Excess capacity may generate deflation
(Shenzhen Daily)
Updated: 2005-11-21 08:42

Excess capacity resulting from rapid investment could generate deflation in coming months in China, a leading academic said Saturday.

Beijing University economics professor Justin Lin noted that China's retail price index was flat in September, even though the broader, more closely watched consumer price index showed annual inflation of 0.9 percent and 1.2 percent in October. "I think deflation is likely to occur later this year or early next year because investment has been growing rapidly," Lin told an economics forum in Beijing. Inflation for all of 2006 would be low, at around 1 percent, Lin added, although he did not specify which measure he had in mind. Consumer inflation in 2005 is likely to average 2 percent, the central bank says. Lin said he expected investment growth, concentrated in real estate, autos and construction materials, to continue to grow strongly in 2006 because, unlike in the West, Chinese investors were less sensitive to signals suggesting falling prices.

Some banks' bad loans rising: regulator

Some domestic banks are suffering rising volumes of bad loans, the banking regulator said Friday, despite a trend for falls in nonperforming debt.

"Currently, the volume of bad loans within the banking system is still very high," Xinhua quoted Liu Mingkang, chairman of the China Banking Regulatory Commission, as saying. "The pressure for them to rebound is remarkably high." Bad loans have been falling for more than two years, and Liu gave figures suggesting the trend was continuing, despite some banks' problems. At the end of September, bad loans amounted to 1.3 trillion yuan, 8.58 percent of all loans, which was down 4.28 percentage points from the beginning of the year, he said.

Insurance premiums up 12 percent

China's property and life insurance premiums totaled 412.26 billion yuan (US$50.83 billion) in the January-October period, up 12 percent from 366.93 billion yuan in the same period last year, China's insurance regulator said Friday.

Property and life insurance premiums were up from 377.87 billion yuan in the January-September period this year, according to data from the China Insurance Regulatory Commission. Life insurance premiums amounted to 303.73 billion yuan during the first 10 months this year, and property insurance premiums totaled 108.53 billion yuan, the insurance regulator said. Domestic life insurers accounted for 90 percent, or 273.56 billion yuan, of total life insurance premiums, while foreign-invested life insurers accounted for 30.2 billion yuan worth.