From FN Arena News, by Rudi Filapek-Vandyck:

The
US Federal Reserve may find itself behind the cyclical curve in the
coming months, as suggested by several commentators who believe the
combination of slowing economic growth and rising inflation is about to
put Fed chair Bernanke in serious limbo. At DBS the analysts
believe the same principle applies to the Chinese authorities.

Chinese
government officials have been announcing further administrative
measurements to cool down over-investment in certain areas, including
the Chinese property market, but DBS believes the government will soon
have to draw the conclusion that this problem is no longer manageable with
administrative regulations only.

China needs higher interest
rates and a stronger currency, DBS argues, posing the problem that the
first will attract even more speculators who want to benefit from the
direct impact on the second.

The expectation is therefore that
higher interest rates won’t become reality any time soon; however, to
achieve a stronger currency the authorities may well sit on their bums
and wait for things to take course without intervening, DBS argues.

This
vision is based upon the expectation that the US dollar will
feel downward pressure increasing in the second half of 2006. This will
make it easier for Chinese authorities to allow the yuan to appreciate.

The analysts maintain, however,
that it would not be very wise to keep domestic interest rates in China too low for
long. One of the obstacles to increasing Chinese interest rates,
DBS believes, is the IPO of one of the largest banks in the country,
ICBC, which is scheduled to take place in the final quarter of 2006.