Global inflation improves China starts to beware of asset bubbles and international hot money

Xinhua Beijing June 9: Global incremental currency pushes up inflation expectations China is wary of asset bubbles and international hot money journalist Zhangchong Liu Yan when Chinese government officials and academics are still buzzing about whether the economy has bottomed out, inflation expectations triggered by a weaker dollar are becoming a concern for more and more economic people,　　Ordinary investors are also choosing to invest in property and gold to hedge against the risks.　　Factors driving inflation expectations include rising stock markets, rapid commodity price rises, a rebound in the property market and soaring gold and gold prices. In recent times, the world's major stock markets have shown gains.　　China's Shanghai-Shenzhen stock index has hit a 10-month high, with a cumulative gain of more than 50%; Hong Kong's Hang Seng has hit a eight-month high. Crude oil futures have risen to a seven-month high, with prices at once breaking $70 a barrel, almost doubling the price of the year.　　Crude oil futures rose 30% per cent in May, the biggest monthly gain in 10 years. The price of non-ferrous metals has also risen considerably. International futures gold prices hit a three-month high, once approaching an ounce of $1000 trillion. In the past two months, the Shanghai Futures exchange period copper price rose nearly 30%; Soybean, corn, wheat and other agricultural products prices rose markedly.　　Wheat futures in the United States rose 19% in the last one months, Dalian soybean futures rose nearly 15%, and US corn futures rose more than 30% from the year's lowest in three months. "One of the big drivers of this round of commodity price hikes is the depreciation of the dollar.　　Zhangjian, senior economist at the Asian Development Bank's China representative office, told reporters. In the past 3 months, the dollar index has plunged from close to 90 highs to 78, down more than 10% per cent, interpreting the worst slump in more than 20 years.　　The continued rise in commodity prices and emerging market equities, in turn, has added to the pressure of a weaker dollar. "While demand for commodities is gradually recovering, it has not yet reached a robust level."　　Zhangjian stressed that, although the price rebound and speculative capital speculation also has a big relationship, but the root of the dollar depreciation. "Investors ' fear of the world economy is fading. The dollar, once a hedge tool, has fallen faster. Excess liquidity is pushing up global inflation expectations.　　"he said. In response to the financial crisis, the Fed has taken "quantitative easing" measures to release liquidity through direct purchases of long-term treasuries. After the US, central banks in Britain, Japan and Europe poured liquidity into the market.　　Money-lending rates such as the dollar, sterling and the euro have fallen sharply recently. International crude oil futures and gold prices have been adjusted as investors fear the Fed may start raising interest rates in the near future.　　But experts expect international oil and gold prices to remain relatively high as global economic data continues to grow better, and fears of inflation and asset bubbles will become stronger. "Once the US economy has bottomed out, the confidence of commercial banks will be restored, and then it is likely inflation." ”Zhu Qing, a professor at the School of Finance and Finance at Renmin University, says U.S. inflation could be exported to countries around the world, including China. China's investors have taken some measures to avoid the risk of inflation, real estate has become the new favorite, not only buyers wait and see the atmosphere has been diluted, developers confidence recovery, and even began to rob the land.　　Vanke, China's biggest property developer, has spent more than $2.3 billion on a few months of cautious practices. According to the latest data from the new SouFun Data Monitoring Center, more than 30 real estate projects in Beijing increased in May. During the month, only 28 transactions were traded in Beijing, with turnover exceeding the sum of the previous 4 months.　　Land deals are also heating up in other first-tier Chinese cities.　　"The recent land-use behavior of the developers does not explain that real estate investment and development confidence has fully recovered, and they are more motivated by inflation expectations," said Ha Jiming, chief economist at CICC. In addition to the real estate sector, ordinary investors also choose to invest in both hedging and preserving the dual function of gold. "It's not worth the money now," he said.　　National debt is so difficult to buy, holding points in the heart of gold, "in the so-called" China's first gold "Beijing Cai Department store to buy Gold products Cao Yaje told reporters. According to the mall general manager Wang Chunli, under the influence of the financial crisis, shopping malls last year's turnover of 3.5 billion yuan, the year-on-year growth of nearly 50%.　　Sales have reached 2.3 billion yuan in the first 5 months of this year, with sales of gold products accounting for all 60%. The World Gold Association report says global demand for gold rose 38% per cent in the first quarter to 1016 tonnes a year.　　Gold retail investment demand, including exchange-traded gold funds, gold bullion and gold coins, and so on, a sharp increase of 248%, up to 596 tons. "Gold as a hard currency is still the main tool for people to hedge their risk, especially under inflationary expectations." Wang Chunli told reporters. "Inflation is not a question of when, but it has affected the decision-making behavior of investors." "Moderate inflation expectations will help the economy recover. Yang Tao, deputy director of the Institute of Monetary Theory and policy at the Chinese Academy of Social Sciences, said that once the market has formed inflationary expectations, some companies will buy back raw materials, which will drive demand for upstream industries. Consumers to avoid the future decline in purchasing power to increase spot consumption, will eventually lead to a rebound in demand.　　Rising prices and increased demand will improve corporate profitability. In China, inflation expectations are also linked to ample liquidity. In the first 4 months of this year, new renminbi loans to create 5.17 trillion of the day amount.　　Some experts believe that China's current monetary policy, its easing level has surpassed the 1997 Asian financial crisis level. "The problem of excess liquidity is not yet prominent in China, but virtual assets such as equities have emerged as bubbles."　　"It is not superfluous to worry about asset bubbles," Zhangjian, who believes that the stock market's continued sharp rise and rising house prices are lacking enough support from both the macro and the real economy. In a recent report, CICC called for vigilance against asset-bubble-volume soil weightTo。　　The report stresses that global capital flows spawned Asian asset price bubbles in the early 90, and that there are many similarities between the current situation and the risk of a recurrence of emerging market bubbles. Experts warn that only the stability of price indices and the rise in financial assets and real estate prices are likely to lead to a loosening of monetary policy.　　If the central bank fails to recover huge amounts of liquidity in time for the recovery, it could put a further risk of asset bubbles and inflation, when the international hot money will surely turn again. There are already signs that the Chinese stock market and real estate industry eye-catching performance behind the "Hot money" hype.　　According to Citigroup's latest study, the average weekly flow of money into Asia over the past 6 weeks has reached the level of capital inflows per week at the peak of the 2007 bull market. "' hot money ' has become more active in emerging markets, including China, and should remain highly vigilant.　　Zhangjian stressed that the emergence of these hedge funds is mainly based on the expectations of foreign investors on the appreciation of the renminbi. Yang Tao that the global easing of monetary policy is a double-edged sword. "In a downturn, this policy is necessary and unavoidable, but it has a lot of negative effects," he said. The key is to grasp a good sense of propriety, to avoid the ' too much ' effect. "For countries, the most important task now is to restore growth." "China's monetary policy is unlikely to change much this year," Yang Tao.