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Reading The Tea Leaves Of China's Economy -- An Official View

By Dan Harris and Steve Dickinson

Very interesting post on the Wall Street Journal's Real Time Economics Blog, entitled, "Reading Tea Leaves: China?s Zhou Prepares For Crisis Impact." The post is by Andrew Batson, Wall Street Journal China reporter extraordinaire, and it sets out "a few key excerpts" from a special report Zhou Xiaochuan, governor of the People?s Bank of China, delivered to China?s legislature on Sunday on ensuring the stability of China's financial system:

At present the external dependence of our economy is high, so the slowdown in the global economy and the reduction that brings in external demand will inevitably have a negative impact on our economic development. ? However, if the global economy slows down and international commodity prices decline significantly, that reduces the external pressure on the CPI and PPI. Recently, crude oil prices in New York fell to around 80 U.S. dollars. And international coal prices fell nearly 25% last month. This means that there is a lot of uncertainty in China?s inflation trend. Since April 2008, China?s CPI inflation has gradually come down. In September, there was a rare month-on-month decline in food prices, which shows that to a certain extent there is downward momentum in prices. ? The current the global economic and financial adjustment is the inevitable result of the long-term accumulation of imbalances, and its influence on China?s economy should not be underestimated. At the same time, we should also see that China?s overall economic situation is good; that the strength of China?s financial institutions has increased, with higher profitability and improved ability to resist risks; that market liquidity is still relatively abundant; that the financial system is sound and safe and can effectively resist external shocks. What is particularly important is that our country is still going through the processes of industrialization, urbanization and structural upgrading, and has the advantages of a vast domestic market, abundant capital and a labor force that is continuously improving in quality. The basic trend of the development of the national economy has not changed. But faced with so many unstable and uncertain factors, we must raise our awareness and actively respond to challenges, and prepare well for a difficult situation.

Not that I am an economist, but I concur with this assessment of China's economy.

Full post as published by China Law Blog on October 27, 2008 (boomark / email).