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Donate 1 pip for the People of Thailand

noreply@blogger.com (FXOpenIndia) — Thu, 27 Oct 2011 15:25:00 +0000

Bangkok faces the highest flood levels yet and is preparing for the worst, the governor of the Thai capital told CNN Wednesday.

Residents are urged to flee the rising floodwaters, which have already forced the closure of Bangkok's Don Muang airport and the evacuation of flood victims who have taken refuge there.

UK CPI inflation rate rises to 4.4% in July

noreply@blogger.com (FXOpenIndia) — Wed, 17 Aug 2011 06:39:00 +0000

The rate of Consumer Prices Index (CPI) inflation rose to 4.4% from 4.2% in June, according to figures from the Office for National Statistics (ONS).

The Retail Prices Index (RPI) measure was unchanged at 5%.

Clothing and footwear prices measured for CPI saw their biggest annual increase since records began in 1997.

Bank of England governor Mervyn King has written another letter to the chancellor to explain why CPI inflation remains well above the 2% target rate.

The governor must write a letter every three months if CPI is more than one percentage point above or below the target.

He blamed the continuing high inflation rate on, "the increase in the standard rate of VAT to 20%, and past increases in global energy prices and import prices".

He also stressed that "the big risks currently facing the UK economy come from the rest of the world".

The Bank of England said last week that it remained confident that inflation would return to its target level in the next two years.

source: BBC

US overall trade deficit is the highest in 32 months

noreply@blogger.com (FXOpenIndia) — Thu, 11 Aug 2011 13:47:00 +0000

The trade gap rose from an upwardly revised $50.8bn in May, the Commerce Department said, a bigger rise than analysts had expected.

Industrial goods accounted for much of the fall in exports.

The figures come amid growing concerns about the US economic recovery and the country's high debt levels.

Total exports for the month fell by $4.1bn to $170.9bn, while imports fell by $1.9bn to $223.9bn.

Consumer goods exports actually increased, while cars and car parts were virtually unchanged from the previous month.

Imports and exports of services were virtually unchanged.

The US's deficit with China grew to $26.7bn, up from $25bn in May, while that with the European Union rose by $1bn to $9.8bn.

The US recorded a trade surplus with Hong Kong, Australia, Singapore and Egypt.

Source: BBC News

US lost an A in ratings

noreply@blogger.com (FXOpenIndia) — Mon, 08 Aug 2011 15:04:00 +0000

NEW YORK (CNNMoney) -- The Triple-A debt club just got even more exclusive: Late Friday, the United States was booted out of a prestigious group of countries that boast a spotless credit rating.
Now only 15 countries (and the very small Isle of Man) hold the triple-A rating from both Standard & Poor's and Moody's.
Canada, France, Germany, Norway, Sweden and Switzerland are among those with the undisputed stamp of approval -- so is Isle of Man, a British crown dependency off the United Kingdom's west coast, and Singapore (both of which are too small to see on our CNNMoney map above.)
The triple-A rating enables nations to borrow funds at a low cost, because their governments are considered stable and their bonds safe.
S&P downgrades U.S. credit rating
The United States for example, has seen its dollar become the world's No. 1 reserve currency because its bonds are held in such high regard by investors. They're backed by the "full faith and credit of the U.S. government" -- which until now, has never seriously been called into question.
On Friday, S&P downgraded the United States to AA+, an investment grade level just one notch below triple-A. It marked the first time the world's largest economy has been downgraded, since Moody's first gave the country a credit rating in 1917.
S&P cited estimates that U.S. government debt would balloon to 79% of the size of the entire U.S. economy by 2015, and 85% by 2021 -- a level S&P says is consistent with AA+ rated countries.
In comparison, estimates from the International Monetary Fund show triple-A rated Canada's debt is likely to only rise to 34% of its economy by 2015, and Germany's is forecast to rise to 52%. (The IMF does not publish forecasts out to 2021).
Your money in a AA-rated U.S.
The debt of Belgium, another AA+ rated country on S&P's list, is expected to grow to 85% of GDP by 2015, according to the IMF.
Abu Dhabi, with a AA rating, is just a step below AA+. Also in that group are Bermuda, Chile, Qatar, Slovenia and Spain.
Meanwhile, China -- the world's second largest economy -- is rated two notches below the United States, at AA-.
Greece -- the lowest rated country in the world -- is forecast to see its debt well exceed the size of its economy, at 149% the size of its GDP in 2015.

Will I Get my Credit Line extended?

noreply@blogger.com (FXOpenIndia) — Wed, 27 Jul 2011 04:09:00 +0000

Will US Senate approve the Debt Ceiling?

noreply@blogger.com (FXOpenIndia) — Tue, 26 Jul 2011 15:52:00 +0000

NEW YORK (CNNMoney) -- The dispute du jour in the debt ceiling debate? How long a debt ceiling increase should last.

The two sides -- with a week to go before the Treasury Department says it may run short of money to pay all the government's bills -- have starkly different answers to the question.

President Obama and Democrats want an increase to last until 2013.

To that end, Senate Majority Leader Harry Reid has proposed a $2.7 trillion debt reduction plan in exchange for a $2.7 trillion increase in the debt ceiling. Such a package would not include any tax increases or entitlement cuts.

House Republicans, however, say they don't want to give Obama what they call "a blank check" just so he can avoid another debt ceiling fight during his re-election campaign in 2012.

They would rather the $14.3 trillion ceiling be raised in two steps.

The first increase of up to $1 trillion would last about six months and be accompanied by $1.2 trillion in savings achieved by cutting and capping domestic and defense spending over 10 years.

To get the debt ceiling increased by another $1.6 trillion after that, Congress would need to enact an additional $1.8 trillion in savings that don't include any tax hikes. Those savings would be chosen by a new joint committee, and the House and Senate would have to vote on the committee's recommendations without amendment.

If they vote down the committee's proposals, the debt ceiling couldn't be raised.

U.S. credit: Raising the debt ceiling isn't enough

Treasury Secretary Tim Geithner on Sunday said he doesn't have a problem with a two-stage approach to debt reduction but worries that dragging out the debt ceiling decision could be dangerous.

"What we cannot do because it would be irresponsible is to leave the threat of default hanging over the economy," he told CNN's Candy Crowley on the "State of the Union."

Increasing the debt ceiling through the next election -- and removing the fear of default until then -- will help economic growth in the second half of this year, Geithner argued.

What certainly could impede economic growth is a credit rating downgrade, which the credit ratings agency Standard & Poor's has threatened to do in the next three months.

S&P hasn't said specifically that it would downgrade the United States if the initial debt-ceiling increase was short-term.

But it did note that continued use of the debt ceiling as a political bludgeon might trigger a downgrade.

"We may also lower the long-term rating and affirm the short-term rating if we conclude that future adjustments to the debt ceiling are likely to be the subject of political maneuvering to the extent that questions persist about Congress' and the administration's willingness and ability to timely honor the U.S.' scheduled debt obligations," the agency said earlier this month.

On the other hand, S&P and the other ratings agencies have said they won't be pleased if lawmakers fail to pull together a credible, substantial debt reduction package.

That's one reason why Douglas Holtz-Eakin, a former Congressional Budget Office director who now runs a Republican think tank, doesn't think the prospect of a short-term increase followed by a longer one would damage the economy.

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noreply@blogger.com (FXOpenIndia) — Thu, 21 Jul 2011 05:29:00 +0000

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Where will EURUSD be heading???

noreply@blogger.com (FXOpenIndia) — Mon, 15 Nov 2010 08:02:00 +0000

We are seeing increased volatility in currency markets due to growing worries in Eurozone and unsettling harmony between G-20 nations. Last week G-20 summit failed to reach agreement on currencies, at the same time China, Japan and Germany criticised US of devaluing its currency by printing more money.

Earlier this month Fed decided to print $600Bn over next several months in anticipation that it will likely to aid US economy. Most analyst are worried that these dollars will trickle through to emerging economies and cause asset bubbles, appreciate their currencies and increase inflation.

EURUSD this week is going to be affected by decision from Ireland if they are going to need help from EU to deal with debt issue. Other EU countries are insisting on Ireland to accept bailout to increase confidence.

Looking at weekly charts EURUSD dropped sharply from Weekly upper trendline last week and looking to head lower. If Ireland refuses to accept help then EURUSD could fall below 1.3500 and find support at 1.3300

Mother of Spike for EURUSD - about 100 pips in one minute

noreply@blogger.com (FXOpenIndia) — Thu, 04 Nov 2010 03:49:00 +0000

Global Forex Market

noreply@blogger.com (FXOpenIndia) — Sun, 31 Oct 2010 03:18:00 +0000

AT the Group of 20 nations meeting, finance ministers from industrialised and developing economies acknowledged a “fragile and uneven” global economic recovery and pledged to avoid employing competitive depreciation of currencies.

Nonetheless, discussions on maintaining sustainable levels of trade balance, a major determinant of exchange rate levels, concluded with ministers agreeing only to “indicative guidelines” with the IMF chosen to be the referee.

With respect to rebalancing the global economy, IMF is set to release specific critiques of countries’ policies at the upcoming Seoul Summit on Nov 11 and 12. Without enforceable mechanisms, many Asian countries were seen reverting to capital controls and currency interventions during the week. Bank of Korea, for instance, highlighted that measures to mitigate capital flows may be “useful”, while China’s Central Bank set CNY’s reference rate level at 6.6912 against USD, the weakest level since September.

On another note, emerging markets were allocated a bigger voting and financial stake, with Europe ceding two of its nine seats on the 24-member IMF board.

Federal Reserve of New York surprised markets by prompting bond dealers to estimate the size of asset purchases, leading investors to believe that the next quantitative easing measure would be in line with market expectations.

The Wall Street Journal’s survey of economists revealed that the Fed is poised to purchase about US$250bil per quarter, and may continue until Q2 2011, totalling to US$750bil in all. The expected amount pales in comparison to the US$1.75 trillion deliberated during the financial crisis. Fresh optimism resurfaced during the week, following a series of better-than-expected economic data.

Durable goods orders reversed a previous decline, rising by 3.3% in September, indicating that companies are likely to remain on an expansionary mode.

In the same month, housing sector posted gains, with new home sales rising by 6.6% over a month ago, compared to 1.1% in August.

Australia’s CPI rose by 2.8% (y-o-y) in the third quarter, lower compared to 3.1% in the previous quarter. Moderating inflation pressures spurred expectations that the Reserve Bank of Australia may keep the key interest rate unchanged, prompting AUD/USD to plunge by 1.3% during the week.

Growth in Asian economies seems to be moderating, following recent appreciation in the region’s currencies. South Korea reported a Q3 GDP growth of 4.5% (y-o-y) from 7.2% in Q2, with the slowdown attributed to declining export levels. In Taiwan, industrial production growth halved to 12.2% over a year ago, the slowest growth rate in 11 months.

On another note, in a move to address global economic rebalancing, China’s vice-commerce Minister indicated that the nation’s trade surplus would “definitely” be narrower compared to levels in 2009.

Price Movement analysis for EURUSD

noreply@blogger.com (FXOpenIndia) — Tue, 12 Oct 2010 10:12:00 +0000

Private bankers advise: "just say no to gold"

noreply@blogger.com (FXOpenIndia) — Wed, 06 Oct 2010 06:59:00 +0000

Reuters) - Gold is all the rage as investors flee uncertain markets and worry about inflation, but some bankers to the very rich do not take a shine to the precious metal.

Gold prices have spiked 22 percent this year, with investors sending gold futures to record highs of more than $1,337 on Tuesday. The weak dollar, volatility in currency markets and deficit worries boosted demand for the metal as a safe store of value.

Private banking executives, say gold's glittering price tag is or should give their wealthy clients pause.

"We're not really recommending gold right now, just because it's at a level where there are things driving it beyond the types of things (where) that we can add a lot of value," U.S. Trust President Keith Banks said at the Reuters Global Private Banking Summit in New York.

Instead, Banks said gold prices may reflect the surge in demand for gold exchange-traded funds, listed shares that purchase physical gold, and broader worries about government spending leading to rapid price inflation.

"So what exactly is leading to gold at the levels it's at? Your guess is as good as mine," said Banks, who runs the Bank of America (BAC.N) private bank unit.

The SPDR Gold Trust ETF (GLD.P), which lets retail investors more easily bet on gold, has surged 21 percent this year to a record high of 130.71. The fund shares are up more than 50 percent since the end of 2008.

Wealthy families are more interested than ever in owning commodities such as metals and energy, assets that do not move up and down in step with stock and bond prices. They also offer a hedge against inflation, since their values rise with prevailing prices.

There are many critics who warn gold is the latest frenzy and is doomed to collapse.

"With gold being over $1,300 an ounce now, you have people who are asking whether, first, 'Is it another bubble?' and then, 'How far can I ride that bubble?,'" Credit Suisse Americas private banking chief Anthony DeChellis said.

Bessemer Trust Chief Executive John Hilton said his New York wealth management firm allocated a single-digit percentage of its real return fund into gold.

For some clients, he acknowledged, that was not enough.

"We have clients who have made very large individual purchases of gold. Sometimes they'll just say they're doing it, and they'll ask us if we can hold it for them, but we haven't made any large purchases of gold directly for our clients," said Hilton, whose firm manages about $56 billion.

U.S. private bankers, to be sure, also told the Summit they do recommend investments in a range of commodities.

"We have been a proponent of having an exposure to commodities. The bank is optimistic about the economic recovery, and commodities is a way to play global growth," said U.S. Trust's Banks.

U.S. Trust formed its Specialty Asset Management group, which buys hard assets on behalf of its wealthy clients -- anything from real estate, timberland and farmland to oil and gas properties. U.S. Trust will buy and sometimes hire people to operate these assets.

The business, which manages about $16 billion of assets, is seeing strong interest from clients, he said.

"These are assets that I think people can feel good about, that are probably not going to track the more typical areas, and it's just a unique opportunity," Banks said.

(Reporting by Joseph A. Giannone. Editing by Robert MacMillan)

Economic Calender

noreply@blogger.com (FXOpenIndia) — Wed, 06 Oct 2010 02:05:00 +0000

House passes bill aimed at Chinese Yuan

noreply@blogger.com (FXOpenIndia) — Thu, 30 Sep 2010 03:20:00 +0000

By Doug Palmer and Paul Eckert

WASHINGTON | Wed Sep 29, 2010 7:59pm EDT

(Reuters) - The House of Representatives on Wednesday passed legislation to pressure China to let its currency rise faster, fanning the flames of a long-running dispute over trade and jobs.

The bill passed by a vote of 348-79. Both Democrats and Republicans, speaking just over a month ahead of mid-term elections in which the economy has taken center stage, said it was time to take action to support U.S. jobs.

The House vote, with about 100 Republicans joining Democrats to pass the bill, cleared the legislation for action in the Senate.

However, any vote in the Senate won't come until after congressional elections on November 2 when the U.S. political landscape could be greatly changed, and odds have appeared to be against passage in the Senate.

The bill treats China's exchange rate as a subsidy, opening the door to extra duties on Chinese goods entering the United States, some of which are already subject to special levies.

"China's persistent manipulation of its currency contributes to the outsourcing of American jobs and poses a very serious problem that requires real action," said House Ways and Means Committee Chairman Sander Levin.

noreply@blogger.com (FXOpenIndia) — Tue, 28 Sep 2010 20:27:00 +0000

noreply@blogger.com (FXOpenIndia) — Mon, 27 Sep 2010 13:27:00 +0000

noreply@blogger.com (FXOpenIndia) — Thu, 23 Sep 2010 02:18:00 +0000

Daily Calender of Events

noreply@blogger.com (FXOpenIndia) — Wed, 22 Sep 2010 08:28:00 +0000

U.S. yuan raid idea is fascinating but flawed

noreply@blogger.com (FXOpenIndia) — Wed, 22 Sep 2010 04:03:00 +0000

A top think tank has advised Washington to declare a currency war on China. The proposal from the Peterson Institute to force up the value of the yuan sounds fascinating, but a direct attack may be hard to pull off in practice. Beijing is likely to respond better to multi-lateral persuasion.

Peterson has called for a U.S. raid on the forwards market for the yuan, which it believes has to rise at least 25 percent against the dollar. The timing is good. U.S. lawmakers are already threatening to slap tariffs on Chinese imports, and the 1.5 percent rise of the yuan in the past two weeks hardly looks enough.

Targeting China’s currency directly goes to the heart of the problem, whereas duties only address exports from China on a product by product basis. Foreign traders can’t buy yuan in large quantities because of China’s strict capital controls, so the next best thing is “non-deliverable” forwards.

These forwards, where no yuan actually change hands, don’t directly impact the exchange rate. But a big rise in their value could give China a headache. If forwards seemed to price in strong appreciation, it could attract speculative inflows and make China’s asset bubbles worse.

While this idea is fascinating, the execution would be tricky. The size of the forwards market is just $1 billion on a volatile day. The United States could not intervene in such a small market without being noticed. That would risk inviting counter-trades by arbitrageurs, who might sell forwards even as the United States buys.

Beijing might also inflict losses on would-be raiders. If it resolutely fixed the yuan below the forward price, the trader would make a loss. Washington may thus struggle to find investors willing to do its bidding. Unlike Beijing, it doesn’t control its financial institutions, so can’t tell them to carry out unrewarding trades.

The biggest problem with Peterson’s idea, though, is that Washington can’t really justify manipulating the yuan when it is blaming Beijing for the same thing. Two wrongs don’t make a right. Transparent, multi-lateral pressure looks a better way to call for change.

Japan intervenes to weaken yen

noreply@blogger.com (FXOpenIndia) — Thu, 16 Sep 2010 02:38:00 +0000

Japan's bold strike to weaken its currency on Wednesday sent the yen tumbling more than 3.0 percent against the U.S. dollar, but unsettled allies who feared the unilateral move may complicate efforts to restore balanced global economic growth.

Japan unleashed waves of yen selling, estimated at more than $20 billion (12.8 billion pounds), which spread from Tokyo through New York trading. The sales, conducted alone without help from its Group of Seven partners, are expected to continue in the days ahead, Japanese news agency Nikkei reported.

Japan's first intervention in global currency markets in six years was not a complete surprise given that officials had tried to talk down the currency in recent weeks after it hit a 15-year high against the dollar.

But the timing and go-it-alone approach drew criticism. A top European official said coordinated action was a more effective means of adjusting exchange rates. And as the U.S. Congress began hearings on China's currency policy, a U.S. lawmaker called Japan's move "deeply disturbing."

DOUBTS REMAIN

Doubts remained though about how effective Japan's unilateral yen selling spree might be. A 15-month solo effort by Switzerland which ended earlier this year did little to tame the Swiss franc.

Like Japan, most advanced economies are grappling with slow growth at home, making exports an economic imperative. Japan's move heightened concerns that countries would launch a round of competitive devaluations to give their own exporters an edge.

U.S. lawmaker Sander Levin, who chairs the congressional committee examining China's currency policy, blamed Beijing for Japan's "deeply disturbing" intervention. Levin and many other U.S. lawmakers say China keeps the yuan artificially low, boosting its exports at the expense of U.S. companies.

"What's happening is that China's actions have affected Japan, and now Japan's actions affect us," he said.

Andrew Busch, global currency strategist at BMO Capital Markets in Chicago, said Japan's move would make it more difficult for Congress to get its message through to China.

"How can the Japanese get a pass to intervene when the Chinese are being criticized for essentially the same activity?" he said.

Some emerging markets were also wary of losing out in a beggar-thy-neighbour round of devaluations. Brazilian Finance Minister Guido Mantega said he would not sit on the sidelines "watching the game" while other countries weakened their currencies at the expense of Brazil.

"We're going to take appropriate measures to stop the real from appreciating," Mantega said in Rio de Janeiro.

FLYING SOLO

The EU offered some sympathy for Tokyo's plight, saying too rapid yen appreciation could threaten economic recovery, but a top official said coordinated action would have been better.

"Unilateral actions are not the appropriate way to deal with global imbalances," Jean-Claude Juncker, chairman of the Eurogroup of euro-zone finance ministers, said when asked about Japan's intervention.

U.S. officials at the Federal Reserve, White House and Treasury declined to comment.

After this week's victory in a party leadership contest, Japanese Prime Minister Naoto Kan appeared to be stepping up efforts to wrench the country out of deflation by targeting the yen's strength which has weighed on stock prices and corporate profits.

The Japanese Prime Minister told reporters that Wednesday's intervention had some effect but the government was watching foreign exchange moves with a sense of urgency.

Aside from apparently acting alone, Japan faces the stiff task of trying to weaken the yen while other major central banks such as the U.S. Federal Reserve mull more steps to ease monetary policy, which could weigh on their currencies.

The dollar rose to 85.72 yen from its 15-year low beneath 83 yen, its biggest daily gain in nearly two years. It was last up 3.1 percent at 85.60 yen.

MAKING FRIENDS

The Japanese currency's rise had brought it closer to its record peak of 79.75 per dollar set in 1995, squeezing exporters' profits, but Wednesday's yen drop helped push Tokyo stock market's Nikkei average up 2.3 percent.

It also pleased Japanese exporters, many of whom had expected the yen to average 90 per dollar this fiscal year.

"We applaud the move by the government and the Bank of Japan to correct the yen's strength," Japan's No. 2 automaker Honda Motor Co said in a statement.

Honda has pencilled in 87 yen per dollar in its estimates for the fiscal year to March 2011.

Billionaire financier George Soros said Japan was right to act to bring down the value of the yen.

"Certainly, they are hurting because the currency is too strong so I think they are right to intervene," Soros said at a Reuters Newsmaker event.

Japanese Finance Minister Yoshihiko Noda, who will reportedly keep his post after a cabinet reshuffle, indicated Tokyo acted alone. Noda said he was in contact with authorities overseas, and analysts expected Japan to be spared international criticism.

Unlike previous forays, the Bank of Japan will not drain the money flowing into the economy as a result of the yen selling, sources familiar with the matter said.

That indicated the central bank plans to use the sold yen as a monetary tool to boost liquidity and support the economy.

Authorities that sell their own currencies to weaken them often issue bills to "sterilise" the funds and keep the excess money from becoming inflationary. In Japan's case, it wants to promote inflation since the economy has been dogged by deflation for much of the past decade.

(Reporting by Tokyo newsroom; Additional reporting by Tara Joseph Hui in Hong Kong, Doug Palmer and Paul Eckert in Washington; Writing by Kevin Plumberg and Emily Kaiser; Editing by Mike Peacock and Neil Stempleman)

China's forex reserve growth rate slows down

noreply@blogger.com (FXOpenIndia) — Thu, 16 Sep 2010 02:16:00 +0000

China's foreign exchange (forex) reserve expanded by US$417.8 billion last year, $44.1 billion less than in 2007, the People's Bank of China (PBOC) said yesterday (January 13).

The central bank also said the supply of money and loan growth picked up in December, reflecting the government's effort to boost the economy through proactive fiscal and moderately loose monetary policies.
The country's forex reserve increased by less than $45 billion in the fourth quarter to $1.95 trillion by the end of 2008, a PBOC report said.

The reserve growth slowed over the months last year. The total reserve was up 27.34 per cent over 2007, the lowest rate since 2001.

The growth rate from January to September was 32.92 per cent and that from January to June 35.37 per cent.
The fall in the growth rate is the result of a shrinking trade surplus and a possible slowdown in the inflow of "hot money", analysts said.

But despite the slowing of the reserve growth for the whole of last year, the monthly reserve for December increased $61.3 billion, up $30 billion year-on-year, the PBOC said. The fourth quarter's reserve, though, dropped compared to the same period in 2007.

Guo Tianyong, a Central University of Finance and Economics professor, said expectations that the yuan would weaken and extraction of capital from the domestic market to help stabilise the supply of capital in the West were major factors that caused a year-on-year drop in the fourth quarter reserve.
December saw a sharp rise in the reserve as the Central Economic Work Conference vowed early that month to keep the yuan stable--at a reasonable and balanced level--he said. That reversed expectations of a weaker yuan.
The government has been worried over "hot money" being brought into the country by businesses and individuals speculating on the continuous rise of the yuan. It fears that it would create asset bubbles and increase the pressure for the yuan's revaluation, making the domestic financial system vulnerable.
The flow of "hot money" into the country, however, began to dry up after some developed countries de-leveraged their financial markets to overcome the global financial crisis, the analysts said.
Money supply

As the money supply picked up in December, M2, which includes cash and all types of deposits and indicates overall liquidity in the financial system, increased 17.8 per cent year-on-year. It had risen 14.8 per cent in November.

Banks extended 772 billion yuan in new loans in December, compared to 476.9 billion yuan in November. That helped the annual loan growth to accelerate to 18.76 percent in December, up 2.66 percentage points year-on-year.

The annual growth of money supply including cash in circulation and demand deposits, or M1, was 9.06 per cent in December compared to a 6.8 per cent in November.

The growth suggests the recent aggressive cuts in banks' reserve requirement ratios have helped improve liquidity, said Jing Ulrich, chairman of China equities at JPMorgan.

The PBOC has cut interest rates five times, totaling 2.16 percentage points, since September. It has reduced the amount of deposit that lenders have to set aside to boost liquidity, too.
Earlier, policymakers said the government would try to ensure a 17 per cent M2 growth this year despite the economic slowdown.

The moves, the analysts said, are expected to encourage banks to issue new loans, which are crucial for the government to deliver the $586-billion stimulus package.

But some economists fear that increased lending could lead to a spurt in bad loans because returns from infrastructure projects are less predictable than what they were a decade ago. Ten years ago, the government began building a wide network of highways and other infrastructure as part of its fight against the Asian financial crisis.

"The boost to the economy is obvious in the short term," said Ha Jiming, an economist with China International Capital Corporation. "But we need to keep an eye on the risk for lenders."

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