MarketWatch ’s Moming Zhou reported that China has to suspend its credit tightening campaigns to alleviate the economic pain brought by the deadly snowstorms. The effort could push China’s inflation, already an 11-year high, even higher. Meanwhile, the world will see surging prices of coal, iron ore, and other commodities as China is likely to spend more money on infrastructures after the storms. From Marketwatch.com:
China’s efforts to rein in rampant inflation took a step backward this week after the central bank made an emergency effort to soften the economic pain caused by ongoing brutal snowstorms.
The People’s Bank of China issued an order Thursday instructing local commercial banks to speed up loans in areas hit by the deadly blizzards. The action amounts to a suspension of the central bank’s efforts to tighten credit in the face of the hottest inflation in 11 years, analysts said.
“[The order] effectively announced that the credit tightening since end-October 2007 is temporarily over for many sectors,” said Merrill Lynch economist Ting Lu in a report. It “makes it very clear that the most important task for the PBoC for now is to guarantee the normal functioning of the economy.”
