China'S Monetary Policy Is In A Dilemma, &Nbsp; Interest Rate Increases Directly Refer To "Imported Inflation".

However, when external liquidity brings inflationary pressure and asset bubbles, the domestic economy is also constrained by demand and policies.

Raising interest rates directly refers to "imported inflation".

With the approaching of the Fed's Conference on interest rates, there are various loose volume projections on the market, ranging from US $500 billion to US $2 trillion.

Goldman Sachs believes that the Federal Reserve will carry out quantitative easing in batches, and expects a total of $1 trillion in the short term for the first time to $500 billion.

The Fed has invested $1 trillion and 700 billion in the first round of quantitative easing.

The recovery of China's emerging economies is expected to be more optimistic than that of Europe and the United States and the developed economies in Europe and the United States will pour large quantities of capital into emerging markets. The two quantitative easing policy in the US will surely increase this trend.

"In the case of global monetary liquidity, we should be vigilant against asset bubbles in emerging markets. Monetary tightening is imperative."

Lu Zheng commissar, a senior economist at Xingye Bank, told the economic reference daily that the central bank is also necessary to continue to raise interest rates to control inflation expectations due to persistent high inflation pressure in China.

If C PI exceeded 4% in October, it is likely that the central bank will raise interest rates again.

In the fourth quarter, there is also a possible overall adjustment of the 1 to 2 reserve ratio.

Lu commissar believes that there may be more frequent policy moves in the fourth quarter to ensure that the 7 trillion and 500 billion credit and M 2 growth target for the whole year is finally achieved.

Guo Tianyong, director of the banking research center of Central University of Finance and Economics, also believes that if C PI continues to rise, it is not ruled out that the central bank will continue to use quantitative tools to curb inflation during the year. The possibility of raising interest rates and adjusting the deposit reserve ratio will all exist. The relevant departments of the NDRC and other relevant departments may also curb inflation by regulating the prices of agricultural products.

Raising interest rates or increasing the pressure of real economy

However, raising interest rates is also a double-edged sword. While achieving the goal of "stabilizing prices", it may hurt other monetary policy objectives.

"If we choose to raise interest rates, it will be contrary to the policies of the developed countries to maintain interest rates unchanged or even reduce interest rates, and the real economy may be more stressful, the profits will shrink faster, and even a large area of losses and production will stop. The pressure of employment will increase dramatically."

Wang Yong, a professor at Zhengzhou Training Institute of the people's Bank of China, pointed out.

More importantly, continued interest rate hikes are not conducive to the adjustment of China's economic structure.

"Raising interest rates will inhibit potential consumption and investment, while China's economic restructuring is to encourage consumption and increase domestic demand, so the continued interest rate increase will be contrary to this policy expectation."

Zhao Qingming, senior researcher at China Construction Bank, said.

Yu Ze, School of economics, Renmin University of China, pointed out that domestic liquidity needs to be tightened, and monetary policy easing from loose to healthy and gradually tightening, but it is not advisable to further raise interest rates in a short time.

Further increase in interest rates has a certain inhibitory effect on the economy and is not conducive to the stabilization of the current economy.

But if the central bank does not raise interest rates, if inflation is not controlled, China's inflationary pressure and asset bubbles will certainly intensify further, which will further threaten China's long-term economic development.

Chen Wei, a macroeconomic strategist at national securities, recently quoted an example from Japan in the media interview that, because the yen was under pressure of appreciation, Japan did not put too much pressure on the export enterprises to maintain its monetary policy.

The results show that the longer the duration of the situation, the stronger the speculative attitude of Japanese enterprises. So in 80s of last century, with the rapid appreciation of the yen, Japanese enterprises invested heavily in real estate and stock market. Later, it was too late to raise interest rates, which left a great calamity, which led to Japan's loss to ten years.

In addition, some economists interviewed by the economic reference daily also expect that the US will not only launch the policy of "quantitative easing" again, but also maintain the low interest rate policy for a long time, so the emerging economies are also faced with the dilemma of increasing interest rates and preventing hot money.

Experts believe that after the central bank raised interest rates, the interest rate gap between China and the United States has further expanded. If the United States continues to implement quantitative easing, more hot money will make profits through arbitrage pactions.

The original intention of raising interest rates is to help control inflation expectations and prevent asset bubbles formation, but may lead to a new round of short-term capital inflows, which will further increase inflationary pressures and asset price pressures.

In an interview with the economic reference daily, Zhang Ming, deputy director of the International Financial Research Institute of the Institute of world economics and politics of the Academy of Social Sciences, said that the central bank should strengthen capital account control by raising interest rates to curb inflation and asset price bubbles. Otherwise, it will easily lead to hot money inflow, that is, short-term capital inflow.

China is vigorously promoting the internationalization of RMB, and the internationalization of RMB must be relaxed in some areas of capital item control, which has increased the difficulty of capital regulation, and has provided an opportunity for hot money.

However, whether the increase in interest rates will lead to further acceleration of inflow of hot money, the political commissar held a negative attitude. He said that the interest rate differential would not lead to large-scale inflow of hot money, which really caused the inflow of hot money. The expected appreciation of the renminbi continued to increase. This requires the introduction of new targeted measures in the exchange rate, such as widening the fluctuation of the RMB against the US dollar.