China going for growth as inflation eases
Source: Xinhua |
December 6, 2011, Tuesday
|
Print Edition
Print Edition
CHINA'S central bank began implementing a new reserve requirement ratio for banks yesterday, allowing the country's lenders to keep fewer deposits in reserve.
Easing inflation has encouraged policymakers to shift focus from price controls to stabilizing economic growth due to slack external demand amid the faltering recovery in Europe and the United States, analysts said.
Economists widely expected the year-on-year growth of the Consumer Price Index, a main gauge of inflation, to ease below 5 percent in November.
Data from the Ministry of Commerce, the Ministry of Agriculture and the National Bureau of Statistics showed that prices of farm produce - particularly meat and eggs, which had risen rapidly in previous months - had continued to fall since the beginning of November.
Tang Jianwei, a senior macroeconomic analyst with the Bank of Communications, estimated that food prices would drop by between 0.7 percentage points and 1.5 percentage points. Food prices account for about a third of the CPI calculation.
The carryover factor, which measures the impact of last year's prices on year-on-year changes in prices this year, will pull down the yearly CPI growth in November by 1.1 percentage points, as compared with October, Tang said. "We projected the CPI growth to ease to around 4.3 percent in November," he said.
Lu Zhengwei, chief economist of the Industrial Bank Co Ltd anticipated a CPI growth in November of between 4.2 percent and 4.4 percent.
The most optimistic projection was from Guosen Securities, a Shenzhen-headquartered financial services firm, which said the year-on-year CPI growth in November would slow to between 3.8 and 4 percent, the first reading below the government's full-year target of 4 percent.
The state statistics bureau will release November inflation data on Friday.
Weakening inflation, however, may underscore the pressure for China's policymakers to spur a decelerating economy in the fourth quarter.
The reserve requirement ratio was cut by half a percentage point to 21 percent for large commercial banks and 17.5 percent for mid and small-sized banks yesterday.
An estimated 396 billion yuan (US$62.56 billion) in capital will be released into the banking sector and allow banks to make loans.
Volatile overseas markets and mounting domestic pressure may prompt the People's Bank of China, the central bank, to lower banks' reserves again this month in order to sustain the slowing economy, according to analysts.
A month-on-month decline in the nation's falling yuan funds outstanding for foreign exchanges in October indicated a short-term capital outflow, which would lead to possible systemic risks if the trend continues.
The amount of yuan funds outstanding for foreign exchanges dropped by 24.9 billion yuan from September, marking the first monthly decline in nearly four years.
Easing inflation has encouraged policymakers to shift focus from price controls to stabilizing economic growth due to slack external demand amid the faltering recovery in Europe and the United States, analysts said.
Economists widely expected the year-on-year growth of the Consumer Price Index, a main gauge of inflation, to ease below 5 percent in November.
Data from the Ministry of Commerce, the Ministry of Agriculture and the National Bureau of Statistics showed that prices of farm produce - particularly meat and eggs, which had risen rapidly in previous months - had continued to fall since the beginning of November.
Tang Jianwei, a senior macroeconomic analyst with the Bank of Communications, estimated that food prices would drop by between 0.7 percentage points and 1.5 percentage points. Food prices account for about a third of the CPI calculation.
The carryover factor, which measures the impact of last year's prices on year-on-year changes in prices this year, will pull down the yearly CPI growth in November by 1.1 percentage points, as compared with October, Tang said. "We projected the CPI growth to ease to around 4.3 percent in November," he said.
Lu Zhengwei, chief economist of the Industrial Bank Co Ltd anticipated a CPI growth in November of between 4.2 percent and 4.4 percent.
The most optimistic projection was from Guosen Securities, a Shenzhen-headquartered financial services firm, which said the year-on-year CPI growth in November would slow to between 3.8 and 4 percent, the first reading below the government's full-year target of 4 percent.
The state statistics bureau will release November inflation data on Friday.
Weakening inflation, however, may underscore the pressure for China's policymakers to spur a decelerating economy in the fourth quarter.
The reserve requirement ratio was cut by half a percentage point to 21 percent for large commercial banks and 17.5 percent for mid and small-sized banks yesterday.
An estimated 396 billion yuan (US$62.56 billion) in capital will be released into the banking sector and allow banks to make loans.
Volatile overseas markets and mounting domestic pressure may prompt the People's Bank of China, the central bank, to lower banks' reserves again this month in order to sustain the slowing economy, according to analysts.
A month-on-month decline in the nation's falling yuan funds outstanding for foreign exchanges in October indicated a short-term capital outflow, which would lead to possible systemic risks if the trend continues.
The amount of yuan funds outstanding for foreign exchanges dropped by 24.9 billion yuan from September, marking the first monthly decline in nearly four years.
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