Tags: Central | Bank | Adviser | China | Raise | Deposit | Rates

Central Bank Adviser: China Should Raise Deposit Rates

Wednesday, 15 Sep 2010 08:14 AM

China needs to increase bank deposit rates to help fight inflation, Li Daokui, an academic adviser to the central bank, said on Wednesday.

Li also told a panel at a meeting of the World Economic Forum in the northern port city of Tianjin that China was unlikely to let the yuan rise sharply in the foreseeable future.

Consumer inflation would peak in the year to September at 3.7 percent and average at 2.9 percent in 2010, within the government's full-year target of 3 percent, Li said.

Mild inflation would persist in the next three to five years as China's labour costs and agricultural prices would rise along with global raw material costs, he said.

"In that case, I think we should appropriately raise bank deposit rates to guide people's inflation expectations," Li said.

Savers are unhappy that the purchasing power of their deposits is shrinking: consumer inflation has been above China's one-year deposit rate of 2.25 percent since February.

Other prominent economists, including another central bank adviser, Xia Bin, and World Bank chief economist Justin Lin Yifu, have also called on Beijing to lift real interest rates.

Li attached a small probability to China's bowing to foreign pressure and letting the yuan rise quickly.

"I see a low chance of drastic movement in the yuan's exchange rate in the future," he said, citing China's success in gradually reducing its dependence on export-led growth.

The central bank has permitted the yuan to appreciate more quickly this week in what many economists regard as a concession to Washington ahead of Congressional hearings on Wednesday and Thursday.

Many lawmakers, frustrated over America's large trade deficit with China, want to get tough on Beijing for allowing the yuan to rise little more than 1 percent against the dollar since it depegged from the U.S. currency in mid-June.

© 2017 Thomson/Reuters. All rights reserved.

   
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China needs to increase bank deposit rates to help fight inflation, Li Daokui, an academic adviser to the central bank, said on Wednesday. Li also told a panel at a meeting of the World Economic Forum in the northern port city of Tianjin that China was unlikely to let the...
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2010-14-15
Wednesday, 15 Sep 2010 08:14 AM
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