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Xinhua: No Large Interest Rate Hike

Xinhua quoted several government researchers, stating that China would not increase interest rates to counter inflationary pressure, since doing so would most likely attract international “hot money” to China and hurt China’s economy. Instead, China will rely on lending controls, such as increasing the ratio of lenders’ cash reserve requirements. On December 10, the Bank of China increased the reserve requirement ratio by another 50 basis points, which is the third increase in one month and the sixth in 2010.

In November, China’s CPI increased 5.1% over the same month in 2009. The CPI for food increased 11.7% over the same period last year. Since the global financial crisis began, China has added 17 trillion yuan (U.S. $2.6 trillion) in new loans and the supply of renminbi has reached 70 trillion yuan (U.S. $10.6 trillion).

Source: Xinhua, December 14, 2010