Investors digesting figures out of China

Frederic Neumann of HSBC discusses how inflation is impacting China's economy.

Inflation numbers for many years now have actually shown very tame inflation,but the experience of people on the ground is obviously quite different as we've just just heard.And there are difficulties in measuring it so the numbers,they don't fully reflect the cost of living and I think some of these frustrations just came through in the report,you just highlighted it.

I wanna talk about trade data that came out yesterday because to me it is pretty interesting when you look at the swings between July and June.July exports were up more than 5% year on year,imports were up almost 11%.Both were pretty much,very high and above expectations.As I mentioned,it's quite drastic from what we saw in June,when we saw exports dropping 3%.Are you weary some of these official trade numbers with exports and imports?

Well,we know now that last six months for example the numbers have been very volatile and that has to do with some technical aspects in the way trade is registered at the border.So we are not putting too much emphasis.This is obviously encouraging to see exports accelerate,but we know,for example from companies in China,from surveys,that they have not seen their new export orders rise,so I think the latest trade data should be taken with a bit of a pinch of salt.And we still need more evidence,actually,trade is reviving.

So what is your outlook for the rest of the year,not just the next five months or so,but also into the next year until 2014?

Well,it's a challenging time for China.There is no doubt about it.As I said,the economy is decelerating.Possibly we need more stimulus measures to actually help arrest the slowdown,more by way of infrastracture spending,public construction,but that doesn't sovle the underlying problem for China.We do need far-reaching reforms to put things on a more sustainable basis further out.In the short run,stimulus is needed to stablize the economy over two or three horizon.You certainly need those economic reforms to start today to actually help to improve things.