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China trade jumps, housing wavers 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.
China's exports jumped in June, fresh figures show, though separate data suggests its frothy property market may have peaked. New data show that China's frothy property market may have peaked, after a government clampdown on speculators.
Exports rose 43.9% from a year earlier, well above market expectations. Property prices across 70 cities fell 0.1% in June compared with May - the first monthly fall since February 2009.
But imports failed to keep pace with exports, rising just 34.1%, as Chinese consumer spending continued to lag. Meanwhile, separate trade data released at the weekend showed exports surging, but imports lagging.
Meanwhile property prices fell in June for the first time in more than a year, with analysts suggesting the domestic economy may be at a critical juncture. 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.
Asian stock markets reacted well to the trade figures, which point to stronger recovery in global demand. Turning point
However, the data paints a confusing picture for the Chinese economy, which some economists and investors fear may suffer a sharp slowdown in the second half of the year. 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'
The data release is very timely for China from a political perspective. Meanwhile, Asian stock markets reacted well to the trade figures, which point to stronger recovery in global demand.
With exports surging ahead of imports, the trade data registered a big jump in China's controversial trade surplus. 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 yuan since then. However, so far this "flexibility" has translated into a mere 0.9% rise in the value of the yuan.
Turning point
Meanwhile, Chinese property prices in June were down 0.1% on May - the first monthly fall since February 2009 - suggesting that Beijing's attempts to cool the market may be succeeding.
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.
The Chinese authorities have held interest rates in line with super-low US interest rates, in order to maintain the yuan's currency peg.
Some economists argue that the low interest rates are also used to provide a subsidy from Chinese households, who have large savings, to Chinese industry and local governments, who are major borrowers.
Despite the monthly fall in June, property prices across China remained 11.4% higher than a year ago.
In April, the Chinese government introduced a series of new regulatory restrictions that sought to calmp down on speculative buying in the housing market.
Financial markets are now assessing whether Beijing will successfully engineer a soft landing in the market or whether the property market will now deflate in the same way the US market has done since 2007.