{"id":26078,"date":"2011-12-18T23:58:30","date_gmt":"2011-12-19T04:58:30","guid":{"rendered":"http:\/\/countingpips.com\/fx\/2011\/12\/18\/what-the-next-wave-of-expansion-in-china%e2%80%99s-economy-means-for-you\/"},"modified":"2011-12-18T23:58:30","modified_gmt":"2011-12-19T04:58:30","slug":"what-the-next-wave-of-expansion-in-chinas-economy-means-for-you","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/fx\/2011\/12\/18\/what-the-next-wave-of-expansion-in-chinas-economy-means-for-you\/","title":{"rendered":"What The Next Wave of Expansion in China\u2019s Economy Means For You"},"content":{"rendered":"

By MoneyMorning.com.au<\/strong><\/p>\n

[Ed note: The following story comes from the 1 December issue of Diggers and Drillers<\/a>… If you’d like to see more stories and insights Alex has published recently, click here…<\/a>]<\/em><\/p>\n

In the first week of December, there was some big news for commodities: China’s economy<\/strong> loosened its banks’ purse strings, lowering the reserve requirement rate (RRR) from 21.5% to 21%. <\/p>\n

<\/span><\/p>\n

Right, I know. It’s just numbers. And we’re only talking about a 0.5% difference. (Which does sound like small bickies.) What does it actually mean?<\/p>\n

Well, apparently this cut in the RRR will put about $50 billion back into China’s economy. This will be good for small businesses, because they’ll find it easier to get funding than they have recently. (This is a big reason why China’s economy has been slowing down.) <\/p>\n

More importantly, this is the first cut in the RRR rate for three years. If this is the start of a series in rate cuts, then it could be the start of the next wave of expansion for China’s economy. And this could give commodity prices and the resource sector a nudge in the right direction.<\/a> <\/p>\n

<\/p>\n

China loosens reserve requirement rates for the first time in three years<\/div>\n

<\/strong><\/p>\n

\"China<\/a>
Click here<\/a> to enlarge<\/div>\n

<\/p>\n

Source: Bloomberg<\/div>\n

<\/em><\/p>\n

But hang on. Why are the Chinese reducing rates now?<\/p>\n

Chinese inflation only started to cool off a few months ago. It peaked at 6.5% in August this year, and is still up at 5.5% now. This is still very high. And by loosening the RRR, the Chinese risk getting inflation back up. The Chinese inflation rate closely follows commodity<\/a> prices, so I’ll be keeping a watch on this.<\/p>\n

Rising inflation will also give Chinese investors more reason to buy gold and silver<\/a> to protect their capital. China’s silver market<\/a> is just a few years old, but is exploding. In 2010, it imported 8 million ounces of silver<\/a>. This year it imported the same amount in the September quarter alone. Loosening rates gives 1.3 billion Chinese people more reason than ever to buy gold and silver.<\/p>\n

The rate drop means Beijing must be getting anxious about the Purchasing Managers Index (PMI) data. The official PMI was out on 1 December and came in at 49. This is the first time the numbers have been below 50 there for a while. Anything below 50 suggests China’s economy is contracting. So you see why they are taking action at the risk of higher inflation.<\/p>\n

If they keep up the rate cuts, we could see higher prices for industrial resources. And precious metals.<\/p>\n

Dr. Alex Cowie
\nEditor, Diggers & Drillers<\/em><\/strong><\/p>\n

[Ed note: To see more of what Alex is writing about in Diggers and Drillers, click here…<\/a>]<\/em><\/p>\n<\/p>\n

\n<\/img><\/a> <\/img><\/a> <\/img><\/a>\n<\/div>\n


\nWhat The Next Wave of Expansion in China\u2019s Economy Means For You <\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

By MoneyMorning.com.au [Ed note: The following story comes from the 1 December issue of Diggers and Drillers… If you’d like to see more stories and insights Alex has published recently, click here…] In the first week of December, there was some big news for commodities: China’s economy loosened its banks’ purse strings, lowering the reserve … <\/p>\n

Continue reading “What The Next Wave of Expansion in China\u2019s Economy Means For You”<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-26078","post","type-post","status-publish","format-standard","hentry"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/posts\/26078","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/comments?post=26078"}],"version-history":[{"count":0,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/posts\/26078\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/media?parent=26078"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/categories?post=26078"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/tags?post=26078"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}