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Strategies & Market Trends : Mish's Global Economic Trend Analysis

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To: zonder who wrote (25814)	3/17/2005 9:44:44 AM
From: mishedlo	Read Replies (1) of 116555

China central bank tightens credit on fears of inflation - Merill Lynch Thursday, March 17, 2005 8:13:43 AM afxpress.com BEIJING (AFX) - The central bank's latest moves of raising mortgage rates and reducing the interest rate on excess reserves indicate the government will continue to tighten macro-economic policies in the second quarter on fears of inflation ahead, Merrill Lynch said The People's Bank of China (PBoC) tightened control over real estate loans and said it will cut the interest it pays on excess reserve deposits of commercial banks to 0.99 pct from 1.62 pct currently The bank set a floor lending rate of 5.51 pct for housing loans of more than five years. That minimum rate, which took effect today, is 0.2 percentage point higher than the 5.31 pct preferential home loan interest rate "These policies look conflicting. However, the government is unlikely to loosen its measures against the backdrop of the strong growth momentum," said analyst Marvin Wong He said the the PBoC now allows commercial banks to determine mortgage rates, in line with ordinary loans, which effectively corresponds to an interest rate hike. Commenting on the excess reserve deposits rate cut, he said it was another step towards China's interest rate liberalization. "The PBoC wanted to encourage banks to be more efficient in liquidity management and capital utilization," he said "We expect measures to control credits to the 'hot' sectors to remain firmly in place," he added February CPI rose to 3.9 pct year-on-year on higher food prices compared to a 1.9 pct rise in January Fixed asset investment in the first two months of 2005 rose 24.5 pct year-on-year to 422.2 bln yuan, well below the growth rate of 53 pct in the same period last year and down from the 25.8 pct rate for all of last year

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