The Chinese government may further raise interest rates to drain excess liquidity from the financial markets and combat inflation, said JPMorgan Chase Co. in its most recent forecast, the Economic Observer reported Thursday.

With China’s consumer price index (CPI) rising at over 7 percent, negative real interest rates and ample liquidity, it’s highly likely that the Chinese government will raise interest rates, said Li Jing, general manager and China market chairman of JPMorgan. However, if the rate hike comes too soon, it will hurt the property market and put pressure on home buyers with mortgages, she added.

She also noted that the Chinese government is unlikely to take any large-scale action to boost the markets, but may implement one or two measures including tightening the rules for new share issues and changing stamp duty from a two-way to a one-way tax.

For more details, please read the full story in Chinese

(http://www.eeo.com.cn/finance/other/2008/07/02/105076.html).

(China.org.cn by Yan Pei July 3, 2008)