Friday, November 19, 2010

China Continues to Tighten

The People's Bank of China announced that it will increase banks' required reserves by 50 basis points. It is fifth increase year. Including an earlier temporary increase, the required reserve ratios is now 18.5 percent for big banks, a record high.

It's difficult to get a sense of the accuracy of Chinese money supply, but this death by a thousand cuts method of slowing money growth will eventually break the Chinese stock market and real estate market, and will put a lot of additional change into the pocket of money manager Jim Chanos, who is short Chinese real estate.

1 comment:

  1. If you can't trust a communist's statistics, whose can you trust? FWIW, I've found 2-3.5% annual growth to be an important inflection point to watch. Latest is 4.66% for Sep (up only 0.06% from Aug), which was before the rate hike and previous reserve req. change. Oct is released Nov 25.