High polyolefin inventories in China amid growing credit fears

22-Feb-10

Polyolefin inventories in China are high with an increasing risk that tighter lending conditions will impact consumption after the Chinese Lunar New Year holiday, as per ICIS. Substantial imports from early November bookings through to January arrivals have ended up as stockpiles. The big export volumes seen from early November were the result of macroeconomic optimism. Will demand, post-Lunar New Year Holiday from the first week of March, be sufficient to consume the inventory, seems to be the question. Though the summer months happens to be China’s peak manufacturing season, concern over tightening credit is on the rise. China had taken several measures since early January to cut back on credit supply, including increases in bank reserve requirements and a moratorium on new bank lending from mid-January through to the end of the month. Total lending had doubled during 2009 to US$1.4 bln, enabling China to easily reach its target of 8% GDP growth, but it also led to higher inflation and a surge in house prices, which rose by 11%. While nationwide house-price inflation in 2009 was reported to have averaged around 11%, property prices had risen by as much as 90% in some regions. The government now aims to cut lending by 22% versus 2009 to help keep inflation under control.