Yesterday we got a few remarks from China’s Premier Wen Jiabao. Bits of those remarks are rather more usual ones, but one is particularly interesting, in my view.
Premier Wen spoke In Guangxi. According to Mingpao, Premier Wen said that control of food prices remains an important priority, with the usual problems that have been discussed here and there, including his concern on the supply situation, the costs of logistics (note that moving stuff within China can sometimes be even more expensive than shipping them to New York), and the need to build up reserve. He also believes that it is now a critical time in regulating the property market as well as construction of affordable housing, giving no hint of any easing.
But at the same time, Reuters also reports that Premier Wen suggested that in the face of global economic slowdown, job creation will also be a priority. Not surprisingly, as the export sector feeling the pain of the global slowdown (as we have seen in the absolutely underwhelming rebound of manufacturing PMI in September), and as bosses run away from the shadow banking debt burden, businesses are being closed, inevitably, and jobs are lost as a result.
The problem, of course, is that price stability and property market cooling on one hand and job creation on the other are incompatible goals. On the whole, the price stability remark by Premier Wen suggests no easing (at least on hold), while job creation remark suggests easing. While inflation is decelerating (or not?) and property market is getting past the turning point, it is probably still a bit early to say that the mission is completed, so it seems too early to call monetary easing. At the same time, jobs creation would probably require some easing in policy. Indeed, we have seen some “easing” in the small and medium sized business front, but I am not sure if such minor measures can really be effective.
As I have said for many times, the task of inflation fighting and maintaining fast economic growth (or so-called soft landing) is a very difficult one, so difficult that I have long assign a very low probability of that happening (if that happens, that’s a miracle). Since late last year, I have already suggested that either China needs to engineer a very significant slowdown (or hard landing or recession), or the inflation and property bubble problems will not get solved. This choice has to be made.
So, good luck with that then.
This article originally appeared here: China: Is Wen Jiabao Hawkish Or Dovish Now?
Also sprach Analyst – World & China Economy, Global Finance, Real Estate
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