Beijing is likely to raise interest rates to curb inflation while the appreciation of the yuan will slow, according to analysts.
DBS Bank (Hong Kong) senior economist Chris Leung Shiu-kay said the People's Bank of China could raise interest rates 27 basis points after the Beijing Olympic Games.
The bank forecasts the yuan will gain about 10 per cent this year to 6.60 to 6.70 yuan against the US dollar by the year-end but the pace would slow more than half next year.
'The appreciation of the currency will probably [slow to] below 5 per cent next year,' Mr Leung said.
The yuan has risen more than 6 per cent this year, closing at 6.869 yesterday from 6.8589 on Friday.
The continuous rise in the yuan has triggered inflows of speculative funds, so-called hot money, which complicates monetary policy and adds to inflationary pressure.
To ease inflation, the mainland has been increasing reserve ratios at banks instead of raising interest rates.
