Carrot & stick

Until 1404, Tianjin was called “Zhigu” or “Straight Port”. In that year, the Yongle Emperor renamed it Tianjin, which literally means “the Heavenly Ford”, to indicate that the Emperor (son of heaven) forded the river at that point; and he did so on a campaign to scramble for the throne from his nephew. Today, it is one of four directly controlled municipalities in China and the Nation’s sixth largest city. It can also get pretty cold there, with temperatures regularly below freezing in January but in September it is very pleasant which is one of the reason’s why it is host to the ‘Summer Davos’ meeting of the World Economic Forum (which is normally snow covered).

China’s Premier Wen is there as you would expect – with his carrot and stick (which, I guess, you would also expect); the former being an economy in “good shape”, while the latter is a warning that the Government will, if necessary, stamp on an errant property market (real estate company shares fell 1.1%). For my money, though, I think the ‘vegetable’ is the more significant.

Elsewhere, the Conference Board said that China’s economic outlook rose for a third month in July with a (preliminary) gain of 0.5%, which follows a revised 0.7% in June and 0.9% in May. This signals the continuation of moderate economic growth albeit that this may become less evenly shared among manufacturers, investment and consumers.

The Yuan is also at its highest (6.7470) since 1993 which prompted Merrill Lynch to say that “China doesn’t want to see the relationship with the US get hurt because of the currency issue. There will be more space for Yuan appreciation also because signs show the economy will have a soft landing”. ML is looking for 6.6 by year-end.

All pretty good to be getting on with. If it’s not, though, and you are a Chinese citizen, you can now send messages online to a Communist Party bulletin board and harangue senior political leaders, says the FT. What would you say?

Shanghai Composite:
Today: +0.01% at 2,688.52 at close
This week: +1.0
YTD: -18.0

Hang Seng:
Today: +0.17 at 21,696.04 at close
This week: +2.1
YTD: -0.8

Oil futures: $77.18
Gold futures: $1251.60
Euro/$ spot: 1.2866

Headlines

• Wen says China's economy is in “good shape”, but cautions on property
• Conference Board’s leading economic index increases for third month
• Yuan surges to highest level since 1993
• PBOC sells one year bills at unchanged yield of 2.0929%
• China plans to introduce credit-default swaps by year end
• China may remove net asset limit on bond placements, says the 21st Herald
• Hong Kong will lead global house price league table in 2011