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| Version 3 | Version 4 |
|---|---|
| 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. |
| China's frothy property market may have peaked after a government clampdown on speculators, new data has shown. | |
| 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 figures 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 point | Turning 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. |
| 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 | 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. | 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. | 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. | 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. | 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. | 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. | 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. | This tends to weaken consumer spending by households, and overstimulate investment. |
| Lagging imports | |
| Meanwhile, Asian stock markets reacted well to the trade figures, which pointed to stronger recovery in global demand. | |
| Exports jumped 43.9% compared with 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 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. |
| 'Currency manipulator' | |
| 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 argue 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. |
| Slowing reserves | |
| One indication of China's alleged manipulation of its currency is its accumulation of US dollar reserves. | |
| In order to keep the yuan cheap, the Chinese central bank must hoover up all the unwanted dollars accumulated by its exporters. | |
| Yet according to data released on Monday, the pace of reserve accumulation has slowed significantly. | |
| The central bank said it collected only $7.2bn of reserves in the second quarter of the year, down from $47.9bn in the first quarter and a quarterly average of $113bn last year. | |
| This may be an indication that since the new "flexible" yuan policy began, markets have had a bigger role in deciding the exchange rate. | |
| However, much of China's reserve accumulation does not appear in the official data, making it difficult to draw an immediate conclusion. |