China history of Rate Hikes

Typically, the PBoC tightens when inflationary pressure is starting to build, significant resource bottlenecks exist, or/and when asset prices turn bubbly. There have been three other tightening cycles since the 1980’s: the 1988~89 and 1993~96
episodes when inflation hit ~28% are not comparable, and the 2004 episode saw a severe capacity constraint in the transportation and power generation sectors, which is largely absent in the current cycle. As such, the current situation bears more resemblance to that of early 2006, the initiation of a strong bull market.