SHANGHAI, Sep. 13 (SMM) – China’s National Bureau of Statistics and its central bank announced on September 11th a slew of major economic data for August. Among the data, China’s CPI in August gained 3.5% from a year earlier, up from 3.3% in July, a sign of greater pressure of price hikes. China’s M2 increased significantly in August, indicating ample cash flow.

Pressure of Price Gains Accelerates
China’s CPI data registered a year-on-year growth of 3.5% in August, exceeding a 3.0% target set for 2010 again, and up from 3.3% from July. Of those, food prices increased 7.5%; non-food prices gained 1.5%; consumer prices rose 3.8%; prices of service items grew 2.4%. Food prices experienced marked increases due to flooding in many regions of the country and market speculation on agricultural products, which was expected to result in a growth of 2.46% for the CPI, becoming a major factor behind a higher CPI in August. In addition, China’s PPI increased 4.3% in August on a yearly basis, and down from July's 4.8% growth. As economic expansion both home and abroad slowed, China’s domestic demand for industrial products has waned to an extent, and so producers were wary of lifting prices, resulting in no significant price transmission, and the growth of CPI was due mainly to food price hikes. SMM believes that China’s PPI will continue to edge down during the rest of the year.

Industrial Production Keeps Strong
Industrial added-value growth at enterprises above the designated scale increased 13.9% on a yearly basis, up 0.5% from July levels, and with YTD growth of 16.6%, down 0.4% from the growth from January to July. According to latest economic data released by the NBS, industrial added-value growth outperformed others, an indication that China’s industrial production keeps healthy development, with stable growth.

China Fixed-Assets Investment Remains High
China's urban fixed assets investment was RMB 14.1 trillion in the first eight months of 2010, up 24.8% on a yearly basis, but down 0.1 percentage points compared with fixed assets investment in the first seven months of 2010. Property market investment grew by 36.7% year-on-year to RMB 2.84 trillion in the first eight months of 2010, still higher than the average YoY growth rate of 24.8%, which will prompt China's Central Government to rein in property markets. If domestic house prices post another round of rises, new tightening policies will likely be unveiled. Total retail sales of consumer goods were RMB 1.26 trillion during August, up 18.4% YoY, and up 0.5 percentage points MoM. Total retail sales of consumer goods were RMB 9.75 trillion in the first eight months of 2010, up 18.2% on a yearly basis, and unchanged compared with that for the first seven months of 2010. The growth rate of consumption in August was also higher than previous market forecast. 
 
Money Supply Remains Sufficient
China's central bank released on September 11th that China's broad money supply (M2) has increased by 19.2% on a yearly basis at the end of August, much higher than July levels of 17.6%. Previously, the YoY growth rate of M2 kept falling month-on-month after reaching the peak of 29.74% in November 2009. The target of YoY growth rate of M2 is set at 17% for 2010. In addition, China's central bank announced that China's new yuan loans in August were RMB 545.2 billion, up RMB 134.8 billion on a yearly basis, bringing total new yuan loans to RMB 5.7 trillion in the first eight months of 2010, and new yuan loans from January to August have reached 76% of China's total new yuan loans of RMB 7.5 trillion set for 2010. China's banking regulator has told commercial lenders to restrict new lending on a quarterly basis, so average monthly new loans will fall during 4Q 2010. The YoY growth rate of M2 in August was significantly higher than July levels, and has ended the eight-month declines, which may intensify market concerns over higher prices as a result of excess liquidity and will in turn increase pressure faced by China's central bank to tighten money supply.

Trade Maintains High Growth
According to data from China Customs, China’s import and export value was USD 258.57 billion in August, up 34.7% YoY. Export value was USD 139.3 billion, up 34.4% YoY, which is 3.7% percentage slower from a month earlier, and import value was USD 119.27 billion, up 35.2% YoY, leading to USD 20.03 billion in surplus in August. China’s total YTD import and export value was USD1.87558 trillion, up 40% YoY. YTD export value was USD 989.74 billion, up 35.5% YoY, and YTD import value was USD 885.84 billion, up 45.5% YoY, leading to YTD USD 103.9 billion in surplus, down 14.6% YoY. With regard to China’s bilateral trade with major trading partners, China’s trade surplus in August was down by USD 8.7 billion from that in July. China’s trade surplus to the US slipped to USD 18.1 billion in August, down USD 1.33 billion MoM, and China trade surplus to the EU declined to USD 13.18 billion in August, down USD 380 million MoM. China’s trade with Japan remained in deficit, with China’s traded deficit to Japan slipping by USD 280 million MoM to USD 4.84 billion in August. China’s trade surplus with major economies hasn’t expanded further, easing RMB appreciation pressure.

Comprehensively speaking, August economic data indicated rebound of economic activities, suggesting that no major correction is expected in China economy in the short term. China’s central bank will not prefer to raise interest rate, but will continue to maintain loose monetary policy. In this context, financial market and commodity market is expected to receive certain support amid China’s economic restructure and global neighboring markets recovering.

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