Investment Contrarians

People’s Bank Of China

The People’s Bank of China is the central bank of the People’s Republic of China. It functions in much the same way as the Federal Reserve does here in the U.S. It sets monetary policy in China and is in charge of preventing and handling financial crises. It manages all of the foreign reserves, which are made up of other bonds from countries around the world, including the U.S. Much like the Federal Reserve, the People’s Bank of China manages the treasury. It is also responsible for regulating the financial system. The People’s Bank of China issues, and is responsible for the circulation of, China’s official currency, the renminbi.

Hard Landing in China?

By for Investment Contrarians | Jul 9, 2012

Hard Landing in ChinaA month ago, the People’s Bank of China cut interest rates for the first time since 2008. In an obvious response to the slowing Chinese economy, the People’s Bank of China took what it felt was a necessary step to stem the tide of slow growth.

It looks like the People’s Bank of China is more concerned about growth than many people thought, because, just last week, it lowered interest rates for a second time. Clearly the manufacturing data out of China have shown a steady decline for almost a year. The consensus, even among those in the People’s Bank of China, is that the Chinese economy is experiencing a slowdown due to the recession in Europe and the faltering U.S. economy.

The question many investors are asking in relation to the Chinese economy is: will it experience a hard landing?

The world’s biggest maker of concrete pumps in the world and the largest maker of construction machinery in China is Sany Group. Sany Group has roughly 51,000 employees and for the last 10 years Sany has been increasing its payroll within the Chinese economy.

Well, for the first time in a decade, there are reports that Sany Group is laying off workers in the Chinese economy (source: Financial Times, July 4, 2012). The company denies it. However, to put perspective on this possible scenario, Sany didn’t even lay off workers when the financial crisis hit in 2008.

Analysts are well aware that the People’s Bank of China is notorious in carefully managing economic data. In all fairness, most central banks around the world can be accused of the same … Read More