Could China in 2013 be heading towards a financial crisis similar to the US in 2008 and Japan in 1989? It’s the billion dollar question of the day, but for now the optimists have been able to outshout the doom-mongers by pointing to China’s much lower debt to GDP ratios than those that characterised the US and Japan before it all went pop.

Then along come analysts from Nomura with some unsettling numbers. 

Could rising food prices come back to haunt China’s leaders once more? A sharp increase in inflation, revealed in economic data published at the weekend, was driven largely by a jump in the food index.

Consumer prices rose 3.2 per cent in February, compared with 2 per cent in January, with food prices rising 6.0 per cent, up from 2.9 per cent in January. And, if Stephen Green of Standard Chartered Bank is right, there could be worse to come. 

We are all China bulls now.

So the stock markets appeared to be saying for the past few months. The Chinese government released a slew of positive data in January — ranging from strong exports in December to faster GDP growth in the fourth quarter to the news on the weekend that industrial profits were up 17 per cent.

But Diana Choyleva, a persistent bear on China at Lombard Street Research, wants none of it and is now trying to take away the punch ladle just as the party was getting started

No retail sector in the world has benefitted as much from the new wealth in China as Hong Kong’s has. But in the second half of 2012 retail sales growth slumped to single digits, a far cry from the 20 per cent monthly growth rates in 2011.

However, despite this slowing growth, the Hong Kong Tourism Board revealed on Monday a 16 per cent increase in visitor arrivals to the city to 49m in 2012, with a staggering 35m coming from mainland China. Why the slump? 

The World Bank’s upward revision of China’s growth prospects for 2013 ought to be unalloyed good news. The bank’s forecasters believe that China’s slowdown has “bottomed out”, basing their optimism on quarter-on-quarter growth in the third quarter of 9.1 per cent.

The bank has revised its GDP growth target for China to 8.4 per cent in 2013, up from an earlier forecast of 8.1 per cent. 

Chinese investors watch a stock price boardIf China’s days of growing at 10 per cent are over, what might be a plausible average growth rate for the near future?

Pessimists suggest 6 per cent because of the huge overhang of over-investment that is widespread across different sectors of the economy and the long list of difficult reforms ahead. Standard Chartered’s economist Stephen Green suggests the likely rate over the next five years is 7 per cent without big bang reforms in the interim. 

Walmart Stores, the retailer that arguably took Chinese goods into most American homes, might prove to be among the early indicators that sales to China’s vast middle class are starting to slow.

That is one way to understand the company’s announcement in Beijing on Thursday that it would slow the rate of its new store expansion to 100 stores over three years – down from the 50 to 60 stores a year the American retailer was opening rapidly in China. 

China’s Canton Fair – the famous twice-a- year trade show – has for decades brought together buyers from all over the world to the southern city of Guangzhou to meet suppliers of everything from microchips to Christmas decorations.

Many see it as a litmus test for the country’s export industries, including the People’s Daily, the state mouthpiece, which declared, “Canton Fair Foretells Grim Outlook.” But has the fair’s economic relevance waned? 

Parsing China’s numbers is not for the faint hearted. The more closely one looks at China’s impressive trade data in September released over the weekend, the more complicated the picture looks.

True, exports grew by 10 per cent – but Standard Chartered economist Stephen Green has adjusted the data to account for seasonal effects and found that September exports were neither hot nor cold, but lukewarm.

 

Does Chinese industry need more inflation?

The question might seem absurd for a fast-growing developing economy but with consumer prices increasing at just two per cent, Gavekal Dragonomics, the China economic research consultancy, is arguing that inflation is “more a friend than a foe.” 

With so many China doom-mongers anticipating a property bubble to burst in the country, along comes a prediction to the contrary prediction from a well-regarded China watcher, Stephen Green of Standard Chartered.

Green is pointing at the falling inventories for housing in China’s Tier 1 and Tier 3 cities in the past few months and predicting that real estate sector will pick up in the first half of 2013.

 

What the People’s Bank of China giveth with one hand, it taketh away with the other. How else does one make sense of Wednesday’s announcement that non-residents in Hong Kong will be allowed to convert unlimited amounts of renminbi at a time when the PBOC is also making efforts to push down the renminbi relative to the dollar?

The Hong Kong Monetary Authority’s announcement suggests continuing incremental steps in the Chinese central bank’s efforts to internationalise the renminbi; letting it decline relative to the dollar suggests a return to mercantilist policies that favour China’s exporters and annoy the US and others. 

Is the world of forecasting overly fixated on China’s growth rate staying at 8 per cent? Certainly, investment banks in the past few days have tripped over themselves trying to guess the size of the China stimulus package and whether it’ll keep China on track for that default growth figure.

But has the time come to lower China’s magic number? 

Spending by wealthy Chinese tourists has become such a boost for stores in major capitals in Paris, London and Hong Kong in the past couple of years that it is hard to imagine the world of luxury without them.

But, by focusing on the exaggerated effects on Hong Kong’s retail sector, UBS economist Silvia Liu has underlined just how extraordinary the growth in 2010 and 2011 was. It was driven by an increasingly relaxed approach by the Chinese government to overseas travel by its citizens and the mainland Chinese love affair with luxury

In the run up to Hong Kong’s return to China in 1997, a favourite topic of debate was whether Shanghai would supplant Hong Kong as China’s financial centre.

Fifteen years on, the subject hasn’t lost its appeal. Last week, Chatham House revived the debate and added Taipei and the stock market in Shenzhen for good measure to the financial market beauty parade.