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.
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