Despite China’s inflation rate hitting a 20-month low in February sparking talk of further monetary easing, some analysts don’t expect Beijing to aggressively boost growth as rising prices are still a threat.
Kelvin Lau, Senior Economist, Global Research at Standard Chartered Bank, tells CNBC there are two major reasons why Chinese authorities will continue to take a cautious, rather than bold, approach to monetary easing.
“Any massive loosening of monetary policy could add upward pressure on property prices, which are still not fully deflated,” Lau said on Friday.
He adds that the government also needs to boost wages and improve living standards. “So long as there’s some wage inflation… that will continue to feed through to (overall) inflation.”
According to a StanChart survey conducted after the Chinese New Year, wages in China’s densely urbanized Pearl River Delta region are expected to rise on average 10 percent in 2012.
Lan Xue, Partner at hedge fund Trivest Advisors, says rising incomes is going to be an ongoing trend.
“What we are seeing is that income levels are growing in China, maybe not 20-30 percent this year, but more like in the teens,” Xue said.
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