The tightening on bank of reserve requirement ratios and short-term debt yields lately has wrought some concern on both property buyers and stock punters.Perhaps there are parties that are of the opinion that it is too soon for China to raise interest rates because inflation is still containable and a rate hike could spur an unwelcome influx of speculative money.
Xia Bin, head of the financial institute of the Development Research Centre, a cabinet think tank, said China’s economy could maintain relatively rapid growth of at least 8 per cent this year and keep consumer price inflation down to about 3 per cent, the official China Securities Journal reported.
Xia warned that if China raised interest rates before the United States did, it may attract unnecessary inflows of “hot money” while the consumer price index was still within a range where it could be kept under control.
Data released on Thursday showed China’s economy grew 10.7 per cent in the fourth quarter from a year earlier while the December CPI jumped 1.9 per cent year-on-year, accelerating from November’s 0.6 per cent rise. The strong data appeared to set the stage for further monetary tightening.
The central bank has already started to clamp down on the abundant liquidity in China’s markets by raising bank reserve requirement ratios and short-term debt yields over the past two weeks.
Xia’s latest published remarks echoed comments last month that China was unlikely to raise interest rates in the first quarter of this year.
He added the government should gradually make adjustments in the property sector over two to three years because aggressive moves could put pressure on the economy.
China is considering steps on second-home purchases and other measures to curb speculation and address a possible property price bubble.
It is better to be wary then to do costly damage control later. So tread carefully,won't you?
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