(RTTNews) - China may raise banks’ reserve requirements next year rather than interest rates, an opinion piece in the official China Securities Journal said Wednesday. It also said maintaining stable asset prices would be given more attention next year.

Compared with the historical high of 17.5%, the newspaper report said, there is plenty of room to raise the requirement reserve ratio to 15% from current rate of 13.5%.

Moreover, the newspaper said an increase in China’s interest rates is less likely in the near future. It added that if China increases interest rates ahead of the U.S. tightening monetary policy, that could cause more international capital to flow in, pushing up Chinese asset prices and pressuring the yuan to appreciate. The newspaper report warned that the government should take actions to prevent asset price inflation.

Asset prices in China will likely have a lot more room to grow over the medium term, Chris Leung, an economist at DBS bank said in a note on Nov 23. However, it will not be a straight line but with intermittent disruptions from administrative measures, the economist said.

According to DBS, the most likely policy for China is to appreciate the yuan by around 3% per annum and keep monetary policy loose to support growth. The risk of asset price inflation will deepen and this would likely be a multi-year process, the economist noted.

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Posted in Categories: Economy, Releases, USA.

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