Interest rates in upward curve
26 March 2007
China is expected to raise interest rates again in the next few months,
according to a survey of economists done by Bloomberg. The People's
Bank of China will also likely boost banks' cash reserve requirement
ratios in an effort to mitigate bubbles, inflation and excessive
investment in factories caused by a flood of cash from what could be a possible
record US$200 billion trade surplus in 2007, Bloomberg
reported. "Excessive investment growth may lead to overcapacity and
therefore more bad loans," said Bank of America economist Wang Qing.
China's economy grew by 10.7% last year and the trade surplus hit
US$177.5 billion. Of the 24 economists surveyed by Bloomberg, 21
expected one more interest rate hike this year, with 15 expecting it in
the next six months.