THE SUNDAY TELEGRAPH: China is struggling to contain the threat of an overheating economy in the face of rising house prices, inflationary wage increases and a continuing surge in money supply, the head of the country’s second-largest bank has warned.
Guo Shuqing, chairman of China Construction Bank, said that the latest figures for China’s M1 money supply – a key predictor of inflation – had raised concerns that the country’s vast stimulus and bank-lending was running too hot.“I saw the figures for last month and M1 is still very high, increasing 31pc from last year, which is one per cent higher than last month,” he said in an interview with The Daily Telegraph.
“We are seeing a lot of money coming to China which is creating a current and capital account surpluses.”
China’s regulators have introduced a raft of measures in recent weeks in an attempt to cool down the economy, forcing banks to raise the capital adequacy ratios and hitting second home buyers with regulation designed to drive speculators out of the property market.
However, Mr Guo warned that the effectiveness of measures to cool house prices, which have risen by up to 40pc this year in some major cities, could be blunted by the massive reserves of cash still being held by private developers. “Sales are falling but prices are not,” he said. “Developers have a lot of cash, so they’re not too concerned at the moment.”
“Property prices are definitely seeing something of a bubble, but it differs from city to city. You can see prices going very high on the coastline, but in the inland areas and western areas, even in provincial capitals, it’s still not so high.” >>> Peter Foster and Adrian Michaels in Beijing | Sunday, May 30, 2010
