China Raises Benchmark Deposit, Lending Rate By 0.25 bps As January Inflation Hits 6%

Tyler Durden's picture

The attempts to fight Bernanke's inflation resume in Asia, where not even fully recovered from recent New Year celebration partying, the PBoC decided to hike rates for the second time in over a month. The reason: January inflation could be as high as 6% which means trouble for the various members of politburo. Benchmark one-year deposit rates will be lifted
by 25 basis points to 3 percent, while one-year lending rates will also
be raised by 25 basis points to 6.06 percent, the People's Bank of China
said. The rises take effect from February 9. For the time being markets are orderly, even though the announcement did send the EURUSD to the highs of the day.

From Bloomberg:

A jump in lending at the start of this year may have exacerbated price pressures by adding to an excess of cash in the fastest-growing major economy. Inflation may have climbed to as much as 6 percent in January after snowstorms damaged crops and as demand climbed ahead of a Lunar New Year holiday, according to Daiwa Capital Markets.

“The government wants to front-load tightening to control lending,” Chang Jian, a Hong Kong-based economist at Barclays Capital, said before today’s announcement. “The rate hike is needed to anchor inflation expectations and to control inflation and asset-bubble risks.”

Consumer prices rose 4.6 percent in December and the economy expanded 9.8 percent in the fourth quarter, faster than the pace in the previous three months. Deutsche Bank AG said last month that inflation may average 5 percent for the full year, while UBS AG saw a 4.8 percent rate. November’s 5.1 percent rate was the fastest in 28 months.

Full PBoC statement:

People's Bank of China raised benchmark deposit and lending financial institutions, interest rates


People's Bank of China, from 2011 on 2 February 9, the date of financial institutions raised the benchmark deposit and lending rates. The one-year deposit and lending rates were raised 0.25 percentage points, other deposit and lending interest rate adjusted accordingly (see table).

 Schedule:

 RMB deposits and loans of financial institutions to adjust the benchmark interest rate table

                                                                            Unit: %

?

Adjusted Rate

First, deposits of urban and rural residents and units

?

?(A) demand deposits

0.40

?(B) Lump deposits

?

            Three months

2.60

            Six months

2.80

            Year

3.00

            Years

3.90

            Three years

4.50

            Five years

5.00

Second, all loans

?

            Six months

5.60

            Year

6.06

            One to three years

6.10

            Three to five years

6.45

            More than five years

6.60

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EscapeKey's picture

Pretty much all commodities seem to take a hit.

Well, all, except for gold and silver.

http://www.bloomberg.com/markets/commodities/futures/

 

hugovanderbubble's picture

Thanks,

* http://www.shibor.org/shibor/web/html/index_e.html

Bad for German Exporters

So underweight european equities NOW, no when they free fall 10%...SELL this market NOW

Spain is in DEFAULT----SELL SPAIN AND FEEL THE PAIN¡ Portugal doesnt have a penny to payback any loan.

Long Belgium,Spanish,Portuguese CDS

Short Emerging Markets ; specially Latam and Asia

Long Silver and Gold

 

 

PY-129-20's picture

Be silent my friends. There are bubbles outside and they are hungry. They are waiting for potential investors. (Finnland=bubble mode; China=bubble mode; Australia=bubble mode; Turkey=bubble mode). Don't feed the bubble!

belsebub's picture

Just to add: Sweden has a real estate bubble.

MrTrader's picture

The FED´s plan with QE II wasn´t ever to resolve the unemployment situation. It´s about phu..ing China in the arse. Printing money, creating inflation, monetizing debt and via debt monetizing negating America´s debt burden and make it a "problem" for NON US countries. Now China is not stupid, the answer is to soak up all this lquidity by raising interest rates. Now, that is bad news for multinationals like Apple, GM, McD and others who are selling their "American way of Life" in China. Bye, bye, good times! Expect brutal correction on global equity markets next 3-4 month.

Hephasteus's picture

No problems. Ben can stop inflation in 15 minutes and the dallas fed can stop QE3 with just a NO.

A Man without Qualities's picture

Trouble is, in real terms the rate is zero.  Food prices will continue to creep upwards, property prices will start heading the other way.  Going to be a big problem for all those local government officials who fancied they were Chinese Donald Trumps...

TradingJoe's picture

US Futures tell another story, one must (try to) understand that chinese rate increase does not have any(whatsoever)impact on the Us stock market! Or simply.25 points are not enough to spook The Benvestor!

plocequ1's picture

Of course. Nothing will make this market go down. You know its a sad day when i am actually looking up to Joe Weisenthal from B.I. as a hero.

EscapeKey's picture

Weaselthal is a fucking paid troll. All his articles are light on facts, heavy on controversial statements, but usually tows the estalishment line, no doubt because Blodget keeps a keen eye on the editorial direction, in the hope of duplicating Huffington's exit plan.

When I suggested HamyWanger apply for a job with BI, I was serious. Weaselthal is proof trolls can get paid for their work.

plocequ1's picture

Thats why its a sad day

hugovanderbubble's picture

Short Hong Kong REITS

Landrew's picture

You have it right, the Chinese are behind the curve at zero.

topcallingtroll's picture

You want to see the mother of all real estate bubbles? Google " why is china building erie ghost cities that can be seen by google earth"

PY-129-20's picture

This time it is different, topcallingtroll. And Stephen Roach said: "China gets it." That was his whole explanation. But yes, it is the mother of all real estate bubbles. I am not optimistic about the aftermath. Things will end ugly there. I warned people here (Germany), but they do not listen. They are all like Roach - "China gets it. China is different. China will always be a success story", yada, yada, yada.

I am much more optimistic about the USA (in the long run) than about China.

Tense INDIAN's picture

Is anybody watching India's FALL.??

Zero Debt's picture

India has 16% food inflation running continuously and food + energy price rises are not known to be a great boost to broad-based stock markets indexes.. See e.g. Vietnam.

 

HelluvaEngineer's picture

Bloomberg radio made the point that unlike Egypt, India will not riot due to increasing food prices, because they are a bunch of compliant cows instead of rag head agitators.  Also, Ben Bernanke is responsible for the democracy movement in the third world.

Hephasteus's picture

I am tense. Enjoy your charts. Yes big trouble in little india.

No worries. We'll be thinking about you in the east west wind.

http://www.calleman.com/content/articles/nov8_sixth_night.htm

Quinvarius's picture

Until China lets the Dollar fall, they are not serious about anything but spanking commodity prices.  They want the growth.

hugovanderbubble's picture

China doesnt need US anymore, thats the big trouble

virgilcaine's picture

At .25 % increments inflation will be under control around 2016. But  Not exactly confidence inspiring either, if CB's are So Afraid that any higher rate could bring the whole thing crumbling down.  

chindit13's picture

Politburo finds inflation more acceptable than increased unemployment.  Central bank chief finds increased unemployment more acceptable than inflation.  Both fear their particular bogey man because they believe it might result in social unrest, which is kind of a damned if you do, damned if you don't view.

The central bank chief is winning.

-----------

Here's anecdotal evidence of how much liquidity China currently has.  Burma holds three or four jade auctions a year.  Buyers are all Chinese.  Five years ago the auction would raise $3-4 million per auction.  Last year each auction was raising $100-300 million.  The most recent auction, with about the same quantity and quality of material on offer as previous auctions, raised $1.3 billion.

tmosley's picture

Did you notice that gold prices aren't "plunging"?  So much for your "roach motel" theory.

chindit13's picture

The roach motel referred to the hesitancy of capital outside of China to move in, despite the relative attractiveness of rates. It had nothing to do with the price of gold. You have a tendency toward vindictiveness that clouds your logic. Ego seems fragile and has the best of you, which detracts from any debating skills you might possess. Better you lose it, though that is up to you.

tmosley's picture

lol, you were wrong, so you have to resort to psychobabble to save face.

Here's a hint for you: if foreign capital was hesitant to move into China, the skyline of Beijing wouldn't look like this: http://farm4.static.flickr.com/3173/3103249613_4158846b6d.jpg

Deny reality all you want.  There is no "roach motel".  Chinese interest rates have no negative effect on gold prices.  Psychobabble doesn't strengthen arguments.

chindit13's picture

Wow, do you cruise threads looking for a chance to "get back" at people whose posts might throw doubt on your claimed intellectual superiority? Seems a little childish. Either you do not bother to read, or your comprehension is rather poor. Perhaps you should ask for a recount on that supposed "161", because you are coming up short.

How money behaves today is not necessarily the same as how it behaved yesterday. Rate rises today may prompt some to consider the possibility of social unrest, fed by the recent events in the Middle East. China is no longer viewed as the pie-in-the-sky source of easy riches it was a few years ago when Beijing, Shanghai, etc. were modernized. Higher rates in and of themselves are not necessarily a draw. People will take some time to consider their exit strategy before jumping in, and exit from China is not always easy.

The post that seems to have gotten under your skin referred to the relative attractiveness of China as an investment based on rate rises. It had nothing to do with gold. Your apparently rather fragile ego has you seeing things that are not there, and has you tending toward vindictiveness. That is not Fight Club; that is kindergarten.

Saxxon's picture

Interesting info chindit13; are you over in that region?  Burma is a fascinating place, in one way rather like a benign North Korea with temples.  The Internet was simply shut down when I was there - the Tatmadaw pulled the plug.

As a roundeye, I could not travel widely but my Chinese wife fit right in. Did you know that Chinese citizens have an option to obtain Burmese dual citizenship?  I wanted to buy a villa in Bagan, could not get the wife to get on board.  Are PRC guys bidding up real estate in Yangon.

Saxxon

chindit13's picture

Yes, I’m here. Long story. It has its good points, in spite of everything. Very safe provided one knows his place.  Good people who have time for each other.  Of course, the internet is tempermental, shut off much of the time and its bandwidth limited at most others, but one finds a way. Only one email is allowed, so if one has anything other than gmail, a SOCKS proxy is required.

Chinese are not exactly allowed dual citizenship, but in practice they can buy the identity of a deceased Burmese. There are a few ethnic groups that are for all intents and purposes Chinese, so they can get away with it. Six foot three inch blue eyes have slightly more difficulty. A national ID card is required to officially buy property, though for a price exceptions are made. Prices are in quite the bubble right now, and are equal or higher than in the US, even though US per capita income is approximately 200x higher.

gwar5's picture

The Chinese people are buying lots of gold to protect against inflation, encouraged by Hu Jintao. They are really taking it to heart. China is expected to surpass India as the largest retail consumers in just a year or two.

Any movement by pension funds or mutual funds to diversify into PMs, even a little, could have a similar impact on PMs and could be a Bastille moment for the Fed. And it couldn't happen to a nicer bunch of reptiles.

willien1derland's picture

Sorry for the off topic post - http://www.occ.treas.gov/ is down - Conspiracy theorists should pick up the courtesy phone & act accordingly...

ivars's picture

What do you think China is thinking right now, watching Tunisia, Egypt, food inflation and in general, the turning of informed middle class against ruling elites, be it dictatorships, communist rule, oligarchs or crony capitalists in indebted democracies?

China thinks hard how to organize another 1989 crackdown on democratic intentions of its population in current situation once uprisings reach it. If that happens, how will that affect the stance of current dictatorships and crony capitalism elites people are trying to overthrow, with China showing there is another way out? And the USA not so sure which direction to support? After China makes its choice, the world will polarize again between 2 ideologies, more direct democracy (West) and no democracy at all (China and its copycats=many nations as well).

My bet is that will happen before or during the Party leadership change scheduled for Autumn 2012- Spring 2013. That would be the right time to end Chinese games with capitalism and increasing inequality, and take serious efforts to further destabilize the West and build up military power with obedient poor population.