Goldman analyst urges Beijing to tighten monetary policy

Hong Kong

CHINA should tighten monetary policy as signs of overheating emerge amid quickening inflation, according to the top-ranked forecaster for the nation's economy.

With policymakers torn between reining in price gains and stabilising growth, corporate lending has become too cheap, said Song Yu, chief China economist at Beijing Gao Hua Securities Co. The real interest rate for companies - the lending rate minus producer price increases - has turned negative for the first time since 2011 as the People's Bank of China kept its benchmark lending rate at a record low and the economy snapped out of a deflationary funk.

"Economic growth is trending down gradually while inflation is trending up," said Mr Song, whose firm is Goldman Sachs Group Inc's joint-venture partner in the mainland. "This makes it ha…