China's central bank raised interest rates by 0.25 percentage points for the first time in nearly three years on Tuesday. China need scale back the huge stimulus injected into its economy during the financial crisis to slow this economy down.
Jun Ma, an economist at Deutsche Bank in Hong Kong, said the decision was the start of a cycle of rate hikes. It showed that “a policy consensus has been reached to tolerate lower growth” and that the government’s willingness “to use interest rate policy to contain speculative property demand”.
However, Mark Williams at Capital Economics said that the decision was a short-term adjustment by a “government increasingly concerned about the pace of lending growth” in recent weeks and which wanted to send a strong signal to the banks. As a result, it would not lead to significantly lower growth.
http://www.businessweek.com/news/2010-06-11/china-reaches-lewis-turning-point-as-labor-costs-rise-update1-.html
Wen Zhang
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