Comments by China’s central banker, Zhou Xiachuan, caused markets to tumble when he suggested controls may be used to slow inflation.
Speaking Tuesday at a financial forum in Beijing, Zhou is concerned about capital inflows from developed countries. The recent program announced by the Federal Reserve, quantitative easing where the fed bought bonds to pump more liquidity into the American economy and stave off deflation, results in money finding its way into emerging markets. China is already struggling to tamp down rising asset prices, such as housing. Traders interpreted Zhou’s remarks that interest rates in China may begin to rise.
As of mid-day, the TSX Venture Exchange was down 3.72%, the Shanghai Stock Exchange lost 3.98% and Dow Jones Basic Material Index fell 2.72%. Spot gold declined $26 to settle at $1,334/oz.