Why PBoC NOT Raising Interest Rates Promptly

Do you ever think of the real reasons why People's Bank of China (PBoC), the Chinese central bank, always looks cautious in raising policy interest rates promptly?

2011 HK HSI Hang Seng Index target

In 2010, the Hong Kong benchmark Hang Seng Index (HSI) gained by +5% YoY to

Shanghai vs Hong Kong as Leading Chinese Financial Centre

There are more and more direct competitions ahead for Shanghai and Hong Kong

2011 Shanghai SSE Composite Index target

In 2010, the Shanghai benchmark SSE Composite Index fell by -14% YoY to 2808 at the year close.

How can Unleashing Non Free Float Shares Impact the A-share Market

It is well-known that A-share market has been under selling pressure due to huge amount of non free float shares being unleashed especially after 2008. The real reason for

Commodity Trader Glencore (805.hk) IPO Stock Analysis

If you are considering to invest in Glencore, a leading Switzerland-based physically moving commodity trader, we hope you to read through this article before doing so.

New Feature: Our own Rating System

Tags: Own Rating System, a New Feature of Mr China

It is until now we can say that the main layout and features of our website are ready for our readers. The features which make our website unique are:

Shanghai Strategic Plan in the Next 10 Years

There is a Chinese saying: To know Shanghai today is to know China tomorrow. China continues its ambitious efforts to build Shanghai as a world city and an international financial centre by the year 2020.

Subscribe or Follow Mr China

Recently we, Mr China, see a trend of increasing number of readers subscribed to get our free email updates through RSS (Really Simple Syndication) feed. This is really a good

Financial Review 2011 Q1: Rising Inflation Concerns

You may still remember our article Financial Review 2010: where had all the Hot Money gone which concerned local China news and some other important international news last year. Since we have gained great success

First RMB IPO (Hui Xian REIT Stock Code 87001.hk) Analysis

Recently we have received a few email queries from our readers after we discussed about Hui Xian REIT (stock code: 87001.hk), the first Renminbi (RMB, CNY, or Yuan) Initial Public Offering (IPO) in Hong Kong, in our previous article

How to Invest in RMB Securities Outside China

The time is now ripe for Renminbi (RMB, CNY, or Yuan) securities in Hong Kong, outside the mainland China.

Investment Guide for 12th 5-Year Plan

Needless to emphasize, China's 12th 5-Year Plan must be your investment bible in these five years. That is why we have published quite a number of articles beforehand to outline the main points of this plan to you. However, how should investors wisely respond and make decisions in face of the 12th 5-Year Plan?

Top 10 Focus Areas for Chinese Government in this Year

You may remember that in our earlier article: Chinese Government Key Targets and Work Plan for 2011, we introduced that Chinese premier Wen Jiabao has pointed out his "2011 Top 10 Focus Areas" following the Government Work Plan in his Government Work Report which was released on 5 March 2011. These 2011 Top 10 Focus Areas are now summarized as follow:

5 Key Methods to Curb China Inflation

China CPI (Consumer Price Index) has stayed at a high level of +4.9% YoY in both January and February this year. As the inflationary pressure remains high, China premier Wen Jiabao mentioned in his Government Work Report released on 5 March 2011 that there are top 10 focus areas

Chinese Government Key Targets and Work Plan for this Year

In our previous article China's 12th 5-Year Plan and Government Work Report, we mentioned that Chinese premier Wen Jiabao has outlined his Work Plan for 2011 following the 12th 5-Year Plan in his Government Work Report that released on 5 March 2011. While the 12th 5-Year Plan is only the initial part (Part I) of the Government Work Report, we are now going to introduce

12th 5-Year Plan and Government Work Report

China, as a country adopted to planned economy, is used to establishing plan for its entire country every 5-year since 1953. The latest one, which has been recently delivered on 5 March 2011 by China premier Wen Jiabao to the National People's Congress (NPC) along with his Government Work Report (also called the "Report on the Work of the Government"), is the 12th 5-Year Plan (or called "Twelve Five-Year Plan") in Chinese history and is to be effective

Internal Auditing for Quality Control

Here let us brief our internal audit system for website quality control.

Today, we write to response to a smart reader who wrote by email to ask us why there was a sudden statement "Written by: Independent Internal Audit (IIA) Team" at the end of our article An Important 2010 Internal Review for you. We promised to simply call him Mr. W, not to disclose

Beijing Restricts Foreign Property Purchases

On 15 February 2011, Beijing local government approved the so-called "Beijing 15 Articles" which restricts property purchases by foreigners. Home purchases of non-permanent residents who cannot provide tax proofs or social insurance contributions for a continuous 5-year period are now totally banned in Beijing.

Shanghai Property Tax Freezes Purchases and Boosts Rents

China's commercial capital Shanghai and the southwestern SiChuan megalopolis of Chongqing became the first in China to begin a pilot program that imposes residential property taxes starting from 28 January 2011. However, instead of reducing pressure on rising property prices, it seems the property taxes can just

How New National Eight can Cool China Property Market

On 26 January 2011, China Premier Wen Jiabao chaired a State Council executive meeting and confirmed eight new key measures to cool the China property market (the so-called "New National Eight Articles", or simply "New National Eight" or "New State Eight") amidst inflation pressure. The eight key measures are now summarized as below:

HKD Weakens as Refuge for Capitals Fades

Perhaps we have enough discussions about renminbi (RMB) recently. Today we want to switch our focus to the weakening Hong Kong Dollar (HKD) as refuge for capitals fades.

Wish your Investments Achieve Better Returns in the New Chinese Year

Today is the first day of this new Lunar year, and hence marks the beginning of this new Chinese calendar year.

Gong Xi Fa Cai (in chinese: 恭喜发财)!

We, Mr China, wish you a Happy Chinese New Year! This year is going to be propitious

Financial Review 2010: where had all the Hot Money gone

As mentioned in our first article Big Day of Mr China, one of the purposes of our site is to dictate the rapidly changing economy in China.

Chinese Bank Declares RMB Business War Around the World

China continues to expand the global reach of renminbi RMB (also called CNY, or simply Yuan) amidst allowing direct RMB trading in Russia.

An Important 2010 Internal Review for you

2010 was an important year for Mr China and our readers. We have our own website begun in 2010 - read more about Big day of Mr China.

Direct RMB Trading in Russia

China has taken an important and symbolic step in renminbi RMB (also called CNY, or simply Yuan) internationalization, a move that in the long term can make the USD less relevant to businesses between the two countries.

More Interest Rate Hikes against Inflation in 2011

What a Christmas gift!

On 25 December 2010, the Chinese central bank, People's Bank of China (PBoC), decided to raise domestic interest rates by 0.25% against inflation. It perfectly matches with our expectation stated in our article No More loose Monetary Policy.

Merry X'mas and Happy New Year

We, Mr China, wish all our readers a Merry Christmas and Happy New Year!

Although this greeting

Real Deposit Rate Exceeded -2%

On 11 December 2010, China reported that CPI in November continued to climb up rapidly to +5.1% YoY.

As expected, this time inflation was not only driven by soaring food prices and has spread over much broader categories like residence, household facilities, healthcare etc.

It might be something that Ben Bernanke, chairman of the US Federal Reserve, is happen to see as China has started to export inflation to the world. He might also want the Chinese central bank to raise interest rates immediately, so as to extend difference in interest rates between RMB and USD, attract additional hot money inflows to China, and therefore achieve a more rapid renminbi (RMB) appreciation.

However, quite unexpected to the market, the Chinese central bank did not raise interest rates but only increased again the reserve ratio on bank deposits by 0.5% to 18.5% just one day prior to this latest CPI announcement. It is already the 6th increase this year in reserve requirement ratio to mop up excess liquidity in the monetary system but, it still leaves the problem of negative real deposit rate unresolved.

Actually the China real benchmark 1-year deposit rate has exceeded our warning level of -2% (now it is 2.5% - 5.1% = -2.6%).

The question is: why the Chinese central bank still not to raise interest rates?

The official answer is the National Development and Reform Commission (NDRC) predicts that CPI had peaked in November and will fall to less than +5% YoY in December because of the recent government administrative measures.

This lowers our original expectation that the Chinese central bank will raise interest rates in the short term.

While the market is still hot in debating on the next inflation trend, we choose to stay calm and think about the prediction of NDRC this time.

Remember Chinese officials also predicted in October that CPI might had already peaked at +3.6% YoY in September, price pressures will ease later this year and so their annual CPI target of +3% might still meet. It is obviously not true.

Nevertheless, we cannot assume Chinese officials are making wrong predictions all the time.

In fact, quite a number of new administrative tightening measures to prevent price hikes, such as cracking down on hoarding and speculation, have just started in late November. For this reason, CPI in November definitely cannot tell the degree of effectiveness of the latest government measures.

Due to this technical problem, we may at least have to wait until December CPI to see any representable data, no matter NDRC is correct or not.

In order to protect the interest of all our readers, even we will have to adjust our 2011 CPI target, we cannot do it purely by guess and without knowing the data representing the impact of the government administrative measures.

We hope you can understand, as a responsible site, we can never set our target in this way and we believe this data insufficiency is also a reason why the Chinese central bank did not raise interest rates immediately. Avoid additional hot money inflows to China is apparently another reason.

In any case, it appears that poor people in China will need to stand a bit longer time for the excessive negative real deposit rate.