2012-09-06

Your last chance to sell Chinese real estate; China's three strategic errors

Liu Jun Luo writes that the April 2011 bounce to 3607 level for the Shanghai Composite was your last chance to escape Chinese stocks (the Shanghai Composite peaked in August 2009 and is currently at 2051). The current bounce in real estate is your last chance to escape from housing.
3067点是最后的逃命机会和房地产的最后逃命
目前,他们被美国骗了,干了3个战略性错误的事情,(一)4万亿财政扩张;(二)大量购买了欧洲债券;(三)2010年6月,让人民币继续升值。为了,弥补这些战略性错误,中国央行未来会选择牺牲股市和房地产。
Presently, they've (Chinese central bankers) been deceived by America, adopting three strategic errors, (1) the 4 trillion yuan stimulus, (2) massive buying of European debt, (3) allowing the renminbi to continue appreciating in June 2010. In order to make up for these strategic blunders, the central bank with choose to sacrifice the stock and real estate markets.

The response to China's debt problem will be large scale debt purchases and renminbi devaluation.

To wit: Is the PBoC starting to liberalise its rate regime?
Since July 2012, this has clearly changed, likely in recognition of the shift in liquidity impact of the PBC’s fx operations. The PBC is now comfortable conducting frequent reverse repo operations (grey bars on Chart 1) to quickly offset any imminent liquidity squeeze.
To which FT Alphaville replies:
In short, it’s acting increasingly like western central banks.

Although there's another idea:
Another theory for why the reverse repos have been used so far, rather than an RRR cut, is that the Party is waiting until after its congress, which is happening either in October or November, before making a major easing move.

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