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G20 & Chinese Construction

James Boston
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It’s a muted start to a week that should see quite a bit of activity given the packed economic calendar ahead. Asian stocks posted some minor losses overnight as evidence emerged of a scaling back of property lending in China. The rate of Chinese home loans has slowed for the first time in over a year, a clear indication that government efforts to slow the rising residential property market are taking effect. This is not necessarily a bad thing for China and shows a commitment from the authorities to focus more on the stability of the growth rate rather than solely on growth itself. The Asian stock sell off was clearly contained to construction related companies that face a slowdown in their Chinese business.

Elsewhere in Asia Pacific the G20 meeting of finance ministers and central bankers wrapped up their conference in Sydney with a not unexpectedly vague communiqué. Their statement promised to “increase investment, lift employment and participation, enhance trade and promote competition, in addition to macroeconomic policies”. However one area where there was clarity was in the target they set for the next five years, the groups stated aim is to raise collective GDP by 2% more than the current projections suggest, this implies $2 trillion in additional growth spread across the 20 member countries.

In order to achieve this growth the group noted that monetary policy would have to remain “accommodative” so long as the outlook for “price stability” remained positive. To put this another way, interest rates are going to remain low and the only pressuring factor that will be considered is inflation.

As this was a harmonized statement from the worlds 20 largest economies, there was little impact on relative currency values. Currencies will take their cue this week from the raft of GDP and CPI data scheduled over the next five days.

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