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Opinions split over rise in rate
By Pan Xiaoyi and Zhang Fengming |
September 13, 2010, Monday
|
Print Edition
Print Edition
A STRONG rebound in credit growth, an unexpected rise in industrial output and better retail sales in August reflected the strength in China's economic expansion.
But the rosy data may see authorities tighten policies after consumer prices grew at their fastest in 22 months, although analysts were still divided on whether China would raise interest rate immediately.
Some economists, however, warned that raising the benchmark interest rate above the growth rate of prices may lead to a "hard landing" for the country's property sector by hurting developers and home buyers.
Banks in China extended 545.2 billion yuan (US$80 billion) in loans last month, up from 532.8 billion yuan in July, the People's Bank of China said over the weekend.
The amount was bigger than a Bloomberg survey of 26 economists who forecast 500 billion yuan.
M2, the broadest measure of money supply including cash and deposits, grew an annual 19.2 percent, the first acceleration in nine months.
"The strong monetary figures showed the economy has at least halted its deceleration seen from March to July," said Lu Zhengwei, an Industrial Bank senior economist.
Industrial production raced to an annual growth of 13.9 percent after slowing to 13.4 percent in July. The output has slowed amid the government's efforts to clamp down on property speculation, shut energy-intensive factories and limit bank loans. Retail sales gained 18.4 percent in August from a year earlier.
"The market liquidity is sufficient to bolster the economic growth and the stock market," said Li Daokui, an academic adviser to the monetary policy committee of the PBOC. "A slight increase in the interest rate will help achieve sustainable economic growth in the long run," said Li.
But other market watchers argued that China is unlikely to rush to hike interest rate to avoid a potential damage to the economy.
"Authorities are not willing to see a hard landing for the property market and the economy," said Xie Baisan, professor at Fudan University's Finance and Capital Market Research Center.
But the rosy data may see authorities tighten policies after consumer prices grew at their fastest in 22 months, although analysts were still divided on whether China would raise interest rate immediately.
Some economists, however, warned that raising the benchmark interest rate above the growth rate of prices may lead to a "hard landing" for the country's property sector by hurting developers and home buyers.
Banks in China extended 545.2 billion yuan (US$80 billion) in loans last month, up from 532.8 billion yuan in July, the People's Bank of China said over the weekend.
The amount was bigger than a Bloomberg survey of 26 economists who forecast 500 billion yuan.
M2, the broadest measure of money supply including cash and deposits, grew an annual 19.2 percent, the first acceleration in nine months.
"The strong monetary figures showed the economy has at least halted its deceleration seen from March to July," said Lu Zhengwei, an Industrial Bank senior economist.
Industrial production raced to an annual growth of 13.9 percent after slowing to 13.4 percent in July. The output has slowed amid the government's efforts to clamp down on property speculation, shut energy-intensive factories and limit bank loans. Retail sales gained 18.4 percent in August from a year earlier.
"The market liquidity is sufficient to bolster the economic growth and the stock market," said Li Daokui, an academic adviser to the monetary policy committee of the PBOC. "A slight increase in the interest rate will help achieve sustainable economic growth in the long run," said Li.
But other market watchers argued that China is unlikely to rush to hike interest rate to avoid a potential damage to the economy.
"Authorities are not willing to see a hard landing for the property market and the economy," said Xie Baisan, professor at Fudan University's Finance and Capital Market Research Center.
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