Chinese analysts have brushed aside the possibility of an immediate interest rate hike, predicting a slowdown in inflation for the month of December, a figure which is yet to be released by the statistics authorities.

In its latest report, Shenyin Wanguo Securities projected a rise of 6.1 percent for the consumer price index (CPI) in December, a key gauge for inflation, compared with an 11-year peak of 6.9 percent in November.

The Shanghai-based Guotai Jun'an, however, has set its estimate at 6.3 percent. Both firms attributed the slowdown to the relevant high base in December 2006 which jumped from 1.9 percent the previous month to 2.8 percent as a result of food price hikes.

Lu Zhengwei, macro-economy analyst with the Fuzhou-based Industrial Bank, anticipated a growth ranging from 6.2 percent to seven percent, with the median standing at 6.6 or 6.7 percent, still a slight decline from the November peak.

Analyst Li Huiyong with Shenyin Wanguo said that last year's tightening measures, highlighted by six interest rate hikes and 10 reserve requirement ratio increases, have started to exert an impact. "Chances of another immediate interest rate rise are slim," he said.

Researcher Lin Zhaohui with Guotai Jun'an said that the People's Bank of China would spend a couple of months weighing up the new statistics, predicting the next sensitive window for further tightening moves would probably be March.

As the Spring Festival, which falls on February 7 this year, often skews economic statistics for the first two months of the year, combined with uncertainty that has risen from the delay in releasing the figures, Lin said decision-makers would remain cautious during this period.

"In other words, there will be no sign of any disturbance until March," he said.

Lu, from Industrial Bank, said the People's Bank of China will have to pay close attention to credit growth. Excess rise in credit and bank loans may result in a hike of 27 basis points in the interest rate for loans.

A growth of a small margin may lead to a rise of 18 basis points in the benchmark deposit interest rates and a further cut in the interest rates for demand deposits, he said.

By the end of November, the outstanding balance of various loans denominated in yuan with China's financial institutions rose by 17 percent year-on-year to 26.12 trillion yuan (US$3.5 trillion). The increase was 1.93 percentage points higher than that of December 2006 but 0.63 percentage points lower than the previous month, the first drop since last July.

The outstanding balance of deposits climbed more than 15 percent year-on-year to 38.55 trillion yuan (US$5.2 trillion). November saw the first ever rebound of residents' deposits in the second half of 2007.

Stimulated by the hikes in foodstuff prices, China's consumer inflation has stayed well above the government-set alarm level of three percent. Given that the government has taken a package of measures to raise the farm produce and pig supply, analysts say consumer price hikes may ease.

If the situation reversed, Lu said the government would have to accelerate the appreciation of the yuan by announcing a wider floating band to stave off a soaring CPI.

Although analysts agreed upon less frequent tightening moves for this year, Li Huiyong with Shenyin Wanguo said there was still a chance for a rise of 81 basis points before July so that the one-year benchmark interest rates for deposits could reach 4.95 percent.

There is no official timetable for the release of December's economic indices as well as those for the whole of 2007.

But past performances of the National Bureau of Statistics indicate January 25 is the earliest possible date.

(Xinhua News Agency January 8, 2008)