Bloomberg reported that Mr Qu Hongbin the Hong Kong based chief economist for Greater China at HSBC Holdings Plc gave his views on China economy in a press conference in Hong Kong today.

He spoke before China central bank announced today it raised lenders reserve requirements.

1. On China’s tightening

Mr Qu Hongbin said “We think that probably the peak of China’s inflation is likely to be around the second quarter this year, if the government acts now and acts more decisively over the next six months. So the precondition for us to see inflation peak in the second quarter is that the government needs to act as soon as possible and more aggressively.”

He said that “The peak of inflation can be as high as 5% to 6%. China should raise at least twice the interest rates in the first half this year, the sooner the better and I hope to see such moves before the Chinese Lunar New Year. Credit growth should be suppressed to below 16 percent, and that’s the level to enable better control of inflation.”

He added that “If the measures we discussed earlier can be delivered within the next six months, there’s a good chance that inflation will ease in the second half this year and by the end of the year we probably will see CPI eased to 4% or even lower.”

(Sourced from Bloomberg)