China is to tighten its monetary policy
next year, the Communist Party’s top body has said, in a sign that interest
rate rises may be on the way.
The country has recently tightened
lending rules by telling banks to keep more cash in reserve,
Now the Communist Party’s Politburo has
said China will shift its monetary policy from “relatively loose” to
“prudent”, the Xinhua news agency said.
Annualised consumer price inflation hit
a 25-month high in October, at 4.4%.
That is well above the government’s full-year
target of 3%.
Food prices have been mostly responsible
for the rise, but there have been further price pressures on the back of higher
global commodity costs.
The change of monetary policy had been
on the cards for a number of weeks before the Politburo announcement.
“It means that all sort of monetary
policy tools to control liquidity and to control inflation can now be
used,” said Ken Peng, an economist with Citigroup in Beijing.
“Going forward we could be using
more price adjustments via interest rates,” he said.
The bank funding squeeze that came into
effect on Monday has meant that less cash may now find its way into the stock
China’s key stock index closed flat on
Friday, dropping 1% on the week.
Also on Friday, an IMF paper said China
and Hong Kong would need to implement more measures to rein in property bubbles
forming in parts of their markets.
“The mass-market segment in a few
large cities such as Shanghai and Shenzhen, and the luxury segment in Beijing
and Nanjing appear to be increasingly disconnected from fundamentals,” the
It added: “A senior official at
China’s central bank last week warned that inflationary pressures were building
because of flows of capital into the country and expectations of a revaluation
of the yuan.”
And another report says gold imports
into China have soared this year as investors seek to safeguard their cash amid
The country imported 209.7 tonnes of
gold in the first 10 months of the year, the China Business News said, citing Shen
Xiangrong, chairman of the Shanghai Gold Exchange.
That is an increase of 480% from the
same period last year.