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Chinanews, Guangzhou, Nov. 19 – According to information released from the National Statistics Bureau, the CPI growth rate, after it slightly dropped in September, once again climbed to a high point of 6.5% in October. The high growth rate was almost on a par1 with the growth rate that once occurred in August, which was also regarded as the highest growth point in ten years. Some market analysts3 predict that the central bank will raise the interest rate after all the economic data of October have been announced, the Information Times reported.
A recent survey carried out by the China Youth Daily and Tencent website shows that about 90% of the respondents think their life quality has been affected4 by the current round of price hikes. Nearly 80% of them think food quality has worsened since this summer. It seems that the low- and middle-income group are affected most by the current price hike. About 14,000 people respond to the survey. However, according to Zhu Baoliang, chief economist5 at the State Information Center's Economic Prediction Department, the current round of price hikes has been mostly caused by the price rise in food but has not affected other commodities yet. There is not an overall price rise in society. Of the eight major categories of goods included in the CPI calculation, the prices of five categories of goods have always been climbing while the prices of the rest of the goods are declining. Such situation has remained so for several months. An all-round inflation should be a general price hike in commodities. However, if we look at the core CPI figure (in which the price of food and energy prices are excluded), we can see that China has not experienced an overall price rise at present. So there is no need for people to worry about it, said Yao Jingyuan, chief economist at the National Statistics Bureau. Faced with the possible inflation pressure, the central bank has raised the interest rate five times this year. Meanwhile, related financial and taxation6 departments have reduced the income tax rate. As a result of these measures, the one-year deposit interest rate has been raised to 3.87% and related loan rate raised to 7.29%. Despite these efforts, the interest rate rise still can not keep up with CPI growth rate. Considering this, some market analysts expect that the central bank will further raise the interest rate in future. “If the central bank doesn't raise the interest rate, it might send a signal that the market can tolerate such price hike. However, the central bank is upset with the current price hike and will take stern measures to control it,” said Li Maoyu, an analyst2 at Changjiang Securities, Co., Ltd. Some analysts point out that the central bank is being put in a dilemma7 in interest rise issue. At present, the difference between Renminbi and US dollar exchange rate has been reduced from 245 basis points at the beginning of this year to 70 basis points now. It is likely that the US Federal Reserves might further reduce its interest rate. When the dollar continues to depreciate8 and US government keeps lowering the interest rate, more hot money might flow into China if China further raises the interest rate.
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