China to release inflation, factory data during weekend

Rescheduling to Saturday may indicate surprise result with market significance

By Chris Oliver, MarketWatch


HONG KONG (MarketWatch) -- China will release August national economic data on Saturday, bringing forward the scheduled release by two days and inciting speculation that the data release could contain unexpected results with market implications.

Monthly figures for industrial output, fixed asset investment, along with consumer and wholesale-price inflation data will be reported on Saturday, the National Bureau of Statistics said in a statement. The data had been originally scheduled for Monday.

Analysts said China's central bank could be planning an announcement on interest rates before markets open on Monday in response to what could be surging inflation.

Expectations are for inflation to rise above 3.5%, driven partly by higher food prices. That would bring push the return on deposit, current at 2.25%, significantly negative.

China's food prices jumped 6.8% in July from a year earlier, while the overall inflation rose 3.3% from the year-ago period.

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A CPI measure hovering near 4% would likely be viewed as temporary owing to surging food prices related to weather-afflicted harvest shortfalls earlier this year, an analyst said.

"I don't think it has [interest rate] policy implications," said Citigroup Global Markets economist Ken Peng in Beijing.

He added there was a "policy-induced downside risk" to industrial production figures for August, after Beijing ordered power supply cuts for heavy-consuming industries earlier this summer.

Chinese demand is considered the global price setter and any sharp decline in output could have consequences for crude oil, copper and other industrial commodities.

Yuan allowed to rise

China's central bank on Friday set the yuan parity rate 6.7625 to the U.S. dollar, a level that represents the strongest for the Chinese currency against the dollar since it was delinked from its peg to the dollar in July 2005. Thursday, the dollar-yuan (USDCNY 6.7930, +0.0045, +0.0663%) parity was set at 6.7817.

In separate release Friday, trade data for August showed that imports continued to rise at a fast clip on strong domestic consumption, resulting in a lower-than-expected monthly trade surplus.

The country's exports rose 34.4% year-on-year to $139.3 billion, against 35% growth expected by economists surveyed by Dow Jones Newswires. Imports climbed 35.2% to $119.27 billion, compared to an expected 25% increase. China's trade surplus narrowed to $20.0 billion in August, from $28.7 billion in July. Economists had been expecting a $30.0 billion surplus.

Analysts said the figures showed tightening measures by Beijing earlier this year were helping cool the domestic economy even as external demand remained relatively strong.

"The recent strength in China's exports suggests that the slowdown in Chinese growth that has been evident in the last few months has not been caused by external factors but ...the result of policy decisions made to reduce overheating risks and bring growth down to more sustainable levels," said RBC analyst Brian Jackson in Hong Kong.

He added the $20 billion trade surplus, though below expectations, was high by historical standards.

Other data released Friday showed national house prices rose 9.3% in August, easing from a 10.3% rise on year in July.

Chris Oliver is MarketWatch's Hong Kong bureau chief