ID :
190389
Wed, 06/22/2011 - 13:25
Auther :
Shortlink :
https://oananews.org//node/190389
The shortlink copeid
China's monetary policy still loose: Fitch
By Kim Young-gyo
HONG KONG, June 22 (Yonhap) -- China's monetary policy remains loose despite the country's recent tightening moves, Fitch Ratings said Wednesday, indicating the country will likely face continuing inflationary pressure.
China's consumer prices rose 5.5 percent in May from a year earlier to a 34-month high. It was an increase of more than 5 percent for the third straight month, higher than the Chinese government's annual target of 4 percent.
"With credit still loose, the monetary drivers of inflation remain largely unaddressed," Charlene Chu, senior director of financial institutions at Fitch, said at a conference.
"As a result, when policy loosens, inflation could return quickly. The policy options for the next inflation wave are narrowing."
The Fitch official said China's economic growth has become much more reliant on cheap and loose credit, which fueled a rise in inflation and a property bubble in many areas.
The Chinese government has started to roll back the stimulus package it introduced at the end of 2008, as the country faces high inflation triggered by excessive liquidity and an overheated economy.
In April, the People's Bank of China, the central bank, raised the benchmark interest rate for the second time this year, in a bid to curb rising prices. It has also hiked the deposit reserve requirement ratio for its major banks six times in 2011.
"Inflation is critical because it is the one factor that could force Chinese authorities to end their decades-long policy of funneling abundant, cheap loans to corporations," Chu said.
A significant risk may exist in the banking system over the next few years, as the country's banks are exposed to overextended loans to local governments and property developers, both of which have questionable medium-term repayment capacity, the credit rating agency said.
"At a borrower level, credit risk has risen as maturing loans were replaced with new money extended to higher risk borrowers," Chu said.
ygkim@yna.co.kr
HONG KONG, June 22 (Yonhap) -- China's monetary policy remains loose despite the country's recent tightening moves, Fitch Ratings said Wednesday, indicating the country will likely face continuing inflationary pressure.
China's consumer prices rose 5.5 percent in May from a year earlier to a 34-month high. It was an increase of more than 5 percent for the third straight month, higher than the Chinese government's annual target of 4 percent.
"With credit still loose, the monetary drivers of inflation remain largely unaddressed," Charlene Chu, senior director of financial institutions at Fitch, said at a conference.
"As a result, when policy loosens, inflation could return quickly. The policy options for the next inflation wave are narrowing."
The Fitch official said China's economic growth has become much more reliant on cheap and loose credit, which fueled a rise in inflation and a property bubble in many areas.
The Chinese government has started to roll back the stimulus package it introduced at the end of 2008, as the country faces high inflation triggered by excessive liquidity and an overheated economy.
In April, the People's Bank of China, the central bank, raised the benchmark interest rate for the second time this year, in a bid to curb rising prices. It has also hiked the deposit reserve requirement ratio for its major banks six times in 2011.
"Inflation is critical because it is the one factor that could force Chinese authorities to end their decades-long policy of funneling abundant, cheap loans to corporations," Chu said.
A significant risk may exist in the banking system over the next few years, as the country's banks are exposed to overextended loans to local governments and property developers, both of which have questionable medium-term repayment capacity, the credit rating agency said.
"At a borrower level, credit risk has risen as maturing loans were replaced with new money extended to higher risk borrowers," Chu said.
ygkim@yna.co.kr
