Hey wait a minute–that’s 5AM here in California! I get to wake up in the dark again.
We will discuss the China GDP number that will come out tonight. Here is an outline of the talking points I will use for the spot.
-I expect tonight’s number will be a little over 8%
-China is slowing but not dramatically (8-8.5% GDP growth this year.)
-Policy is easing in China but gradually. The reserve requirement cuts are not monetary easing; the PBOC uses the tool to manage speculative flows. When currency speculators increase their bets that the RMB will rise against the dollar, the money flows into the banks so the PBOC raises reserve requirements to effectively “sterilize it”, i.e., to keep it from showing up as increases in credit. In recent months speculative inflows have stopped, which is why reserve requirements are coming downnow. Means nothing about monetary policy. For easing measures, expect a rate cut, administrative procedures easing, easing mortgage rules.
-Western observers periodically worry too much about a China hard landing, driving copper and other commodity prices down. Those prices are correcting back to a view that China is still growing.
-That’s why I own FCX, RIO, BHP, PTR, CAT in my portfolio.
JR
