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China: We Need To Tighten I R Screw Further

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More tightening needed, top Chinese economist says

May 13, 2006: 7:55 AM EDT

BEIJING (Reuters) -
China needs to tighten policy further by raising interest rates again
, increasing banks' reserve requirements and permitting a more flexible exchange rate, an influential government economist said on Saturday.
The People's Bank of China (PBOC) raised its benchmark one-year lending rate for the first time in 18 months on April 27, to 5.85 percent from 5.58 percent, after annual economic growth accelerated in the first quarter to 10.2 percent.
The central bank also instructed banks to rein in credit, while the National Development and Reform Commission (NDRC), the top planning agency, reinforced curbs on investment in a clutch of sectors suffering excess capacity.
Ba Shusong, vice-head of the financial research institute at the Development Research Centre, a think-tank under the State Council,
China's cabinet, said the rate rise had had only an announcement effect and no real impact on the economy
The measures taken by the government are only a first step
. I expect more tightening measures in the future," he told a financial forum.

The shocks to the bourses may be the first reactions to the surging IR moves by the major players in the world economy. IR sensitive assets are under threat and the good times of HPI and MEW are over.

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