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China Monthly

Tighter Money Supply, Looser Fiscal Policy

By Adam Wolfe and Rachel Ziemba
Nov 03, 2010 4:15:00 PM | Last Updated

EXECUTIVE SUMMARY

China’s economy in Q3 grew at a pace slightly faster than we had expected, exacerbating inflationary pressures from a food supply shock. The People's Bank of China (PBoC) hiked rates in October, as RGE had anticipated, and looks set to maintain a tightening bias in Q4. We expect October’s inflation data to reinforce this bias, though consumer price inflation may have peaked. Money supply and credit are expanding faster than the government target, which may require an additional hike to banks’ required reserves next month. The October data are likely to confirm[...]

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