Chinese Premier Wen Jiabao (溫家寶) signaled for the first time that China would struggle to meet its 4 percent inflation target this year, underlining expectations that interest rates will rise further even as economic growth slows down.
Wen, who is traveling in Europe, was quoted by Hong Kong media yesterday as saying that while he sees the Chinese economy growing above 8 to 9 percent this year, it was hard for China to keep inflation under 4 percent this year.
“China’s financial situation will still be among the best in the world this year, with economic growth kept above 8-9 percent, and CPI [consumer price index] controlled under 5 percent,” Wen told Hong Kong television media during the England leg of his Europe tour.
Photo: Reuters
Wen’s latest comments sounded somewhat less sanguine than his remarks on Friday, when he said China’s inflation was firmly under control this year and should cool steadily. However, they might not alter investors’ thinking about monetary policy.
Many economists had assumed China would overshoot its 4 percent target given that the inflation rate has stayed well above that mark since January, and is expected to peak at 6 percent this month or or next month.
Inflation rose last month to a 34-month high of 5.5 percent.
Economists polled by Reuters this month predicted China would stay in a tightening mode, raising its benchmark lending rate by one-quarter of a percentage point and its deposit rate by a half-point this year.
The central bank has made clear that its focus is squarely on inflation.
It raised banks’ required reserve ratio to a record 21.5 percent earlier this month, hours after last month’s inflation data was released. The higher reserve ratio means banks have less money available for lending, which policymakers hope will help to cool growth and inflation.
China is keen to keep prices in check to preserve social -stability. Food and energy prices have been the primary culprits behind the steep inflation rate, and that tends to hit lower-income households the hardest.
The economy grew 10.3 percent last year and in the first quarter that pace eased to 9.7 percent.
China has claimed a breakthrough in developing homegrown chipmaking equipment, an important step in overcoming US sanctions designed to thwart Beijing’s semiconductor goals. State-linked organizations are advised to use a new laser-based immersion lithography machine with a resolution of 65 nanometers or better, the Chinese Ministry of Industry and Information Technology (MIIT) said in an announcement this month. Although the note does not specify the supplier, the spec marks a significant step up from the previous most advanced indigenous equipment — developed by Shanghai Micro Electronics Equipment Group Co (SMEE, 上海微電子) — which stood at about 90 nanometers. MIIT’s claimed advances last
ISSUES: Gogoro has been struggling with ballooning losses and was recently embroiled in alleged subsidy fraud, using Chinese-made components instead of locally made parts Gogoro Inc (睿能創意), the nation’s biggest electric scooter maker, yesterday said that its chairman and CEO Horace Luke (陸學森) has resigned amid chronic losses and probes into the company’s alleged involvement in subsidy fraud. The board of directors nominated Reuntex Group (潤泰集團) general counsel Tamon Tseng (曾夢達) as the company’s new chairman, Gogoro said in a statement. Ruentex is Gogoro’s biggest stakeholder. Gogoro Taiwan general manager Henry Chiang (姜家煒) is to serve as acting CEO during the interim period, the statement said. Luke’s departure came as a bombshell yesterday. As a company founder, he has played a key role in pushing for the
EUROPE ON HOLD: Among a flurry of announcements, Intel said it would postpone new factories in Germany and Poland, but remains committed to its US expansion Intel Corp chief executive officer Pat Gelsinger has landed Amazon.com Inc’s Amazon Web Services (AWS) as a customer for the company’s manufacturing business, potentially bringing work to new plants under construction in the US and boosting his efforts to turn around the embattled chipmaker. Intel and AWS are to coinvest in a custom semiconductor for artificial intelligence computing — what is known as a fabric chip — in a “multiyear, multibillion-dollar framework,” Intel said in a statement on Monday. The work would rely on Intel’s 18A process, an advanced chipmaking technology. Intel shares rose more than 8 percent in late trading after the
GLOBAL ECONOMY: Policymakers have a choice of a small 25 basis-point cut or a bold cut of 50 basis points, which would help the labor market, but might reignite inflation The US Federal Reserve is gearing up to announce its first interest rate cut in more than four years on Wednesday, with policymakers expected to debate how big a move to make less than two months before the US presidential election. Senior officials at the US central bank including Fed Chairman Jerome Powell have in recent weeks indicated that a rate cut is coming this month, as inflation eases toward the bank’s long-term target of two percent, and the labor market continues to cool. The Fed, which has a dual mandate from the US Congress to act independently to ensure