Chinese analysts have brushed aside the possibility of an
immediate interest rate hike, predicting a slowdown in inflation
for the month of December, a figure which is yet to be released by
the statistics authorities.
In its latest report, Shenyin Wanguo Securities projected a rise
of 6.1 percent for the consumer price index (CPI) in December, a
key gauge for inflation, compared with an 11-year peak of 6.9
percent in November.
The Shanghai-based Guotai Jun'an, however, has set its estimate
at 6.3 percent. Both firms attributed the slowdown to the relevant
high base in December 2006 which jumped from 1.9 percent the
previous month to 2.8 percent as a result of food price hikes.
Lu Zhengwei, macro-economy analyst with the Fuzhou-based
Industrial Bank, anticipated a growth ranging from 6.2 percent to
seven percent, with the median standing at 6.6 or 6.7 percent,
still a slight decline from the November peak.
Analyst Li Huiyong with Shenyin Wanguo said that last year's
tightening measures, highlighted by six interest rate hikes and 10
reserve requirement ratio increases, have started to exert an
impact. "Chances of another immediate interest rate rise are slim,"
he said.
Researcher Lin Zhaohui with Guotai Jun'an said that the People's
Bank of China would spend a couple of months weighing up the new
statistics, predicting the next sensitive window for further
tightening moves would probably be March.
As the Spring Festival, which falls on February 7 this year,
often skews economic statistics for the first two months of the
year, combined with uncertainty that has risen from the delay in
releasing the figures, Lin said decision-makers would remain
cautious during this period.
"In other words, there will be no sign of any disturbance until
March,"he said.
Lu, from Industrial Bank, said the People's Bank of China will
have to pay close attention to credit growth. Excess rise in credit
and bank loans may result in a hike of 27 basis points in the
interest rate for loans.
A growth of a small margin may lead to a rise of 18 basis points
in the benchmark deposit interest rates and a further cut in the
interest rates for demand deposits, he said.
By the end of November, the outstanding balance of various loans
denominated in yuan with China's financial institutions rose by 17
percent year-on-year to 26.12 trillion yuan (3.5 trillion U.S.
dollars). The increase was 1.93 percentage points higher than that
of December 2006 but 0.63 percentage points lower than the previous
month, the first drop since last July.
The outstanding balance of deposits climbed more than 15 percent
year-on-year to 38.55 trillion yuan (5.2 trillion U.S. dollars).
November saw the first ever rebound of residents' deposits in the
second half of 2007.
Stimulated by the hikes in foodstuff prices, China's consumer
inflation has stayed well above the government-set alarm level of
three percent. Given that the government has taken a package of
measures to raise the farm produce and pig supply, analysts say
consumer price hikes may ease.
If the situation reversed, Lu said the government would have to
accelerate the appreciation of the yuan by announcing a wider
floating band to stave off a soaring CPI.
Although analysts agreed upon less frequent tightening moves for
this year, Li Huiyong with Shenyin Wanguo said there was still a
chance for a rise of 81 basis points before July so that the
one-year benchmark interest rates for deposits could reach 4.95
percent.
There is no official timetable for the release of December's
economic indices as well as those for the whole of 2007.
But past performances of the National Bureau of Statistics
indicate January 25 is the earliest possible date.
(Xinhua News Agency January 8, 2008)
