1970-01-01 08:33:27
China is likely to raise interest rates this quarter to cool inflation and investment after the economy grew at the fastest pace in more than 12 years, a survey showed. Some economists expect an increase today.
The benchmark one-year lending rate will rise to at least 6.75 percent from 6.57 percent, according to 20 of 21 economists surveyed by Bloomberg News after the release of second-quarter data. One economist expects a 9 basis point increase. The deposit rate will probably climb to 3.33 percent from 3.06 percent.
Zhou Xiaochuan, governor of the People's Bank of China
Central bank Governor Zhou Xiaochuan wants to cool investment that threatens to leave the nation with too many factories, cutting company profits. The world's fourth-largest economy grew 11.9 percent in the second quarter and inflation rose in June to the highest in almost three years.
"China's economy is firing on all cylinders -- consumption, investment and exports," said Tao Dong, chief Asia economist at Credit Suisse Group in Hong Kong. "The increase in investment indicates that the tightening program has more work to do."
China has raised rates twice this year and ordered banks to set aside more money as reserves five times. Tao expects three more interest-rate increases this year, one within days. Five economists in the survey predicted the central bank will act today and one said this weekend.
The People's Bank of China may order lenders to set aside more money as reserves at least once more this year, 17 economists said.
The benchmark CSI 300 Index of stocks rose 3.7 percent as of 1:41 pm in Shanghai today. The yuan gained 0.02 percent against the dollar to 7.5620.
Record trade surpluses are pumping cash into the economy and have pushed the nation's foreign-currency reserves to a record $1.3 trillion. China exported $112.5 billion more than it imported in the first half, up 84 percent from a year earlier.
Chinese officials say the gap between growth in investment and retail sales is narrowing, showing that efforts to boost domestic consumption are working.
"China will continue to strengthen and improve macro-economic controls in the second half of this year" to keep money supply and lending under control, Li Xiaochao, spokesman for the statistics bureau, said in Beijing yesterday. Major economic initiatives may be delayed until after the Communist Party's 17th National Congress in the fall, economists said.
The following table shows economists' estimates for changes in the benchmark one-year lending and deposit rates and the required reserve ratio for banks.
Lending Deposit Reserve
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Lending Deposit Reserve
rate rate Req. Ratio
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Number of Estimates 21 21 21
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Action Economics 27 (tdy) 27 (tdy) 50 (tdy)
AMP Capital Investors 27 (3) 27 (3) 50 (3)
ANZ Banking Group 54 (w/e) 81 (w/e) 150 (w/e)
BNP Paribas 18 (3) 27 (4) 50 (3)
Bank of East Asia 27 (3, 4) 27 (3, 4) NC
Barclays Capital 18 (soon) 27 (soon, 3Q) NC or 50 (4)
Calyon 18 (tdy) 18 (tdy) 50 (soon)
Capital Economics 27 (3) 27 (3) 50 [3(2x), 4(2x)]
CFC Seymour 18 (tdy) 27 (tdy) 50 (tdy, 3, 4)
CIMB-GK Securities 18 (soon, 4) 18 (soon, 4) 50 (4x)
Citic Securities 27 (3) 27 (3) 50 (4)
Credit Suisse 27 (3x) 36 (3x) n/a
Deutsche Bank n/a n/a 2-3x
Hang Seng Bank 27 (tdy, 4) 27 (tdy, 4) 50 (tdy, 3, 4)
HSBC 27 (soon) 27 (soon) 50 (soon)
Industrial Bank 27 (3) 18 (3) 50 (4)
ING Groep NV 27 (tdy) 27 (tdy) 50 (tdy)
JPMorgan Chase 27 (3) 27 (3) 50 (yr-end)
Morgan Stanley 27 (3, 4) 27 (3, 4) n/a
Royal Bank of Scotland 27 (3) 27 (3) 50 (3Q)
Shenyin Wanguo Sec. 9 (3) 27 (3) NC
UOB Group 18 (3) 27 (3) 50 (3, 4)
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Note: (tdy) = today (20 July); (w/e) = this weekend
3, 4 = third quarter, fourth quarter
2x, 3x = number of times of increase this year
nc = no change in the rates
n/a = not available
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Source:Bloomberg