On March 25, Qiushi published a commentary on the root cause of the chaos in Ukraine. The first reason is that “[Western] liberalism wantonly invaded [Ukraine], splitting Ukraine in the name of ‘freedom,’ and causing ordinary citizens to be unable to tell friends from foes.” The commentary also cited regional cultural differences, rampant corruption, and an unsuccessful “grafting” of the Western political system.
China’s Central Bank’s Four New Policy Characteristics
Xinhua republished an article from CNStock.com, which had reported on several major actions that China’s Central Bank has recently taken. The bank has stopped virtual credit card products, capped the amount of third party payments, and increased the volatility of the RMB exchange rate. All these show that People’s Bank of China is adopting policies to avoid innovation, reduce financial risks, and maintain the GDP level.
The article listed four new directions that the Central Bank is following:
1. Prevent financial problems and maintain the GDP level.
2. Focus on resolving financial risks and ensure that financial innovation does not create additional economic risks. The decision to stop virtual credit card products is an indication that the Central Bank would rather give up new innovation of financial products to avoid the potential risks associated with introducing innovative products.
3. Increate the volatility of the RMB exchange rate to push for the RMB’s devaluation and stimulate exports.
4. Limit the Internet purchase amount to support physical stores.
The article stated that because of item 1 and 2, the increasing trend of the RMB’s interest rate will be turned around and the cost of capital will decrease. This will lead to two results: one is to indirectly support real estate prices; the second is to limit financial innovation, which will reduce the inflow of foreign money into China.
Source:
1. CNstock.com, March 18, 2014.
http://news.cnstock.com/news/sns_jd/201403/2950773.htm
2. Xinhua, March 18, 2014.
http://news.xinhuanet.com/fortune/2014-03/18/c_126280684.htm
Xinhua Calls on Governments at All Levels Stay Calm as China’s Housing Prices Continue to Fall
On March 19, 2014, Economic Information, a publication under Xinhua News Agency published an article calling on governments at all levels stay calm as China’s housing prices, from the Yangtze River Delta region to the first-tier cities nationwide, continue to fall. The downturn in housing prices will inevitably have a negative impact on China’s macro-economic growth and financial stability. According to the article, the impact of the “adjustment of property markets” is still under control.
Source: Economic Information, March 19, 2014
http://www.jjckb.cn/2014-03/19/content_496046.htm
http://news.xinhuanet.com/fortune/2014-03/19/c_119831357.htm
China Review News Agency: China Is Not Ready to Fully Liberate the RMB Exchange Rate in the Market
On March 26, 2014, China Review News Agency published an article on the abnormally sharp decline in the RMB exchange rate this year. In 2012 and 2013, China reduced its goal for maintaining the growth of GDP down from eight percent to seven percent. Last year, as a result, import and export businesses started to slow down. In the past, the appreciation of the RMB (the Chinese yuan) exchange rate resulted from the depreciation of the U.S. dollar. With the recovery of the U.S. economy and the appreciation of the U.S. dollar, the depreciation of the RMB exchange rate has become the trend. Since 2013, a large-scale cross-border capital flow in and out of China has been an indisputable fact. Starting on March 17, 2014, the People’s Bank of China widened the USDCNY trading band to +/-2 percent from +/-1 percent. Thus a larger-scale cross-border capital flow should happen, which may result in a turbulent foreign exchange market and volatile financial markets. Although China holds US$ 3.8 trillion in foreign exchange reserves, they are very limited as China relies more and more on importing fundamental resources from abroad.
The article concluded that excess promotion of the market-determined exchange rate mechanism may intensify the fluctuations of the interest rate in China and not benefit the stability of financial markets. China is not ready to liberate the RMB exchange rate in the market fully because the RMB interest rate and China’s price system are not market-oriented.
Source: China Review News Agency, March 26, 2014
http://hk.crntt.com/doc/1030/9/4/6/103094658.html?coluid=53&kindid=0&docid=103094658&mdate=0326071815
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Central Bank: Sixty Percent of the Residents Believe the Housing Prices “Unacceptably High”
In the first quarter of 2014, the People’s Bank of China conducted a survey of twenty thousand urban depositors in 50 cities. The results showed that 64.3 percent of the residents believe that current housing prices are "unacceptably high," 33 percent believe that current prices are "acceptable," while only 2.7 percent of the residents believe they are "satisfactory." Within the next three months, 15 percent of residents will be ready to buy a housing unit. This figure is 2.7 percent higher than the previous quarter and 0.2 percent higher than the same period last year.
The report showed that 55.8 percent of residents believe that the general price level is "unacceptably high." 32.6 percent of the population expected the price level to continue to climb, 48.5 percent expected the price level to remain "basically unchanged."
Source: Xinhua, March 22, 2014
http://news.xinhuanet.com/2014-03/22/c_119890856.htm