Business & Financial News

The Chinese authorities have decidedly difficult to combat inflation and they could be forced to follow a tighter monetary policy than investors think.

Until now, the markets have hardly been affected by higher rates occurred Tuesday in China, the third carried out since October because they think it shows a gradual approach which aims to curb inflationary pressures without jeopardizing growth of the second world economy.

They may thus underestimate both the intensity of inflation pressures and the determination of Beijing, very sensitive to the historical role played by inflation in the domestic political turmoil, to ensure this control.

"The monetary authorities are beginning to realize the severity of inflation and the housing bubble. It's been almost two months they are racking their brains to standardize their policies as soon as possible," said Isaac Meng , economist at BNP Paribas in Beijing.

If you look past the forecasts of economists, they show how investors have consistently underestimated the frequency of monetary tightening in China, and it seems that this behavior is repeated.

In early October, analysts estimated on average that Beijing would wait until the second quarter of 2011 to increase interest rates.They were caught off guard a few weeks later.

In early December, the prevailing opinion was that China would raise rates by 75 basis points in total by the end of 2011.In fact, rates have been increased by 50 basis points and there is still a little under 11 months to run.

BEHIND THE REALITY

A Reuters poll shows that economists now expect a further increase overall half-point by the end of the year after that Tuesday.

It may be that this new forecast, by not taking sufficient account of the change in tone of the Chinese government is still short of reality.

Several Chinese officials have expressed concerns in recent months against the possibility of a rate rise too fast, which they believe would serve to attract even more speculative capital into the country, with all the inflationary consequences that would result .

But Jianguang Shen, an economist at Mizuho Securities in Hong Kong, noted that the surge in inflation earlier this year has changed that."The decision of the central bank to raise rates is perhaps the change of mind required for a more aggressive tightening of credit," he says.

The annual inflation rate decelerated to 4.6% in December, but analysts polled by Reuters see up to 5.3% in January, the highest in over two years because of soaring prices food.

In fact, the People's Bank of China (PBC) has so far chosen instead to act indirectly, preferring to recommend banks to lend less or raise the required reserve ratio (OR) instead of back interest rates aggressively.

Although it is premature to state that the PCB has changed its tune, it seems that its guidelines have changed. Since late December, it raised rates twice and the coefficient of RO once.

"Increasing the RO or intervene in an administrative way, this can not substitute for an adjustment of rates to contain inflationary expectations," J. Shen Minggao, chief economist of Citigroup China.

TROLLING

However, despite rising interest rates Tuesday, the real deposit rates remain largely negative.Inflation trimming the value of their savings, Chinese households are attempting to preserve their financial wealth by investing elsewhere, especially in real estate, causing overheating that the government has spent most of last year to try to stem.

Therefore it seeks to make deposits more attractive: the rate at one year was increased by 0.75 points but that five years was increased by 1.4 points.

The problem is that the deposits of five years or more represent only 0.1% of harvested savings in banks, while demand deposits, which are available at any time, account for 50%, and it Therefore, any money diverted approach can only produce effects at the margin.

Even admitting that the PCB levels in quick succession, the nature of China's financial system, highly centralized, implies that the volume of credits is a parameter much more important than the monetary cost of these credits.

From this point of view, some 7,000 billion yuan (777.9 billion euros) of new funds expected this year are excessive, "said Wang Tao, chief economist at UBS in China.

"It is possible that raising rates beyond what the markets expect, but I still think that the central bank still lags behind, both vis-à-vis inflation and the economy," he said . "To me, energetic show is from the government, it would sharply tighten credit while the goal of ceasing to approve new projects."

The WSF annual gathering of global justice, is hosting this year's patron of the PS, Martine Aubry.

The World Social Forum (WSF), annual meeting of global justice, spent Monday in Dakar a day of discussions on the African continent, including specifically denouncing the "land grabbing" by foreign groups and "mechanisms of neo-colonialism ". This day was also marked by the presence of former Brazilian President Lula, accustomed WSF born 11 years ago in his country, in Porto Alegre. In Dakar, he had the opportunity to meet with the ruling French Socialist Martine Aubry and was to meet in the afternoon Senegalese President Abdoulaye Wade.

Among the dozens of workshops and debates, very diverse, held Monday, the emphasis has been placed on the "neocolonialism" in Africa after 50 years of independence but also on the fight against land speculation. "Do not touch my land.It's my life! ": Under this title, Enda and Oxfam have denounced the" land grab by foreign groups, European, Asian, "but by" wealthy Africans. "On behalf of Oxfam, Senegalese Lamine Ndiaye spoke of "the case of a Libyan company which has acquired 200,000 hectares in Mali, a UK private company buying land in Tanzania" and other examples in Senegal, Ghana, Mozambique and Ethiopia.

"According to a report by the World Bank between August 2008 and October 2009, 42 million hectares had been acquired in the South. But investors in North and Southern elites involved in this grabbing acquisitions are primarily speculative purposes without investing in agriculture, "said Mr. Ndiaye told AFP.The French Bernard Pineau, of the Catholic Committee against Hunger and for Development (CCFD), stressed the idea that these land purchases were made "not only multinationals, such as the South Korean company Daewoo in Madagascar, but also states including Saudi Arabia, "" to the detriment of small farmers. "

WSF being held until Friday, "we reaffirm that the priority is to strengthen family farming in Africa, the only way to ensure food security," he told AFP. For example, Mr. Pineau cited concrete action to agricultural trade unionists in Guinea, who were able "to impose the higher tariffs for imported potatoes from the Netherlands, and thus enhance the potato local, the belle of Guinea ".Other NGOs, including the Network of Peasant Organizations and Producers in West Africa (DON), planned to launch a campaign called "Celebrating Family Farming in Africa."

On the sidelines of the WSF, Luiz Inacio Lula da Silva has talked extensively with the French Socialist Martine Aubry, to discuss "the upcoming G20 and the need for a" new development model ". "Much has also talked about relations between South America and Africa. Africa is beginning to get out, what Europe is struggling to understand, but what other countries like China and India have understood, "reported Ms. Aubry. At the opening of the Forum, Tunisia Taoufik Ben Abdallah, coordinator of the African Social Forum, launched "Africa is not a battleground for the superpowers. It is a rich continent, provided we allowed to determine its policies, development strategies ".

The loan of about 30 billion euros granted by the IMF to Greece in May must be repaid by 2015. Greek Prime Minister George Papandreou welcomed the Director General of the International Monetary Fund Dominique Strauss-Kahn Athens, December 7, 2010.

The International Monetary Fund said Thursday, Feb. 3 that he could lengthen the time for repayment of the loan he made to Greece, currently planned for 2015 but not beyond 2020. Relations director of the IMF Caroline Atkinson recalled, during a press briefing in Washington that the agency was considering the possibility of converting the loan into an Extended Credit Facility, which offers longer maturities.

Greece had made the request in the fall. "The maturity dates over the Extended Credit Facility are between four and ten years.[...] We do not have that facility has a maturity longer than ten years, "she said. The loan of about 30 billion euros granted by the IMF to Greece in May must be repaid by 2015.

In its last monitoring report on the loan in December, economists at the Fund considered that Greece had the capacity to meet its deadlines if it followed the economic program agreed. The country has so far affected 10.6 billion euros from the IMF. It is also negotiating with its partners in the euro area to lengthen the repayment of 80 billion euros in loans they have given him.

A possible strengthening of the European Financial Stability (FESF) does not necessarily mean an increase in its resources but also through greater flexibility and greater efficiency, said Thursday the French Finance Minister Christine Lagarde.

"This is not necessarily in terms of increase that I shall outline the improvements we make to the European Stability is: full of resources raised efficiency and flexibility, which can take many forms," including the purchase of sovereign debt, "she told a conference in Paris.

Values to follow on Wednesday at the Paris Bourse, where the CAC 40 was stable at around 12:30 at 4072 points, after opening above 4080 points for the first time since September 29, 2008.

* FRANCE TELECOM wins 1.58%, supported by the recovery of opinion Oddo to buy on value, accumulate cons before. The intermediate states in particular that the market underestimates the potential for positive surprise on the "cash back" when publishing the group's annual results on February 24.

* Bank stocks support the CAC 40, in the wake of their European sector index (+1.2%), second best sector performance in Europe behind the mining (+1.7%).SOCIETE GENERALE earns 1.8% 1.65% CREDIT AGRICOLE, Natixis and BNP Paribas 1.1% 0.95%.

* SANOFI-AVENTIS (+0.24%) agreed to raise its bid for Genzyme, offering a little over 70 dollars per share excluding certificate of conditional value, said Reuters on Tuesday a source close to the situation.

In addition, Sanofi announced positive initial results of phase III for lixisénatide, treatment of type 2 diabetes.

* THE CAR weighing on the benchmark index of the Paris exchange.PSA Peugeot-Citroen and Renault drop 2.5% and 2.6%, while posting gains of 3.6% and 6% since the beginning of the year.

New side, PSA and BMW have announced a joint venture equally to strengthen their cooperation in hybrid vehicles.

Renault also declined to comment after the confirmation by the private company Geos Intelligence involvement of one of its employees in case of alleged espionage for the group.

* IPSEN drop of 5.3%.The pharmaceutical company announced potential impairment at the same time as the recovery in the Swiss group Roche rights to the antidiabetic taspoglutide.

Fleury Michon * wins 4.89% after reporting an acceleration in the growth of its turnover in the last quarter of 2010, a trend which should allow the specialist French dishes prepared to absorb rising materials prices materials.

* ST DUPONT still yields 3.7% after falling 6.9% yesterday on profit taking. The title had jumped nearly 32% Monday in favor of its findings released Friday evening.