The view I have been forming of near-term inflationary pressures is that we’re seeing two very different dynamics in play, with the dollar prices of things the Chinese can stockpile and import going up and the dollar prices of everything else (like U.S. wages and rents) under significant downward pressure. The last week seemed to bring some reprieve on the first front.
I wondered what to make of this story from the Wall Street Journal on January 27:
Several state-run Chinese banks have ordered some branches to suspend new lending for the rest of this month, suggesting a coordinated effort by Beijing to manage state banks’ torrid lending in the year’s first few weeks.
A person with direct knowledge of the matter said Tuesday that Industrial & Commercial Bank of China Ltd., the country’s biggest lender by assets, last Friday ordered its branches in Beijing not to issue any new loans for the rest of January.
China Citic Bank Corp. also suspended new lending in Shanghai last week because its local operations have already used up their monthly quota for new loans in the city, a Shanghai-based official at the medium-sized bank said Tuesday. The Citic Bank official added that both the bank’s own headquarters and the People’s Bank of China, the country’s central bank, “have told us to control the pace of lending this year.”
The moves by the two state-owned banks follow similar steps taken last week by state-run Bank of China Ltd.
I’m not sure how significant that is, but thought it made interesting reading side-by-side with earlier anecdotal accounts of Chinese speculative buying and a graph of what happened to commodity prices following the Chinese tightening.