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  • mbablitz mbablitz Mar 13, 2013 9:40 AM Flag

    China'sCentral Bank targets 13% M2 growth to curb inflation

    China's central bank governor stresses prudent, neutral monetary policy...
    China's central bank governor Zhou Xiaochuan Wednesday reiterated that the country's monetary policy will stay prudent and neutral in 2013. China aims to keep its broad money supply (M2), which covers cash in circulation and all deposits, to grow at 13 percent this year and targets the inflation rate at 3.5 percent.

    The 13 percent growth of M2 is smaller than that of last year, which indicates that the government puts more emphasis on keeping stable consumer prices, Zhou told a press conference on the sidelines of the annual legislative session. The M2 growth target also means the monetary policy will stay prudent and neutral, he said.

    China implemented a relatively easy monetary policy in 2008 to cope with the global financial crisis. At the end of 2010, the monetary policy was turned to prudent with the economy gradually recovering.

    China should remain on high alert for inflation

    China's central bank governor Zhou Xiaochuan said Wednesday that China should remain on high alert for inflation and the bank will take measures, including monetary policy adjustments, to stabilize prices. Zhou made the remarks at a press conference on the sidelines of the parliament's annual session.
    China's consumer price index (CPI), the main gauge of inflation, rebounded to a 10-month high of 3.2 percent in February. Zhou attributed the higher-than-expected index partly to the lower comparison base last year as the data was calculated on a year-on-year basis. On a month-on-month basis, February's CPI gained 1.1 percent from the previous month.

    China aims to hold this year's consumer price growth at around 3.5 percent, lower than the 4-percent target for 2012 but higher than last year's actual inflation rate of 2.6 percent. (more...)

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    • Thx, Blitz. China got a rude awakening when growth and inflation ran away from them after their post-2008 stimulus package shot their economy out of a cannon in 2009. I think they learned a good lesson from that and know their economy's speed limit now.

      I appreciate what they're doing because if the growth is managed, then it's sustainable and better for orderly growth in macau without overheating that could lead to visa curbs or other constraints on strained capacities.

      Amazing that as China works to curb growth that's straining at the noose, the U.S. is experiencing only sluggish growth even as it guns the economy with massive money printing and massive deficits. I see where John Paulson is the latest U.S. billionaire to flee Obama socialism...

      ... I'm just not quite sure why he would choose Puerto Rico, which is a U.S. territory. He DID say the reason was to escape punative taxation... which have been the reasons for countlesss other people removing their investment capital from the U.S... and the jobs and industry that moves with it.

      S

    • southeast.asia@rocketmail.com southeast.asia Mar 13, 2013 12:29 PM Flag

      This is an excellent read, thanks for posting.

      I can't recall the name of the brokerage that had an incredibly low price target on LVS, but I know other posters will know the brokerage name. I did pay however pay attention to the rationale they used for determining their low price. Their primary concern was that China like the U.S. was experiencing a housing bubble and once it inevitable burst the economy would similarly tank.

      I initially thought the thesis was valid, but when I investigated further, despite the fact that China has entire cities that are vacant, I don't believe China will experience a housing bust similar to the U.S. The reasons are many, but include no sub-prime mortgages in China, cultural differences and the fact that the vacant housing has actually been purchased by consumers with large down payments and are not on the market for sale. The additional speculation controls, through taxation, mentioned here further support this view.

      SEA

      Sentiment: Strong Buy

    • Monetary measures to cool home prices to continue

      Monetary policies to cool home prices in China will continue or even strengthen in the future, said the country's central bank governor Zhou Xiaochuan at a press conference on Wednesday.

      The measures include down payment rates, special interests rates for housing loans and other measures, Zhou said.

      These are structural monetary policies instead of overall monetary policies, he said.

      Monetary policies mainly focus on dealing with overall demand and usually make changes based on consumer price index (CPI) and production material prices, Zhou said.

      He made the remarks at a news conference on China's currency policy and financial reform, which was held on the sidelines of the first annual session of the 12th National People's Congress (NPC).

      • 1 Reply to mbablitz
      • Excerpt from a related article: China's latest property market curbs have stirred heated discussion, with experts close to policymakers saying China will try to control the side effects of the measures. The central government announced last weak that homeowners who sell their homes will have to pay an income tax equivalent to 20 percent of the profits they make on the transaction. The income tax for such sales is currently 1 to 2 percent of the sale price.

        Qin Hong, a researcher with the Ministry of Housing and Urban-Rural Development (MOHURD), said those who sell their only home after five years of use will be exempt from paying the tax.
        She said the tax exemption will support reasonable housing demand and help to control speculation. Jia Kang, a researcher with the Ministry of Finance, said local governments should make clear regulations in accordance with the policy and prevent non-speculative buyers from being hurt by the tax hike.

        Shortly after the new policy was issued, home buyers rushed to buy or sell second-hand homes over fears that the tax hike would increase transaction costs. On the first day after the measures were announced, sales of second-hand homes in Beijing reached a record high of 1,059 units.

        Hu Jinghui, vice president of a leading property brokerage firm, warned that the increased costs may be shifted to home buyers over the long term. Qin said the shift will depend on housing supply and demand. She said that in a buyer's market, a tax shift would be relatively hard, while in a seller's market, where supplies of second-hand homes are limited, it will be much easier for sellers to put the increased cost on buyers. Shen Li, a broker with HomeLink, another property brokerage firm, said her company puts second-hand home transaction taxes on buyers instead of sellers. Jiang Weixin, minister of MOHURD, said Monday that the ministry will wait to see what effects the new measures will have, adding that he is confident that housing prices will be contained.

        Qi Ji, vice minister of MOHURD, said Monday that if the measures create problems during implementation, authorities will adjust them in a timely manner. In response to complaints that repeated property cooling measures over the last decade have had little effect, Qi said prices would be even higher without the government curbs.

 
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