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China Briefings

Reports on China issued by Samsung Economic Research Institute

China Business Intelligence No. 152

China Business Intelligence No. 152

Samsung Economic Research Institute Beijing Office

Feb. 10, 2010

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Highlights:

I. Economy

In January 2010, China's central bank raised the reserve requirement ratio by 0.5 percentage points for the first time since the global financial crisis in 2008. Aside from the raising reserve requirement ratio, China's central bank has also taken other measures. In January 2010, the central bank raised the interest rate on three-month and one-year bonds by 0.04, and 0.08 percentage points, respectively, through an open market operation. Although the expansionary monetary policies boost the economy in the short term, they have the potential to undermine the economy in the long term.

II. Industry

Real estate prices in China's major (first-rate) cities reached a record high in 2009. Yet, housing demand has been maintained by the younger generation who are influenced by China's traditional ideals that independence begins with marriage and that the house is the most important asset. Also, there is an increase in the number of people who are purchasing houses in the suburbs and renting residences near their workplace. The development of high speed railways has enabled people to commute to first-rate cities while living in second-rate cities. As city life zones expand, major cities will become increasingly supersaturated. Longer commuting times have increased the development opportunities of the telecommunication industry. The expansion has also resulted in the development of the service industry. Technology that enables people to remotely control their work and life has become more popular.

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