Central bank in new bid to tame soaring inflation
By Wang Yanlin |
June 15, 2011, Wednesday
|
Print Edition
Print Edition
China is raising the reserve requirement ratio again to try to curb inflation, which is running at its fastest pace in almost three years.
The central bank move came just hours after data showed that consumer inflation, largely fuelled by high food prices, rose in May to 5.5 percent, a 34-month high.
The new order of a 0.5 percentage point rise will take effect from next Monday, and commercial banks will then have to set aside a record 21.5 percent of funds to make less money available for lending.
The sixth reserve requirement ratio increase this year is expected to soak up some 383.6 billion yuan (US$59 billion) from the market.
China also raised interest rates twice this year to demonstrate a tightening monetary policy stance in fighting inflation.
"The decision was made rather quickly, which indicates a somber view of China's inflation control," said Xu Weihong, an analyst at Guodu Securities Co.
"The People's Bank of China still favors adjusting the reserve requirement ratio, possibly because it won't invite speculative money when many other countries set their interest rates at nearly zero."
Before the central bank announcement, some economists had anticipated an interest rate increase after the National Bureau of Statistics revealed that the Consumer Price Index, the main gauge of inflation, rose to 5.5 percent in May.
This was driven by an 11.7 percent jump in food costs, higher than April's 11.5 percent. The non-food sector also jumped 2.9 percent, more than April's 2.7 percent. It was the highest level since records began in 2002 and a sign that price pressures are spreading in the economy.
The Producer Price Index, the factory gate measure of inflation, expanded 6.8 percent from a year earlier, the same as in April.
China's consumer prices exceeded the government's target of 4 percent in each of the first five months of this year, and settled at 5.2 percent through May.
Bureau spokesman Sheng Laiyun said China faced tremendous inflationary pressure and governments at all levels should put control of prices at the top of their agenda.
But he said China's economy was still in a good shape.
China's industrial production rose 13.3 percent year-on-year in May, down from 13.4 percent in April. Retail sales weakened 0.2 percentage points from April to grow 16.9 percent in May.
Fixed-asset investment unexpectedly gained 25.8 percent from a year earlier in the first five months, 0.4 percentage points quicker than the pace through April.
It was boosted by a 34.6 percent gain in property investment, the bureau said.
"Given only modest signs of an economic slowdown, and still high CPI inflation, we believe the authorities will continue their monetary policy tightening," Nomura economist Sun Chi said.
The central bank move came just hours after data showed that consumer inflation, largely fuelled by high food prices, rose in May to 5.5 percent, a 34-month high.
The new order of a 0.5 percentage point rise will take effect from next Monday, and commercial banks will then have to set aside a record 21.5 percent of funds to make less money available for lending.
The sixth reserve requirement ratio increase this year is expected to soak up some 383.6 billion yuan (US$59 billion) from the market.
China also raised interest rates twice this year to demonstrate a tightening monetary policy stance in fighting inflation.
"The decision was made rather quickly, which indicates a somber view of China's inflation control," said Xu Weihong, an analyst at Guodu Securities Co.
"The People's Bank of China still favors adjusting the reserve requirement ratio, possibly because it won't invite speculative money when many other countries set their interest rates at nearly zero."
Before the central bank announcement, some economists had anticipated an interest rate increase after the National Bureau of Statistics revealed that the Consumer Price Index, the main gauge of inflation, rose to 5.5 percent in May.
This was driven by an 11.7 percent jump in food costs, higher than April's 11.5 percent. The non-food sector also jumped 2.9 percent, more than April's 2.7 percent. It was the highest level since records began in 2002 and a sign that price pressures are spreading in the economy.
The Producer Price Index, the factory gate measure of inflation, expanded 6.8 percent from a year earlier, the same as in April.
China's consumer prices exceeded the government's target of 4 percent in each of the first five months of this year, and settled at 5.2 percent through May.
Bureau spokesman Sheng Laiyun said China faced tremendous inflationary pressure and governments at all levels should put control of prices at the top of their agenda.
But he said China's economy was still in a good shape.
China's industrial production rose 13.3 percent year-on-year in May, down from 13.4 percent in April. Retail sales weakened 0.2 percentage points from April to grow 16.9 percent in May.
Fixed-asset investment unexpectedly gained 25.8 percent from a year earlier in the first five months, 0.4 percentage points quicker than the pace through April.
It was boosted by a 34.6 percent gain in property investment, the bureau said.
"Given only modest signs of an economic slowdown, and still high CPI inflation, we believe the authorities will continue their monetary policy tightening," Nomura economist Sun Chi said.
- About Us
- |
- Terms of Use
- |
-
RSS - |
- Privacy Policy
- |
- Contact Us
- |
- Shanghai Call Center: 962288
- |
- Tip-off hotline: 52920043
- 沪ICP证：沪ICP备05050403号-1
- |
- 互联网新闻信息服务许可证：31120180004
- |
- 网络视听许可证：0909346
- |
- 广播电视节目制作许可证：沪字第354号
- |
- 增值电信业务经营许可证：沪B2-20120012
Copyright © 1999- Shanghai Daily. All rights reserved.Preferably viewed with Internet Explorer 8 or newer browsers.
