In an otherwise slow week for data releases, all eyes yesterday were on the National Association of Realtors report on existing-home sales for November. The very short story:
Existing-home sales declined in November while home prices sustained double-digit annual gains...
Total housing inventory levels rose 1.2 percent at the end of November to 2.90 million existing homes available for sale, which represents a 5.0-month supply at the current sales pace.
You can get your fill of blogger commentary at Calculated Risk, at Housing Bubble 2, and at the Skeptical Speculator. But from China Daily we learn that some are advising the People's Bank of China to pay attention too:
China is on track for robust growth next year but a drop in the dollar could fuel pressure on the yuan and erode the country's foreign currency reserves, an adviser to the central bank said in remarks seen on Friday...
... Yu [Yongding] warned that the United States might stop raising interest rates in 2006 and start guiding the dollar downward, putting upward pressure on the yuan.
"More seriously, China's economy would take a big hit if the U.S. dollar weakened sharply due to such factors as a bursting of the U.S. property bubble," he said. "The loss for China's foreign exchange reserves would be extremely serious."
At the end of September China had $769 billion in foreign exchange reserves, the world's largest after Japan's.
I'm not exactly sure what the designation "adviser" amounts to. Nor am I clear on what serious consequences follow from losses on the central bank's portfolio, except, perhaps, efforts to recapitalize China's struggling banks with transfers of dollar reserves. That, in fact, could be a big deal:
"Some firms feel that bank credit is tight, but that's resulted from banks' efforts to tighten up risk controls rather than monetary policy, and we cannot resolve the tight credit problem by expanding money supply," Yu was quoted as saying.
Economists have said stringent government requirements on capital adequacy ratios had forced banks to slow down lending.
When it comes to the near-term fortunes of the Chinese economy, I'd keep my eyes on stories like this one, from today's Financial Times:
A consortium led by Citigroup has doubled its bid for Guangdong Development Bank to about US$3bn, underlying the US group's determination to win control of the state-owned Chinese lender.