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Chinanews, Guangzhou, June 12 – Li Junjie, an economist1 at the State Development and Reform Commission's Macroeconomy Research Institute, recently wrote an article in the Information Times. The article says that due to liquidity2 problem, capital market expanded quickly, and in order to curb3 the fast rise of assets prices, the central government should raise the interest rates.
In fact, many institutions predict that the central bank may raise the interest rates shortly. If the interest rates are raised, it may curb the rising of the stock index. However, the measure may bring more negative consequences to the real estate market, some experts say. On June 5, Chinese central bank governor Zhou Xiaochuan said that the central bank had paid close attention to the CPI figures in May, which would be released soon. Based on the figures, the central bank will decide whether or not to raise the interest rates, he said. Many insiders said that it was very likely for the central bank to raise the interest rates. Chief economist of Credit Suisse First Boston Tao Dong even gave very specific information on such raise. According to Tao, the central bank should raise the interest rate for loans three times in the second half of this year and the rate should be raised by a total of 81 base points, making the one-year loan rate reach 7.38 percent. In addition, the one-year deposit rate should also be raised to reach 4.14 percent by this end of the year so that the actual interest (interest after the interest gains tax is deducted) will remain positive. Judging from the current status, it is very probable for the May CPI figures to rise more than expected. In light of this, it is almost certain that the central bank will raise the interest rates for the sixth time in recent years, said Han Shitong, a real estate analyst4 in Guangzhou. The central government wants to curb the rise of assets prices by possible raise in interest rates. The idea may not be wrong. However, it should be noted5 that if the interest rates are raised, it may lead to negative consequences to the real estate market, some experts said.
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