China is very likely to announce new interest rate hikes this year after two increases in 2010, which will add to the financial burdens of home buyers.
China raised its benchmark one-year lending and deposit rates to 5.81% and 2.75%, respectively on December 25, 2010.The government also raised rates in October.
Also, six times last year China ordered banks to set aside more money as reserves in a bid to control liquidity.
Yu Yongding, a researcher at the Chinese Academy of Social Sciences said the December hike will not be the last in this cycle of interest rate increases, as there is still a problem of excessive liquidity.
English.News.cn reports that Chinese banks extended RMB7.44 trillion (US$1.12 trillion) of loans in the first 11 months of 2010, just shy of the government’s target of RMB7.5 trillion. The country’s trade surplus in November reached almost US$23 billion.