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China's property market falters | |
(40 minutes later) | |
China's property boom may have peaked in June. | China's property boom may have peaked in June. |
New data show that China's frothy property market may have peaked, after a government clampdown on speculators. | |
Property prices across 70 cities fell 0.1% in June compared with May - the first monthly fall since February 2009. | |
Meanwhile, separate trade data released at the weekend showed exports surging, but imports lagging. | |
The data paints a mixed picture for the Chinese economy, which some economists and investors fear may suffer a sharp slowdown later in the year. | |
Turning point | |
In April, the Chinese government introduced a series of new regulatory restrictions on the housing market that sought to restrict speculative buying. | |
These included higher down-payments on house purchases, stricter lending rules for property developers, and limits on the ability of investors to buy more than one home. | |
Many economists, investors and policymakers - both inside and outside China - worry that Chinese real estate may be experiencing a bubble brought on by excessively low interest rates, which has fuelled speculators. | |
Despite the monthly fall in June, property prices across China still remained 11.4% higher than a year ago. | |
The Chinese authorities have held interest rates down, in line with super-low US interest rates, in order to maintain an exchange rate peg between the Chinese yuan and the US dollar. | |
Some economists argue that the low interest rates are also provide a hefty subsidy from Chinese households, who have large savings, to Chinese industry and local governments, who are major borrowers. | |
Financial markets are now assessing whether Beijing will successfully pull off a soft landing in housing prices or, whether the Chinese property market will now deflate in the same way the US market has done since 2007. | |
'Currency manipulator' | 'Currency manipulator' |
Meanwhile, Asian stock markets reacted well to the trade figures, which point to stronger recovery in global demand. | |
Exports jumped 43.9% versus a year earlier - well ahead of market expectations of a 38% rise. | |
Imports however only rose 34.1%, in a sign that Chinese consumer spending continues to lag the booming economy. | |
The trade data release is very timely for China from a political perspective. | |
The surge in exports means that China's controversial trade surplus grew even more rapidly in June. | |
It comes less than a week after US Treasury Secretary Timothy Geithner published a much delayed report on China's currency policy. | It comes less than a week after US Treasury Secretary Timothy Geithner published a much delayed report on China's currency policy. |
That report notably did not label Beijing a "currency manipulator", undermining efforts in the US Congress to pass punitive trade sanctions against China. | That report notably did not label Beijing a "currency manipulator", undermining efforts in the US Congress to pass punitive trade sanctions against China. |
China pegs its currency, the yuan, to the dollar at an exchange rate that many in the US, including economist Paul Krugman, say gives Chinese exporters an unfair price advantage. | China pegs its currency, the yuan, to the dollar at an exchange rate that many in the US, including economist Paul Krugman, say gives Chinese exporters an unfair price advantage. |
The US Treasury's decision to take the political heat off China was a response to a more flexible exchange rate policy announced by the Chinese central bank in June. | The US Treasury's decision to take the political heat off China was a response to a more flexible exchange rate policy announced by the Chinese central bank in June. |
However, so far this "flexibility" has translated into a mere 0.9% rise in the value of the yuan. | |