More measures to rein in credit rise
By Zhang Fengming |
January 22, 2010, Friday
|
Print Edition
Print Edition
MORE monetary measures are expected to be unveiled to curb excessive credit growth, with interest rates rises likely in the second half of this year, economists said.
Interest rates increases can be front loaded if inflation rises more than 3 percent by the middle of this year, they said.
The government may roll out more frequent quantitative measures amid a de facto moderately tightening monetary policy to avoid economic overheating this year, said Qu Hongbin, chief economist of HSBC China.
The measures include further rises in the reserve requirement ratios and the central bank bills issuance rates, as well as guidance on bank lending.
"We believe controlling the pace of credit growth will remain a key monetary policy objective in the next few months," said Barclays Capital.
Barclays also expects to see a targeted issuance of central bank bills to penalize banks that lent too aggressively, which had been employed before in a tightening cycle.
Economists said the monetary policy this year is geared toward a tightening though China's official stance is still one of a moderately easing monetary policy.
The hikes on central bank bills rates and a surprisingly rise on reserve requirement this year are widely seen as tightening signs.
The central bank's 50-basis-point hike in the reserve requirement, to 16 percent for large banks and 14 percent for small banks, took effect on Monday.
Qu said he expects two interest rate increases, 0.27 percentage point each time, in the second half of this year, a view echoed by economists from Barclays Capital.
"We maintain our baseline view that benchmark interest rates will not be raised until the second half of this year," Barclays said. "We believe the rapid growth of lending is seen by the authorities as the main macro risk at this point (rather than the inflation threat)."
An interest rate hike can be front loaded if the consumer price index rises significantly faster than the projection of 3 percent by mid-year, Barclays said.
China's CPI, the main gauge of inflation, rose 1.9 percent in December from a year ago, the fastest growth since November 2008.
"Now, attention is shifting toward ensuring inflation does not accelerate sharply due to excessive credit growth from the previous focus on growth," Matthew Circosta, a Moody's Economy.com economist, said yesterday.
If authorities can slow lending growth, this should alleviate some pressure on consumer prices, though year-on-year figures are set to rise in the first half of 2010 due to a slow statistical base effect, Circosta said.
China's economy expanded 8.7 percent in 2009.
Interest rates increases can be front loaded if inflation rises more than 3 percent by the middle of this year, they said.
The government may roll out more frequent quantitative measures amid a de facto moderately tightening monetary policy to avoid economic overheating this year, said Qu Hongbin, chief economist of HSBC China.
The measures include further rises in the reserve requirement ratios and the central bank bills issuance rates, as well as guidance on bank lending.
"We believe controlling the pace of credit growth will remain a key monetary policy objective in the next few months," said Barclays Capital.
Barclays also expects to see a targeted issuance of central bank bills to penalize banks that lent too aggressively, which had been employed before in a tightening cycle.
Economists said the monetary policy this year is geared toward a tightening though China's official stance is still one of a moderately easing monetary policy.
The hikes on central bank bills rates and a surprisingly rise on reserve requirement this year are widely seen as tightening signs.
The central bank's 50-basis-point hike in the reserve requirement, to 16 percent for large banks and 14 percent for small banks, took effect on Monday.
Qu said he expects two interest rate increases, 0.27 percentage point each time, in the second half of this year, a view echoed by economists from Barclays Capital.
"We maintain our baseline view that benchmark interest rates will not be raised until the second half of this year," Barclays said. "We believe the rapid growth of lending is seen by the authorities as the main macro risk at this point (rather than the inflation threat)."
An interest rate hike can be front loaded if the consumer price index rises significantly faster than the projection of 3 percent by mid-year, Barclays said.
China's CPI, the main gauge of inflation, rose 1.9 percent in December from a year ago, the fastest growth since November 2008.
"Now, attention is shifting toward ensuring inflation does not accelerate sharply due to excessive credit growth from the previous focus on growth," Matthew Circosta, a Moody's Economy.com economist, said yesterday.
If authorities can slow lending growth, this should alleviate some pressure on consumer prices, though year-on-year figures are set to rise in the first half of 2010 due to a slow statistical base effect, Circosta said.
China's economy expanded 8.7 percent in 2009.
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