Citigroup’s Pandit Says China’s Capital Constraints Are Fueling Inflation
Citigroup’s Pandit Says China Asset Inflation Inevitable
Scott Eells/Bloomberg
Citigroup CEO Vikram Pandit speaks at the Committee of 100's conference, in New Yor
Citigroup CEO Vikram Pandit speaks at the Committee of 100's conference, in New Yor Photographer: Scott Eells/Bloomberg
May 12 (Bloomberg) -- China raised banks’ reserve requirements for the fifth time this year to restrain prices, underscoring the risk that tightening measures will cause a slowdown in the world’s second-biggest economy. Reserve ratios will increase 0.5 percentage point from May 18, the People’s Bank of China said on its website today. Bloomberg's John Liu discusses the ratio hike with Erik Schatzker on Bloomberg Television's "InsideTrack." (Source: Bloomberg)
May 12 (Bloomberg) -- Jim Bianco, president of Bianco Research LLC, talks about the outlook for China's banking rules, inflation and economy. China's central bank yesterday raised banks’ reserve requirements for the fifth time this year. Bianco speaks with Carol Massar and Matt Miller on Bloomberg Television's "Street Smart." (Source: Bloomberg)
May 13 (Bloomberg) -- Shen Jianguang, a Hong Kong-based economist at Mizuho Securities Asia Ltd., talks about China's monetary policy and the timing of convertibility of the nation's currency. China’s inflation is spreading beyond food, signaling Premier Wen Jiabao’s strategy of quarter-point interest-rate increases every two months has yet to contain consumer prices. Shen speaks with Susan Li on Bloomberg Television's "First Up." (Source: Bloomberg)
Citigroup Inc. (C) Chief Executive Officer Vikram Pandit said China’s constraints on sending capital abroad are driving prices higher in the world’s most populous country.
“All that money has to be invested somewhere,” Pandit, 54, said in a speech in New York today to the Committee of 100, a group focused on U.S.-China relations. “As too much money chases too few opportunities in the domestic market, asset price inflation is inevitable.”
Neither nation has a well-balanced economy on its own, and the U.S. needs to step up exporting as Asia overtakes North America as the world’s largest consumer bloc, Pandit said at the Waldorf-Astoria hotel. China’s consumer market isn’t fulfilling its potential with a savings rate of 53 percent, which could limit that nation’s future economic growth, Pandit said.
Concern about inflation in China has roiled financial markets. The central bank raised bank reserve requirements for the fifth time this year, boosting levels for the biggest lenders to a record 21 percent. The move came after reports showed inflation and lending exceeded economists’ estimates in April, with consumer prices rising more than 5 percent.
Citigroup is the third-biggest U.S. lender by assets. The bank has operated in China since 1902 and employs 5,000 people, Pandit said. He’s been emphasizing international growth to help the bank rebound from the 2008 financial crisis, when the New York-based company needed a federal bailout.
China Expansion
The bank is expanding in China as quickly as authorities allow, according to Pandit, who became head of the bank in December 2007. Asia Pacific co-CEO Stephen Bird last year said that he wanted to boost employee numbers in China to 12,000 and triple branches to 100 within three years.
The U.S. has become “a weak exporter” and can correct the imbalance by selling more to consumers in emerging markets, he said. China’s new five-year plan aims to rebalance its economy with more growth from domestic demand, Pandit said.
“Officials still face some difficult decisions with no easy answers, only trade-offs,” he said. “Making the currency convertible would go a long way toward solving the liquidity problem and addressing inflation.”
To contact the reporter on this story: Donal Griffin in New York at dgriffin10@bloomberg.net
To contact the editor responsible for this story: Rick Green at rgreen18@bloomberg.net
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