CCTV.com - CNTV English - CCTV News


Homepage > News > Biz >

Monetary policy likely to remain tight, says CICC

07-04-2011 14:23 BJT

By Li Xiang (China Daily)

BEIJING - China's monetary policy will remain tight for the rest of the year but the risk of a "hard landing" for the economy is small, the top-ranked brokerage China International Capital Corp (CICC) said on Friday.

"Economic growth has started to slow down but inflation remains high, which means that monetary policy will remain tight in the short run," said Peng Wensheng, the chief economist at CICC, at a news briefing.

Peng expected the People's Bank of China to raise the benchmark interest rate another one or two times this year and for inflation to peak in the third quarter before falling back to 4 percent in the fourth.

China's Consumer Price Index, a main gauge of inflation, rose to a nearly three-year high of 5.5 percent in May and is expected to surpass 6 percent in June.

"We think that the intensity of the current monetary policy is appropriate, although inflation appears to be staying at a high level. After all, it takes time for the policies to take effect," he said.

China's official Purchasing Managers Index (PMI) fell to 50.9 in June from 52 in May, according to the China Federation of Logistics and Purchasing. It is the lowest level since March 2009 when the economy was still recovering from the global financial crisis.

The loss of momentum in China's industrial production growth has been caused by several factors, including tighter monetary policies and stricter credit conditions, power shortages caused by weather disruptions and narrower profit margins, particularly in low-end industries, Nomura Securities wrote in a report.

The lower-than-expected PMI has raised concerns among some economists that China's economy is facing an increased risk of a hard landing if monetary policy remains tight.

Peng said that the possibility of a hard landing is slim as China's ongoing process of modernization and urbanization will continue to support economic growth for at least the next three to five years.

"We expect the economic slowdown to be a gradual process instead of a one-time sharp decline," he said.

He forecast that GDP growth will slow to 8.4 percent in the fourth quarter but will remain at a robust full-year growth rate of 9.2 percent.

Meanwhile, Huang Haizhou, the chief strategist at CICC, said that the Chinese stock market will hit a bottom in July as inflation concerns ease, and then move sideways between 2,600 and 3,200 points for the rest of the year.

Huang recommended that investors buy shares of companies with low valuations and stable earnings growth, such as machinery, cement and auto companies.

He also said that investors should avoid banking stocks, although their valuations are at historically low levels.

"The financial sector is still haunted by the concerns about the high level of non-performing loans in the banking industry and potential risks in the local government financing platform," he said.

Editor:Wang Chuhan |Source: China Daily

Hot Videos view more

The celebrations are still continuing as the victorious coach, Joachim Loew, has been honored for his achievement in his hometown of Freiburg.
Germany coach Loew honored in hometown of Freiburg

Chinese men´s national team continued its preparations for next year´s Asian Cup, as they managed a one-all draw against visitors Jordan during a football friendly in Harbin, the capital city of Northeast China´s Heilongjiang Province.
China held to 1-1 draw by Jordan

The defending world champs came into the contest with a perfect 6-and-oh record, but they would be in for a tough first half before opening things up in the second.
USA beat Slovenia 119-76 in quarter-finals

Hot Stories more

UK authorities believe killer of James Foley is a British national

Across the UK the hunt is on for James Foley’s killer, who authorities believe is a British national. As Richard Bestic reports from London, Prime Minister David Cameron cut short his summer break to lead his government’s response.

Israeli war jets renews Gaza strike as truce talks stalled

Three Palestinians were killed and 40 others wounded in the intensive Israeli war jets´ airstrikes on the Gaza city on Tuesday night, shortly before an end of a 24-hour ceasefire in the Gaza Strip,

Missouri police arrest dozens after violent night

As the protests in the town of Ferguson, Missouri turned violent with police facing ´heavy gunfire´ from some ´criminal elements´, cops fired tear gas, stun grenades and arrested 31 demonstrators on Monday night.

Picture in news more

More Video News

Choose TV Program