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Rate Hikes Likely On Hold in China, At Least for Now…

February 7th, 2010 Michael McDonough

According to the China Securities Journal Yao Jingyuan, chief economist of China’s National Bureau of Statistics, said “Money supply is too big and that’s leading to excess liquidity.” He went on to say, “I would prefer reserve hikes to rate hikes because rate hikes could cause hot money to flow back.” Jingyuan’s comments are further evidence that Chinese officials will hold-off on rate hikes for as long as possible to avoid hot-money inflows, and will likely continue hiking reserve requirement ratios while using open market operations to remove excess liquidity. Also keep in mind that Chinese New Year will begin on February 14th.

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