Foreign investment banks expect a two-quarter hike in deposit reserves to be raised

Jing Ulrich, China Securities and Commodities Market chairman, said in Shanghai May 6 that the central bank could still raise interest rates in the two quarter.　　At the same time, international agencies such as Nomura and Goldman Sachs have also said there is a risk that policy levels could be further regulated to prevent excess liquidity and overheating. JPMorgan Jing Ulrich believes monetary policy has shifted from hyper-easing to a neutral stance. Bank lending has fallen considerably in recent months, with bank lending growth of 2009 rising by about 33% per cent compared with 2008. From the new credit in March this year, it fell to 510.7 billion yuan, the growth rate fell to about 24%.　　Reaching the target of 7.5 trillion per cent of new loans this year means that the growth in bank lending this year is 17% per cent compared with last year, meaning that there will be a significant decline in bank lending over the next few months. Ms Ulrich believes there may still be interest rate hikes in the two quarter, partly because of inflationary pressures and because real interest rates have been negative.　　But the government's rate hike will be very cautious, expected to raise interest rates three times a year, 27 basis points each time. Sun, a Chinese economist at Nomura, also believes that the increase in reserve requirements, which began on May 10, reduces the likelihood of a May rate hike, but will raise interest rates by 27 basis points by June. China mainly uses two tools to sterilise (recycle) Liquidity: raising the reserve requirement ratio, conducting open market operations (issuing central votes and implementing repurchase transactions), he said. The amount of unchecked liquidity (the difference between the increase in foreign net assets and the liquidity recovered) has increased substantially since the end of 2008. Although liquidity is still plentiful, the authorities have not only raised the reserve requirement ratio but also issued more central votes to increase liquidity recovery. This should be seen as a normalization process from an ultra loose policy stance to a moderately loose monetary stance.　　Looking ahead, he expects a 50-point increase in the reserve requirement ratio for the three quarter of 2010. Goldman Sachs economist Yu also believes there is a high likelihood of raising interest rates in the middle of the year. He said the rise in reserve ratios was a clear signal of policy tightening, a key to achieving the Government's repeated policy goal of "managing inflation expectations". But given that the excess reserve ratio is likely to remain at around 2%, a 50-point increase in the reserve requirement ratio has a limited direct impact on banks ' ability to lend.　　So it could also be seen as a way to recycle more cheaply than open market operations, rather than stringent austerity measures. April Manufacturing Purchasing Managers index showed strong economic activity, Yu that the real economic growth is still higher than the trend level, so the economy will still face greater overheating pressure in the coming period. The likelihood of a "two dip" in the real economy is low. Goldman Sachs predicts that future regulatory measures will remain dominated by direct credit controls, and that the reserve requirement ratio may be raised several times. In addition, the central bank will raise interest rates this year, especially if CPI year-on-year growth of two consecutive months or more than 3%-4%. Goldman Sachs now expects May CPI to be likely to break through 3%, and after a fewMonths to stay above the level, so the likelihood of higher interest rates in the year.　　And Goldman Sachs is expected to raise interest rates also coincide with JPMorgan Chase-rate hike 3 times, each time 27 basis points. Under pressure to raise interest rates, Ms Ulrich said the Chinese stock market needed time to digest policy tightening, so it would linger between 2,800 and 3,100 in the short term. After a mild market sentiment, she believes the Shanghai Composite index is expected to reach 3,800 in 12 months, with the medium-term impetus coming from China's urbanisation, the appreciation of the renminbi and sustained economic growth.