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Chinese easing now warranted

Posted on Friday, October 14, 2011 at 03:04PM by Registered CommenterSimon Ward | CommentsPost a Comment

Chinese monetary trends remain weak, indicating that the authorities need to loosen policy soon if the economy is to avoid a bumpy landing.

Real M1 was unchanged in the six months to September – unusual for an economy with a high trend growth rate. A similar stagnation in 2008 preceded a contraction in industrial output.

Real M2 looks a little better, with six-month growth recovering from a low in July, though still weak by historical standards.

The authorities are hanging tough because of sticky inflation, with consumer prices rising 6.1% in the year to September. The increase, however, slowed to 4.3% annualised in the latest three months, adjusted for seasonal factors.

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