Strong Possibility for Renminbi Appreciation Expected Feb 24, 2010
SHANGHAI, Feb 24, SinoCast -- The appreciation of Chinese Yuan seems to be a better way to fine-tune the monetary policy than the increase of the benchmark interest rate.
Compared with the adjustment of the interest rate, the appreciation of Chinese Yuan is able to control the input-typed inflation pressure caused by massive fluctuation in prices of domestic products and continuous rise in prices of international bulk commodities. The inflation rate might be higher than 5% circa this April or May. Thus, the Chinese central bank vows to guide the bank loans and adopt the flexible monetary policy.
It seems that the Chinese government is in a dilemma whether to adjust up the benchmark interest rate. On the one hand, more international money is likely to flow in with the increase of the interest rate, which might cause negative effect on domestic economy. On the other hand, the appreciation of the Chinese yuan will have negative impact on the Chinese export.
As from February 25, 2010, the central bank People's Bank of China (PBOC) will once again require the lenders to further raise the renminbi deposit reserve ratio by another 0.5 percentage point. After the move, the deposit reserve ratio for large state-owned commercial banks will increase from current 16% up to 16.5% and a total of CNY 300 billion liquidity in the banking sector will be frozen.
From February 19, 2010 till the end of this March, the mature buy-back capital and central bank bills will reach CNY 900 billion. The total liquidity to be reclaimed by the central bank from February to March might be around CNY 1.6 trillion.
As for the full year of 2010, more than CNY 4 trillion mature funds will fuel the pressure for the central bank to reclaim the liquidity. It is guessed that the required deposit reserve ratio might be higher than 17.5% within this or next year, as PBOC is likely to use this as a major means to fine-tune the monetary policy.
Earlier, the Chinese Academy of Sciences predicts that the growth rate of the country's GDP is expected to reach 10% in 2010. The investment, consumption and net export are expected to contribute 6.3%, 4.2% and minus 0.5% to the GDP growth. In the whole year of 2010, the consumer price index (CPI) is likely to grow by 3.06% and the producer price index (PPI) is expected to rise 5.22%. At the time of the stable increase in domestic demand, the foreign trade of the country is also expected to make a turnaround this year.
SHANGHAI, Feb 24, SinoCast -- The appreciation of Chinese Yuan seems to be a better way to fine-tune the monetary policy than the increase of the benchmark interest rate.
Compared with the adjustment of the interest rate, the appreciation of Chinese Yuan is able to control the input-typed inflation pressure caused by massive fluctuation in prices of domestic products and continuous rise in prices of international bulk commodities. The inflation rate might be higher than 5% circa this April or May. Thus, the Chinese central bank vows to guide the bank loans and adopt the flexible monetary policy.
It seems that the Chinese government is in a dilemma whether to adjust up the benchmark interest rate. On the one hand, more international money is likely to flow in with the increase of the interest rate, which might cause negative effect on domestic economy. On the other hand, the appreciation of the Chinese yuan will have negative impact on the Chinese export.
As from February 25, 2010, the central bank People's Bank of China (PBOC) will once again require the lenders to further raise the renminbi deposit reserve ratio by another 0.5 percentage point. After the move, the deposit reserve ratio for large state-owned commercial banks will increase from current 16% up to 16.5% and a total of CNY 300 billion liquidity in the banking sector will be frozen.
From February 19, 2010 till the end of this March, the mature buy-back capital and central bank bills will reach CNY 900 billion. The total liquidity to be reclaimed by the central bank from February to March might be around CNY 1.6 trillion.
As for the full year of 2010, more than CNY 4 trillion mature funds will fuel the pressure for the central bank to reclaim the liquidity. It is guessed that the required deposit reserve ratio might be higher than 17.5% within this or next year, as PBOC is likely to use this as a major means to fine-tune the monetary policy.
Earlier, the Chinese Academy of Sciences predicts that the growth rate of the country's GDP is expected to reach 10% in 2010. The investment, consumption and net export are expected to contribute 6.3%, 4.2% and minus 0.5% to the GDP growth. In the whole year of 2010, the consumer price index (CPI) is likely to grow by 3.06% and the producer price index (PPI) is expected to rise 5.22%. At the time of the stable increase in domestic demand, the foreign trade of the country is also expected to make a turnaround this year.