China update

CHART OF THE DAY: The One Inflation Number That Terrifies Chinese Officials:

Food price inflation in China is booming well beyond the rate of the broader CPI.

The Chinese CPI zoomed 5.1%, year-over-year, in November. But food soared 11.7% for the same period.

What's that mean for Chinese tightening measures?

China Said to Plan for at Least $1.1 Trillion of Credit Expansion in 2011:

China is likely to set a target of at least 7 trillion yuan ($1.1 trillion) of new loans for 2011 after leaders met to decide key economic policy objectives for the coming year, said two people briefed on the matter.

The government also aims for 4 percent inflation, 8 percent economic growth and 16 percent money supply expansion for next year, the people said, declining to be identified because the information isn’t public. No final target for new lending has been set and the figure may change, one person said.

A quota of more than 7 trillion yuan would exceed estimates made by UBS AG and Bank of America Corp. in the past month, suggesting the government may avoid stepping up a clampdown on lending. China moved to rein in credit this year after record loan growth in 2009 caused inflation to quicken and home prices to surge.

China Risks `Rush' to Tighten in 2011 After Inflation Accelerates Past 5%:

China risks a more abrupt tightening in monetary policy next year after refraining from raising interest rates since October even as inflation accelerated to the fastest pace in more than two years.

Consumer prices jumped 5.1 percent in November, a statistics bureau report showed Dec. 11. A measure of wholesale costs climbed 6.1 percent, exceeding all 28 estimates in a Bloomberg News survey of economists. Even so, the central bank held off over the weekend on the rate move predicted by firms including UBS AG and Mizuho Securities Asia Ltd.

Policy makers’ hesitation may be in part a product of China’s policy of holding down the yuan, as higher returns on deposits and loans would boost prospects for inflows of speculative capital that put pressure on the exchange rate. The danger is that a quicker move to raise borrowing costs next year unsettles the expansion in the fastest-growing major economy.

China Inflation `Fight' May Widen as Growth Withstands Tightening Measures:

China’s economic data for November showed growth is withstanding government curbs and extra measures may be needed to tame the highest inflation rate in more than two years.

Industrial-output gains accelerated to 13.3 percent last month from a year earlier, exceeding economists’ median estimate, a statistics bureau report showed in Beijing yesterday. Consumer prices rose a more-than-forecast 5.1 percent, the most since July 2008.

The world’s fastest-growing major economy is maintaining momentum after an interest-rate increase in October, curbs on energy consumption and a crackdown on real-estate speculation. So far, officials have held off on the rate increase predicted for this weekend by firms including UBS AG. Instead, the central bank boosted lenders’ reserve requirements on Dec. 10.

Think Again On China: It's Really A Debt-Burdened Builder Of Bridges To Nowhere.