PBOC To Defer To Fed On Easing After Inflation Comes In Hotter Than Expected

Tyler Durden's picture


Last week, when we commented on the amusing spread between the Chinese PMI as measured by HSBC on one hand (plunging) and the official number (soaring), we had one very simple explanation for this divergence: "the Schrödinger paradox - where the economy was doing better and worse at the same time - which was experienced for the past three months in the US (and is now finished with the economy rolling over), has shifted to Shanghai, where it is now the PBOC's turn to baffle all with bullshit. Why? One simple reason: despite what everyone believes, China still has residual and quite strong pockets of inflation. So while the world may be expecting an RRR, or even interest rate, cut any second now (just as China surprised everyone literally house before the November the global FX swap line expansion by the Fed in November 2011), the PBOC is just not sure it can afford the spike in inflation, or even perception thereof." It appears we were correct, following the just released Chinese CPI number, which in March printed at a far greater than expected 3.6%, on expectations of a 3.4% print, and well above the February 3.2%.

The core number so most relevant to social stability - food inflation, came at 7.5%, the highest since January's 10.5%. Bloomberg, as well as the PBOC of course, validates our prediction that inflation is still a significant factor in the Chinese economy: "Today’s data show Premier Wen Jiabao’s officials may need to remain alert to the risk of inflation bouncing back even after price increases stayed below the government’s 4 percent target for a second month. Authorities will seek to “prevent a rebound” in consumer prices and manage inflationary expectations, Wen said during a visit to southern China from April 1 to 3." Translation: the Shanghai Composite will be rather unhappy as the possibility for any RRR cut is now pushed back by at least another month into the future, as the Chinese central bank has decided to defer to Bernanke's (and the BOJ's) upcoming QEasing, thank you very much.

China CPI:

From Bloomberg:

“Inflation will pick up further as China’s economy warms up again,” Liu Li-Gang, Hong Kong-based head of Greater China Economics at Australia & New Zealand Banking Group Ltd., said before the release. Rising wage costs and the government’s policies to boost consumption will add upward pressure on prices, he said.


Wen said last month the government aims to keep consumer- price gains within about 4 percent for 2012, taking into account risks from imported inflation and rising costs of land, labor and capital. He also pledged to change the way the price of resources including electricity and fuel are set to better reflect their costs.


China, the world’s largest oil consumer after the U.S., increased gasoline and diesel prices for the second time in less than six weeks on March 20 after crude had its biggest monthly gain in a year, adding to pressure for consumer prices to rise.


China Petroleum & Chemical Corp., Asia’s biggest refiner, said last month it will ramp up crude production and develop natural gas fields to counter losses from selling diesel and gasoline at state-mandated prices. Sinopec, as the Beijing-based company is known, said fourth-quarter profit dropped 23 percent, missing estimates.

And Reuters:

China's annual inflation spiked unexpectedly in March to 3.6 percent driven by rising food prices, data showed on Monday, surprising investors who had bet on cooling price pressures to give Beijing room to ease monetary policy.

There is data, and then there is data... the type that is telegraphed by central authorities for market consumption purposes:

Underlining slowing food inflation, official data showed pork prices fell every week in March and have shed 10 percent in the past two months. Pork is a staple meat in Chinese diets and a key component of food inflation.


And though China raised retail gasoline and diesel prices in March by 6-7 percent, analysts say that has limited direct impact on overall inflation as they believe energy carries a small weight in China's consumer price index basket

Our view: render unto Bernanke all hopes of easing in the next three months: a badly burned by prior QEs China is going to wait this round out. Why? Because the last thing China needs is to go ahead and cut rates only for Bernanke to follow through and slam the country with America's favorite export: monetary inflation, leading to such festive occasions as [insert geographic location] [insert season] around the world.

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Sun, 04/08/2012 - 22:22 | 2327076 francis_sawyer
francis_sawyer's picture

InfRation bitchez!

Sun, 04/08/2012 - 22:29 | 2327086 economics9698
economics9698's picture

When was the last time China bought our paper?  July 2011?  Maybe they figured out the game.

Mon, 04/09/2012 - 11:49 | 2328146 LongBalls
LongBalls's picture

Hard landing?


Sun, 04/08/2012 - 22:30 | 2327088 SHEEPFUKKER

Transitory price increases my Chinese brothers and sisters.  Sincerely, Bennie Boy. 

Sun, 04/08/2012 - 22:40 | 2327100 Xibalba
Xibalba's picture

meawhile, we serr tleasuirly!

Sun, 04/08/2012 - 23:18 | 2327121 mophead
mophead's picture

Can't the Chinese just print food stamps? That's how we solve food inflation here.

Sun, 04/08/2012 - 22:49 | 2327124 KingPin 999
KingPin 999's picture

Just think what inflation would be in China if they didn't subsidize gasoline. If gasoline price increases were flowing through to all other items the inflation number would easily be double the official number. 

Mon, 04/09/2012 - 00:07 | 2327233 old naughty
old naughty's picture

gasoline is rising (may be 10%+ from earlier this year) and will continue rising...

and subsidized or not, it is creeping into every activty, including trucking food around.

It just might get worse...

Mon, 04/09/2012 - 01:06 | 2327290 Cadavre
Cadavre's picture

Just think what inflation would be in China if they didn't subsidize gasoline.

You're so ... so ... provincial.

Yeah them Chinese politicians are crazy - subsidizing gasoline prices and all that "commie" stuff - meanwhile, our congress, not to be outdone by any on the take PM's in the rest of the world had a hearing regarding the the high price of of gasoline .. the focus of the CSPAN event was a re scripting of the old, but classic,  "to release or not to release" more of the US strategic reserves "gag", conveniently purchased, fyi, at the top of the war driven energy inflation market by the esteemed Dubby Tug Job Leader (driving it even higher), at least it was convenient to his daddy's buds `n Dick's blind "with one eye open" trust fund, and on the pretend other side the GOPs were working one of their marquis flagship routines, (for the moment anyway), TAXES, but both sides in this ongoing CSPAN theater of the absurd neglected to ask if the fact that more than half of the gasoline refined in the US is exported has anything to do with US fuel inflation! Big oil, thanks to Dubby's first official act as the prez (after he got back from Mexico) was to eliminate all oil tariffs for oil piped over federal lands,

The US subsidizes big oil. Them Chinese got it all wrong!

Ya see we don't subsidize no f*cking sh*t here here in de good ole USA - no - we sell our strategic reserves (cheap) to US refineries so they can export it - when will the Chinese understand they got it all wrong?

Big oil is subsidized here where sugar glazed eyes of America's shabby sheik Wal Mart Elite  haunt the aisles of their local Wal Mart pricing "T-Shirts for Zero Iodine Fat Asses"  like ghosts without a clue and no more credit at the liquor store. Them Dumb Chinese politicians - they could be making a killing bleeding the commons dry like they do in the US - maybe they still got some survival skills ya think?

From the art:
It appears we were correct, following the just released Chinese CPI number, which in March printed at a far greater than expected 3.6%, on expectations of a 3.4% print, and well above the February 3.2%.

Ya got to ask what would the Chinese inflation print be if Chinese statisticians excluded fuel and food from the inflation number like da Unca Helicopter Ben do!

The art's author is really making a big deal out of the change from 3.2 to 3.6 - WHEN - the Chinese inflation target (that includes food and fuel unlike here in Morbid Self Denial Banana  Land, is 4%. At least Chinese inflation is a better accounting and at least the Chinese are under target - so what's the big deal - invest in a US company (that is not located in China - name one?),

But dat old inflation demon he be rearing his nassity assed head real soon - check it: Slumping U.S. Crop Reserves Raising Food Costs in Election Year

Yeah - them dumb Chinese - subsidizing fuel - trying to cheat dat old inflation demon out `o his pound of flesh - what are they thinking indeedy me?

Mon, 04/09/2012 - 08:57 | 2327611 marathonman
marathonman's picture

Just a small price to pay for saving the TBTF Wall Street banks.  Just happy to do my part.

Sun, 04/08/2012 - 22:52 | 2327126 LowProfile
LowProfile's picture


meawhile, we serr tleasuirly!

And buy goad, silwer, famland, minelal lights and oyel!

Hahahah!  Stupid Amedican!  You think Chinese dumb coolie sweat shop slave not know ass from hole in glound!  We see who end up who bitch, flucking lound eye!

Mon, 04/09/2012 - 01:54 | 2327314 wee-weed up
wee-weed up's picture



Sun, 04/08/2012 - 22:23 | 2327080 Yen Cross
Yen Cross's picture

 ME Likey!

Sun, 04/08/2012 - 22:22 | 2327081 Jim in MN
Jim in MN's picture

We Have Them Right Where They Want Us

Sun, 04/08/2012 - 22:34 | 2327093 Marginal Call
Marginal Call's picture

The Chinese?  They are treading water right now.  The Russians are winning.


But the we are losing part, you got that right.

Sun, 04/08/2012 - 23:05 | 2327154 LowProfile
LowProfile's picture

Not convinced myself, but I'm open to data...  But last I checked Russia looked like a clusterfuck of private gangsters vs. public gangsters, half the population wanting a return to Stalinism, and the other half saying "Whatever, fuck it, I want to get wasted and fuck hot chicks".

China, India, S. America and Africa look like the winners here.  The West look like the losers, Russia ends up second.

Sun, 04/08/2012 - 22:23 | 2327082 chump666
chump666's picture

Nasty the global economy is being ripped apart by central banks.

Sun, 04/08/2012 - 23:21 | 2327172 Yen Cross
Yen Cross's picture


Mon, 04/09/2012 - 00:09 | 2327241 old naughty
old naughty's picture

now someone is talking sense...

there's no winner/loser, only them and us sheeples,

tptb rules and still have a few tricks up their sleeves...

Sun, 04/08/2012 - 22:26 | 2327084 Cursive
Cursive's picture

Central Bankers have been painting us all into a tight corner.  Well, the paint is still wet and nobody bothered to strip the old lead paint before the paint job.

Sun, 04/08/2012 - 22:33 | 2327089 Marginal Call
Marginal Call's picture

Silly Chinese.  Don't they know that food and energy don't count towards inflation?


Me thinks they need to sign up for GAO 101 and learn proper accounting.

Sun, 04/08/2012 - 22:33 | 2327090 buzzsaw99
buzzsaw99's picture

The Bernanke is worried about wage inflation. He doesn't want his overseers to have to pay chinese labor 7.5% more than not jack shit so he may only give JPM execs one blow job this quarter instead of the usual two.

Sun, 04/08/2012 - 22:34 | 2327092 Quinvarius
Quinvarius's picture

Maybe they should adjust their exchange rate and stop acting surprised.

Sun, 04/08/2012 - 22:35 | 2327094 Yen Cross
Yen Cross's picture

You dip shits are missing the point! Hot China is a good thing.

  Front end risk spreads ( are cheap) nit wits!

Sun, 04/08/2012 - 23:01 | 2327145 LowProfile
LowProfile's picture

Good thing for WHAT?!?!

Perpetutating the global ponzi?!


Sun, 04/08/2012 - 23:24 | 2327178 Yen Cross
Yen Cross's picture

 You missed the point. For  what? , is the right answer!

  Trade lean and smart.

Mon, 04/09/2012 - 02:17 | 2327325 LowProfile
LowProfile's picture

Lol, and actual person still trades this market?

Do yourself a favor, take 10% of your stake and buy physical gold.

At least you'll finally question whether you have a gambling problem when you head to the metal dealer to make that margin call.

Sun, 04/08/2012 - 22:35 | 2327096 edstar
edstar's picture

print is 3.6% not 3.4%

Sun, 04/08/2012 - 22:38 | 2327099 Cursive
Cursive's picture


I didn't fact check but, heh, It's China.  It could be 4.2% tomorrow or 2.4% next month.  Not that Amerika's BLS is any better....

Sun, 04/08/2012 - 22:44 | 2327111 edstar
edstar's picture

Agree entirely. ZH may as well quote the right data though ... 3.6% beat expectations of 3.4% 


Sun, 04/08/2012 - 22:41 | 2327102 Yen Cross
Yen Cross's picture

I submit Ya Junkster! Tell me I'm wrong? Gi'me some love ya " all knowing" one?  You are a Trans Vestite or a Lesbian!

  I love My Mother and my Sisters!   China is soft landing!

Sun, 04/08/2012 - 22:41 | 2327106 apberusdisvet
apberusdisvet's picture

Hmmm.  I wonder if China has any tungsten?

Sun, 04/08/2012 - 22:47 | 2327119 Yen Cross
Yen Cross's picture


Sun, 04/08/2012 - 23:41 | 2327139 devo
devo's picture

Somewhere, Dennis Gartman is pretending he bought gold on Friday...

Mon, 04/09/2012 - 01:30 | 2327305 fromthebleachers
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BINGO! In yen -- of course..

Sun, 04/08/2012 - 23:31 | 2327187 YesWeKahn
YesWeKahn's picture

Double US inflation export to China.

Sun, 04/08/2012 - 23:37 | 2327197 q99x2
q99x2's picture

Jiabao Giabo

Mon, 04/09/2012 - 00:35 | 2327267 Yen Cross
Yen Cross's picture

 Tyler is dropping posts.  It's Ok

Mon, 04/09/2012 - 02:35 | 2327331 cnhedge
Mon, 04/09/2012 - 07:16 | 2327437 Ted Baker
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