ECONOMISTS REACT: CHINA STILL CAUTIOUS AS INFLATION BREACHES 3%
ChinaRealTime Report, June 11, 2010
Analysts react to China’s major economic indicators for May, which showed consumer-price inflation breaching the 3% level for the first time in more than a year and a half.
– Slowing growth and rising inflation – which is what the May data shows – is a policy puzzle for the government…Falling growth argues for policy continuity. Rising inflation suggests accelerating the tightening schedule. We think government will be more focused on risks to the growth outlook than the current, rather mild, inflationary pressures. The extent of the impact of the current sovereign debt crisis in Europe, and the policy controls on the domestic real estate sector, are not yet known. The government will want to see whether the Chinese economy slips up on either of these banana skins, before accelerating the tightening schedule. – Tom Orlik, Stone & McCarthy Research Associates
– Inflation remains a risk due to the underlying strong demand. Recent industrial strikes suggest that wage hikes will spread across industrial sectors, placing pressures on firms to raise prices on their final products. Therefore, CPI inflation is far from its peak as inflationary pressures continue to mount. We believe that as China is experiencing strong demand pressures, [and] it is time for the People’s Bank of China to switch its policy priority from controlling credit to raising interest rates in order to counter the risk of run-away inflation. – Li-Gang Liu, Australia & New Zealand Banking Group
ChinaRealTime Report, June 11, 2010
Analysts react to China’s major economic indicators for May, which showed consumer-price inflation breaching the 3% level for the first time in more than a year and a half.
– Slowing growth and rising inflation – which is what the May data shows – is a policy puzzle for the government…Falling growth argues for policy continuity. Rising inflation suggests accelerating the tightening schedule. We think government will be more focused on risks to the growth outlook than the current, rather mild, inflationary pressures. The extent of the impact of the current sovereign debt crisis in Europe, and the policy controls on the domestic real estate sector, are not yet known. The government will want to see whether the Chinese economy slips up on either of these banana skins, before accelerating the tightening schedule. – Tom Orlik, Stone & McCarthy Research Associates
– Inflation remains a risk due to the underlying strong demand. Recent industrial strikes suggest that wage hikes will spread across industrial sectors, placing pressures on firms to raise prices on their final products. Therefore, CPI inflation is far from its peak as inflationary pressures continue to mount. We believe that as China is experiencing strong demand pressures, [and] it is time for the People’s Bank of China to switch its policy priority from controlling credit to raising interest rates in order to counter the risk of run-away inflation. – Li-Gang Liu, Australia & New Zealand Banking Group
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