Deutsche Bank: People's Bank Of China Wants To Raise Rates, But It's Beijing That Won't Let Them

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Why did China suddenly decide not to hike interest rates? And then go on to increase its inflation target to 4 per cent for 2011?

Top Deutsche Bank economist Ma Jun says it’s because the central government is overriding the central bank, according to China Business News.

“It has been difficult to reach consensus on a rate hike,” Ma said in an interview in Hong Kong yesterday, noting that “the People’s Bank of China is not the final decision- maker of monetary policy.”

Rate decisions tend “to represent different interests in the economy, not just the inflation control objective,” said Ma, the No. 1 China analyst in polls by the magazine Institutional Investor and the top China economist in an Asiamoney survey.

This from a central government that jails suppliers over rising prices while writing editorials in support of the stock market. So far markets like the news, but concerns will move back to overheating.

Check out Morgan Stanley’s guide to the inflation threat in emerging markets >

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