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China's property market falters 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.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.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.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.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 pointTurning point
In April, the Chinese government introduced a series of new regulatory restrictions on the housing market that sought to restrict speculative buying.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.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.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.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 used to 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.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.
Brakes on
The property market restrictions are just one dimension of a general move by Beijing to unwind a package of stimulus measures that helped China weather the global recession, in the face of accelerating inflation.
Data released on Monday by the Chinese central bank showed a continued slowdown in bank lending throughout the economy.
Net new lending - which is tightly regulated in China - fell to 603bn yuan ($89bn; £59bn) in June, down 5.6% from May, and down more than half compared with a year ago.
The Chinese government encouraged an unprecedented expansion in bank lending last year in response to the recession.
Much of that lending went into infrastructure investment. But some of it also went into property speculation.
Interest rates have also been kept at an artificially low rate, which some economists argue provides a hefty subsidy from Chinese households, who have large savings, to Chinese industry and local governments, who are major borrowers.
This tends to weaken consumer spending by households, and overstimulate investment.
'Currency manipulator''Currency manipulator'
Meanwhile, Asian stock markets reacted well to the trade figures, which point to stronger recovery in global demand.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.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.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 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.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 argue 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.However, so far this "flexibility" has translated into a mere 0.9% rise in the value of the yuan.