseline and that if there were to be greater risks externally China has sufficient fiscal space to respond.
Of course, Mr. Singh is right on all counts. He’s just a bit late. As MTD noted almost two years ago in May, 2010, fears of a property bubble and an economic meltdown in China have been misplaced. China began tightening credit and taking measures to curb property speculation since early 2010, and has vigorously implemented those policies ever since. Only in November of last year, when China saw that it was on the other side of the inflation issue, did the People’s Bank of China begin to ease credit by lowering bank reserve requirements.
A hard landing for China is off the table, because it was never on the table. Commentators on China don’t seem to understand that China has all of the monetary and fiscal policy tools under its control, and that its leaders make monetary and fiscal policy decisions based on economic, not political, considerations. Due to the risks of inflation and high real estate prices to the economy, they’ve been all over the property issue for some time now. I’m constantly amazed by how out of date information in the West is on China. It may only be a 13-hour time difference between Beijing and New York, but most days it feels like two years.
Nina Xiang, formerly of Business Week and Institutional Investor and the host of China Money Podcast, a top-rated talk show series focused on investing in China, stopped by our offices on Tuesday, and we discussed China’s economy, property market and much, much more.