China Rates Set to Rise after Surge in Capital Spending ; ECONOMICS
Condie, Bill, The Evening Standard (London, England)
GROWTH in factory and property spending in China has unexpectedly accelerated, increasing expectations that the central bank will raise interest rates for a sixth time this year to cool the economy.
Capital spending in urban areas on fixed assets such as factories and power plants rose 26.9% to 8.9 trillion yuan (Pounds 585 billion) in the first 10 months of 2007 from a year earlier, the statistics bureau said today.
The central bank is poised to raise interest rates after inflation hit a decade high in October and the trade surplus widened to a record.
Economists say investment spending in October alone was up 30.7% from a year earlier.
"That makes an interest rate rise more likely today. Everybody in the market is now expecting it," said Qiu Gaoqing, an analyst with Bank of Communications in Shanghai.
The threat of higher rates took a toll today on Shanghai stocks and the yuan eased on currency markets. …