– This is the script of CNBC's news report for China's CCTV on February 6, Monday.
Welcome to CNBC Business Daily, I'm Qian Chen.
China's central bank surprised financial markets on Friday by raising short-term interest rates on the first day back from the Chinese New Year holiday, in a further sign of a tightening policy bias as the economy shows signs of steadying.
While the rate increases were modest, they reinforced views that Chinese authorities are intent on both containing capital outflows and reining in risks to the financial system created by years of debt-fueled stimulus.
The People's Bank of China (PBOC) raised the interest rate on open market operation reverse repurchase agreements (repos) by 10 basis points, effective on Feb. 3.
Analysts said the tightening of primarily money market rates suggested the PBOC wanted to retain policy flexibility as it balances the need to keep the economy from slowing again.
In late January, the PBOC raised rates on its medium-term loan facility (MLF) for the first time since it debuted the liquidity tool in 2014. It was the first time it has raised one of its policy interest rates since July 2011.
[TAI HUI, J.P. Morgan Asset Management Chief Asia Market Strategist] "I think this is gonna be a year where the authorities in China will be particularly mindful about economically and financially stability. So for example, deleveraging. We did see some of the money market instruments' rates been raised last week, try to deleverage but my guess is, if you start to see too much of deleverage, the growth environment start to be threatened, you may actually see the PBOC wilding some of those back."
Property markets, bonds and some stocks might keep reacting to the news in the shorterm, but Tai Hui, Chief Asia market strategist from J.P. Morgan Asset Management, told CNBC that fundamentals are getting better for Chinese companies.
[TAI HUI, J.P. Morgan Asset Management Chief Asia Market Strategist] "From a market standpoint, earnings are starting to improve, we are starting to see industrial profits, as reported many times, starting to pick up, and the new economy is doing pretty well. So in many ways, investors over China, they are always very emotional, very sentimental, but fundamentals for China are slowly getting better, from an equity investment standpoint, we just need a little catalyst to set that going."
Analysts expect any further steps to be gradual as policymakers weigh their impact on economic growth, and believe the PBOC will be in no hurry to raise the policy lending rate for now.
CNBC's Qian Chen, reporting from Singapore.