SocGen: China Is Heralding The Beginning Of A Huge Tightening Wave All Across Asia

This morning, China expressed concerns that tomorrow’s inflation number was going to surprise to the upside by indicating the country is ready to raise rates.

The country also raised bank reserve requirements, in an effort to stymie lending.

But all this tightening is part of a broader plan by China to get its economy under control.

China’s boom has been well advertised, but it has been brought on by low interest rates and evidenced in a real estate boom.

Sound familiar, and somewhat worrying?

It’s not just China getting in on the tightening game, however. The whole region is keen on it.


Photo: Societe Generale

You can see India is somewhat in the lead in terms of tightening, because its inflation rate has been so high. Indian inflation was at 8.62% in September.

Australia has too been quicker than China in raising rates. The country’s central bankers are concerned about the potential housing bubble there.

But China’s increase in rates has only begun.

Societe Generale expect China’s central bank to tighten, but mildly.

If that tightening looks anything like the U.S. from 2004 through 2006, could it reveal the real estate ghost towns underneath the Chinese growth story’s cover?

U.S. Interest Rate

Photo: Trading Economics

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