星展银行—中国加息可能性提高 04.20

Economics

CN: More rate hikes to come

DBS Group Research 20 April 2007

Revisions to interest rate and reserve requirement ratio projections
First quarter GDP growth accelerated to 11.1% YoY (in line with DBS forecast and market consensus of 11% YoY),
from 10.4% YoY in 4Q06 despite a Mar07 rate hike (the third since Apr06) and banks’ reserve requirement ratio
(RRR) being raised by 150bps this year alone (Chart 1). Indicators across the board have shown few signs of deceleration.
Persistently low real interest rates have encouraged both enterprises and depositors to take higher risks. The
Shanghai and Shenzhen A-share markets have risen 35% and 86% respectively so far this year.
Strong growth, an ever widening trade surplus, continued
rapid liquidity growth and higher inflation all point to
further tightening measures ahead. We have added
another 27bps interest rate hike to our