From "What is the Latest Property Tightening About?" by Wang Tao, UBS senior China economist, April 20:
Although the investment and new construction activity of developers in the high-end property market are expected to slow, the push for mass market and public housing construction, as well as acceleration in urbanization build up in inland regions, will still keep overall construction activity robust in 2010. Therefore, we maintain our 10% GDP growth forecast for 2010 … The tightening measures … if implemented effectively, will likely bring forward some corrections in the commodity space as the expected property tightening became real. On the positive side, property sector tightening now should reduce the risk of "overheating" or a big asset bubble later. The subdued property prices may also help ease inflation expectations. On the negative side, there are concerns that a too-aggressive property sector tightening could bring down growth substantially and trigger other unwanted effects such as a rise in non-performing loans at the local level. The risk is there, though we think the continued emphasis on increased supply and volume of activity should help sustain growth. In addition, we also think the government may relax some of the policies once they are worried about a sharp slowdown in overall construction activity. On the other hand, if the announced measures again fail to bring desired effect … further actions could be taken.
From "12 things worth knowing about China’s 2009 BoP" by Stephen Green and Li Wei, Standard Chartered economists, April 19:
The current account surplus was revised up a little from the preliminary release, to US$297.1 billion, or 6.1% of GDP (from an initial 5.8% estimate). This is still a significant reduction from 9.6% in 2008 (and 11% in 2007). The main driver was the smaller trade surplus, which fell by 32% y/y to US$249.5 billion. Adding to the fall in the current account surplus was the increase in the services deficit, to US$29.4 billion, partly due to a bigger shipping services deficit. Tourism flows turned negative after a positive reading in 2008 … The huge financial account surplus was made up of three parts: large net foreign investment inflows, large securities investment inflows, and a large increase in "other" investments. Gross foreign direct investment into China was again huge, at US$110 billion, although US$31.8 billion worth of foreign investment left the country, resulting in a net inflow US$78.2 billion. Given the nervous state of many international companies in 2009, we cannot help but think that there is some "round-tripping" going on here – money coming out of China, passing through an offshore center like Hong Kong or the British Virgin Islands, and then coming back as "foreign" money in order to benefit from special tax and other legal advantages.