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China hikes rate to cope with inflation soon

Posted by Aliuser on Jan 22, 2010 in China Import and Export

China’s economy grew 8.7 percent in 2009 after fourth quarter growth jumped to 10.7 percent year-on-year. The report released by the National Bureau of Statistics was above Beijing’s 8 percent target anf sparked early rate hike fears.

China-GDP-growth-rate-in-2009 - Alirens.com

China-GDP-growth-rate-in-2009 - image courtesy of China Daily

Worries over rising inflation rate and resulting higher interest rate in the forthcoming future started kicking in. Stock prices in Hong Kong and mainland China slumped , led by mainland banks and property sectors The Consumer Price Index (CPI) rose 1.9 percent in December from a year earlier, higher than the 1.7 percent increase expected.

China’s December Producer Price Index (PPI) reversed twelve months of declines, climbing 1.7 percent year-on-year, way beyond than market’s estimate for a 0.5 percent rise.

China says it has recovered from the global crisis but inflation picked up, adding to pressure on Beijing to prevent overheating and keep its economic recovery on track.

”China has become the first, on the whole, to achieve recovery and stabilization in its economy,” said Ma Jiantang in his “National Economy: Recovery and Posing in the Good Direction in 2009“, Mr Ma is the commissioner of the National Bureau of Statistics.

But he said China still faces ”uncertainties” and a weak global outlook so the government will avoid major changes in economic policy. Mainland leaders say stimulus spending will continue but worry about rising prices and have ordered banks to curb lending after a record surge in 2009.

Aliuser watched a CNBC’s interview clip with Mr Richard Yetsenga, regional FX strategist at HSBC yesterday. He expected China’s tightening monetary policy soon.

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