China may further cut its interest rates within this year in the face of a deteriorating external financial environment and the country's falling exports, economists said.
China's exports and foreign direct investment both fell last month, with the fall in exports being the first monthly decline in seven years, indicating increasing pressure on the country's efforts to keep its annual economic growth at more than 8 percent next year.
Interest rate cuts may be an option to help bail out the economy, which may have grown by less than 8 percent in October, analysts said.
Lu Zhengwei, chief economist of China Industrial Bank, estimated that the country's central bank may cut benchmark interest rates by 27 to 54 basis points and lower the reserve requirement ratio, or proportion of money commercial banks must keep in reserve, by 50 to 100 basis points.
Such a move may come as early as this weekend, Lu was cited by the Guangzhou Daily as saying.
China's November producer price index (PPI) rose 2 percent year-on-year, the lowest in 31 months, and the consumer price index (CPI), a major gauge of inflation, eased to 2.4 percent last month, a 22-month low, according to the National Bureau of Statistics. Analysts say the easing in prices means that any interest rate cuts would not lead to high inflation.
Yuan Gangming, a senior economist of the Chinese Academy of Social Sciences, told the Beijing Morning Post: "The Central Economic Work Conference has stressed a moderately relaxed monetary policy to spur economic growth, and the central bank will probably reduce the interest rate before the end of this year."
China's top leadership yesterday wrapped up the three-day Central Economic Work Conference and vowed to stimulate domestic demand, and keep the country's expansionary fiscal policy and moderately relaxed monetary policy, in an effort to maintain a sound economic growth.
Morgan Stanley Asia's chief economist Wang Qing said that China's central bank may cut benchmark interest rates by 162 basis points to ease deflationary expectations in the first half of next year.