The Political Bureau of the Communist Party of China Central Committee, chaired by President Hu Jintao on 3 December 2010, decided that it will switch its monetary policy stance from moderately loose to become prudent next year to curb the rising inflation and also to maintain economic growth at sustainable pace.
However, China will still continue its proactive fiscal policy in the year 2011.
In order to increase the focus, flexibility and effectiveness of macroeconomic regulating policy in 2011, China has to set two goals: keeping economic growth and also curbing the drastic increase in inflationary pressure.
Keeping economic growth needs a policy of fiscal expansion while fighting inflation needs a tighter monetary policy. The existing economic situation in China requires a combination of the two.
The Chinese Political Bureau also stated that more measures will be in place to ensure sufficient market supplies, to stabilize prices level and to regulate market order in next year.
The Chinese central bank, which is under high political pressure due to recent criticisms for the delayed action on raising interest rates until 19 October 2010, fear that the so-called QE2 (Quantitative Easing) will really become "kill me too".
In fact, the Chinese central bank already raised the reserve requirement ratio for banks twice to 18% later in November, indicating its concern about rising inflation expectation as liquidity from abroad grows.
On 17 November 2010, the China premier Wen Jiabao also further confirmed the direction of harsh administrative tightening measures, including temporary price controls when necessary, and has cracked down on hoarding and speculation to prevent price hikes.
Although these actions mostly addressed worries stated earlier in our inflation warning, China inflation remains a risk as the real benchmark 1-year deposit rate is approaching our warning level of -2% (now it is 2.5% - 4.4% = -1.9%).
Deposit level has started to fall because Chinese savers see the value of their holdings eroded. This encourages them to look for better places to put their money and, as long as the trend of negative real deposit rate continues to extend, it will eventually fuel asset-price bubbles forming.
As the chance of real deposit rate to exceed -2% remains high in the near future, we therefore still expect Chinese Central Bank to raise interest rates soon, hopefully before the end of 2010.
Last but not least, we also decide that stocks of utilities, electricity and coals will not be our picks in 2011 owing to the risk in government price controls.
let a group of independent local people in China tell you exactly about the real Chinese economy as well as its subsequent impacts on China financial markets in both Shanghai and Hong Kong. See also: About Mr China and Support us by Donation. We are your ideal choice of professional online China investment news magazine!
Friday, December 10, 2010
Subscribe to:
Post Comments (Atom)
Popular Articles in this Week (Top 10)
-
There are more and more direct competitions ahead for Shanghai and Hong Kong
-
This article is an extension to our earlier article: Financial Review 2011 Q1: Rising Inflation Concerns .
-
This article introduces how we can advertise with you through our website. It also contains a FREE download section for advertising with our...
-
Happy Chinese New Year of Dragon! Today is the Lunar New Year's Day. Just like last year, we, Mr China, do have special greetings as our...
-
In our earlier article: Inside LGFV debts in China , we explained how China’s national public debt to GDP ratio
-
Why and What is New Crisis Era? New Crisis Era, as per our own definition, refers to
-
Benefit from China's fast economic growth, the mainland banking sector continues to grow. According to
-
Renminbi (RMB in short, or called Yuan or CNY), by definition, means "people's money" in Chinese and is actually
-
In this post, we would like to bring you some ideas how you can earn some extra money online easily from
-
We, Mr China, determine to set targets of various major China market indicators on our own. The reason behind that is
Not What You Want?
Try More Search in Our Website Here...
0 Comments:
Post a Comment