Tags: xie | china | interest | rates

Xie: China Must Raise Rates to Stop Inflation

By    |   Thursday, 18 Feb 2010 02:47 PM

China’s recent moves to raise bank reserve requirements aren’t enough to curb inflation, says Andy Xie, former chief Asia economist for Morgan Stanley.

Interest rate hikes are needed instead, he says.

“The government is concerned about the property market. It looks like an asset bubble,” Xie, now an independent economist, told Bloomberg.

“January loan growth was extraordinarily high. Inflation was picking up pretty fast. The government feels like it has to do something.”

But raising reserve requirements doesn’t cut it. “So they have to raise interest rates pretty soon,” Xie said.

“The government is still hoping for a softer landing. Maybe it’s possible, but I think the government needs to raise interest rates, otherwise it may be too late.”

Rates aren’t high enough compared to economic growth and inflation, Xie says. Demand deposit rates are about zero, and long-term deposit rates are at 3 percent, he noted.

“That’s when the economy is growing 8 percent to10 percent,” says Xie.

Inflation was reported at 2 percent in January, but Xie say it’s commonly known that number is inaccurately low.

“The inflation rate is going up very vast. For savers incentives are going down to keep money with banks,” he said.

Economic guru Nouriel Roubini also says China needs to raise interest rates.

“My worry about China is that if they are not doing enough early on . . . there will be a slowdown in the U.S., Europe and Japan,” he told CNBC.

© 2017 Newsmax Finance. All rights reserved.

 
1Like our page
2Share
StreetTalk
China s recent moves to raise bank reserve requirements aren t enough to curb inflation, says Andy Xie, former chief Asia economist for Morgan Stanley. Interest rate hikes are needed instead, he says. The government is concerned about the property market. It looks like...
xie,china,interest,rates
242
2010-47-18
Thursday, 18 Feb 2010 02:47 PM
Newsmax Inc.
 

Newsmax, Moneynews, Newsmax Health, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, and Newsmax World are trademarks of Newsmax Media, Inc.

NEWSMAX.COM
MONEYNEWS.COM
© Newsmax Media, Inc.
All Rights Reserved