Beijing, China (CNN) – China’s central bank surprised the market with its timing of an interest rate hike Tuesday. The 0.25% hike is the fourth since October as the country tries to rein in inflation.
From Wednesday, the one-year deposit rate will stand at 3.25% and the one-year lending rate at 6.31 %.
The announcement came on a Chinese holiday and ahead of inflation data for March, being released next week, leading to suggestions it was a pre-emptive strike to soften the market for the figures.
Qing Wang, economist with Morgan Stanley, said the hike has “a strong signalling effect.” He is picking consumer prices to come in at 5.2% year-on-year for March due to rising prices of food, fuel and housing.
China, like other economies around the globe, is caught between a need to rein in inflation and promote growth. But as the price of oil and other commodities continues to climb, hiking is winning out.
The European Central Bank could be next, with expectations it will raise interest rates by a quarter of a percentage point Thursday. It would be its first hike since 2008.
Dariusz Kowalczyk, of Credit Agricole CIB, expects the Chinese government to continue increasing its interest rates due to the rising prices. "Bank rates need to be higher than inflation," he said. "Otherwise, people will invest in houses and equities, leading to asset bubbles." He warns it could slow China’s growth.
But others believe rates could have peaked as the economy slows and inflation flattens out. Mark Williams, senior China economist with Capital Economics, thinks Chinese policymakers will opt to control credit growth by ordering banks to keep more cash in reserve.
The hike follows Chinese Premier Wen Jiabao’s March announcement to his nation's legislature that combating inflation would be the government's top priority in 2011.
With so many policymakers looking to fight inflation this year, how worried are you about rising prices?
Beijing, China (CNN) - I had thought China's situation was significantly different from the Middle East because the government has been successful in bringing better living standards to the people here. You would think that would make Beijing feel less vulnerable. But perhaps all authoritarian regimes react the same.
My crew and I went out Sunday afternoon to see if there was going to be a public response to anonymous calls on the Internet to stage protests and begin a Tunisia-style "Jasmine Revolution" in China. When we arrived at the shopping district Wangfujing, the designated protest location, hundreds of uniformed and plain clothes police patrolled the area. We waited to see if any protesters would show up. But after half an hour, there was no obvious demonstration.
We started shooting a short report and within minutes the police descended upon us. My cameraman was led away. My producer, Jo Kent, started filming me with a small camera when a plain clothes policeman batted it out of her hand. He and several other officers started shoving us around. Three bulky men grabbed my petite female producer. Three more nabbed me, holding my arms tight. We offered to walk on our own but the officers pushed, at times lifting us off the ground, before dragging us to a bank branch where police were already detaining other journalists.
Beijing, China (CNN) – Peng Gaofeng appeared exhausted, but the migrant worker couldn't have been more content.
After three years of searching for his son, Wenle, he and his child were playing together at the offices of internet company Sina in Beijing. Peng traveled here last Friday to express his gratitude to some of the people behind China's version of Twitter for helping him bring his son back home. "Without the Internet, it would be too difficult - nearly impossible - to find my child," he told me.
Across the Middle East, social media is fueling political change. In China, it is fanning civic campaigns. Chinese bloggers are encouraging private citizens to fight injustices such as child trafficking. People are taking photos of street kids and uploading them on blogs for hundreds of millions of people to see and potentially identify them as missing children. And the Internet censors aren't stopping them.
Deng Fei, a reporter turned activist, says saving children is an indisputably worthy cause. Thousands are kidnapped every year here, he said, to be sold to factories or parents who want a son. Deng says the Internet is a game changer in this regard. He said, for many distraught parents, searching for one kidnapped child in a country of 1.3 billion people is seemingly futile and often costly. Deng said, "Tweeting changed all that. It spreads information openly, quickly, and cheaply."
Beijing (CNN) - When it comes to labor rights, collective bargaining is forbidden in China. But if you're talking shopping, it's all the rage.
Group buying, or tuan gou in Chinese, is wildly popular across the country. Groupon of the U.S. isn't here yet but over a thousand local websites are. These sites offer similar services– hooking up China's 140 million online shoppers looking to buy the same thing and negotiate hefty discounts.
The Chinese have taken the concept and run with it. Sites like Lashou, Meituan, and Teambuy are selling everything from cars to home furnishings, to the homes themselves in bulk.
Beijing, China (CNN) - In a battle between the Chinese yuan and the U.S. dollar, which currency would you bet on? Currently, the dollar reigns supreme in the world of trade and finance. But HSBC economist Qu Hongbin told me, longer term, he would bet on the yuan.
The Chinese government is making a big push to raise the stature of its currency. Hardly anyone uses it outside China. But, with China's economy now the second largest, authorities here are actively encouraging business people to use the yuan. The government is allowing Chinese companies to conduct some international business in yuan. It is allowing yuan trading in Hong Kong and, to a much smaller degree, New York. It is also encouraging companies to issue yuan-denominated - or "dim sum" - bonds.
The yuan's value is still determined by the Chinese government, raising tensions with Beijing's trading partners, including the U.S. Even so, Qu believes China's recent moves will raise the yuan to be among the top three currencies in global trade. "Within five years' time," he said, "one third of China's cross border trade will be settled in yuan rather than dollars."
Chinese President Hu Jintao called the dollar a "product of the past" ahead of his meeting with U.S. President Barack Obama. Will the yuan be the currency of the future?
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