Pudding and proof

“A whole parade of official sources has issued statements over the past few weeks predicting, with the unruffled, enigmatic certainty one normally associates with a blackjack dealer dealing a fixed deck, that inflation will come in right at 3% this year”. So says (rather lyrically, I thought) Professor Patrick Chovanec of Tsinghua University as speculation mounts that the official figures are just that: ‘official figures,’ which mask soaring food and accommodation costs. Indeed another professor, Michael Pettis at Peking University says that inflation could well be 6%. Anecdotal evidence is even stronger with, for example, cowpeas having doubled in price in two weeks to 40 cents per pound and a standard foot massage up from around $10 in 2008 to about twice that today.

Proof, of course, can only be verified by retrospective consumption; and inflation remains a source of concern. The same goes for a seven basis point rise in the seven day repurchase rate (which measures funding availability in the money market) to 1.85% as the ICBC warms up for it $3.7 billion convertible note sale. But, this runs counter to action in the PBOC’s bill sale market where yields remain remarkably static across the maturity range.

In other news, a potential property tax has still not gone away and died, as even Warren Buffett shows he is not immune to the rules governing real estate in China. And, finally, the first majority owned Chinese company, Yangzijiang Shipbuilding, is to list in Taiwan in a “milestone” event.

We have a long way to go….

Shanghai Composite:
Today: +0.27% at 2,603.48 at close
This week: -1.5%
YTD: -20.6%

Hang Seng:
Today: -0.11% at 20,612.06 at close
This week: -1.8%
YTD: -5.8%

Oil futures: $72.97
Gold futures: $1244.70
Euro/$ spot: 1.2716

Headlines

• Official China data mask surge in housing and food prices
• Money rate rises as ICBC bond sale looks set to drain funds
• Property tax machinations continue
• Luxury homes and apartments are very slow to sell in Beijing’s Chaoyang District
• China may make an example of Buffett-backed BYD for land-use violation
• China shuns US in its foreign investment
• China's Yangzijiang share sale is a “milestone” for Taiwan