CCTV News: China 3Q10 Economic Figures
I was on Bloomberg TV and CCTV News today, talking about the release of China’s September and 3rd Quarter economic figures for GDP and inflation. I will post a link to the Bloomberg interview if they post it online. In the meantime, you can check out my CCTV interview (alongside fellow guest Professor Huo Deming of Peking University), where I basically said the same things.
The first clip focuses on the GDP growth figures, which slowed from 11.9% in 1Q, to 10.3% in Q2, to 9.6% in Q3. I note that while markets tend to dislike any slowdown in growth, runaway growth fueled by money creation, which produces empty buildings and unused ports and airports is NOT a good thing. A moderation in China’s growth right now, putting it on a more sustainable growth path, IS a good thing, and should actually reassure markets.
The second clip discusses inflation and China’s recent interest rate hike. Many people were afraid that China’s CPI would hit 4.0% in September, and breathed a sigh of relief when it came in at 3.6%. That’s still the highest rate this year, a continuation of the steady upward trend that we’ve seen all year long. But it’s even more revealing to look at the components of that CPI figure. Food inflation is running at 8.0% (compared to 7.5% in August). The price of vegetables are rising by 18%. The prices for manufactured goods, on the other hand, are rising only slowly, holding down the rest of the index. That makes sense, since much of the money that was created went into fixed asset investment and expanded capacity for those products.
Inflation has to work its way through an economy, and does so unevenly. It is like a flood flowing across a landscape filled with hills and valleys. Understanding the topography of that landscape is critical to following its course.