China's central bank decided that from January 20, 2011, the raised deposit-taking financial institutions of RMB deposit reserve ratio by 0.5 percentage points. JP Morgan predicts that China will in 2011 raised the deposit reserve ratio twice, three times raised the benchmark interest rate, and will accelerate the pace of yuan appreciation in order to deal with inflationary pressures and continued recovery in domestic demand.
JP Morgan is expected that China will continue to gradually increase and multi-angle approach, by strictly controlling capital inflows, raising the deposit reserve ratio and liquidity offset, and the tightening of credit and other measures to curb excess liquidity.
Meanwhile, JP Morgan believes that China may be through the sharp appreciation of the yuan to ease imported inflation pressures.