Chinese Online Class - Interest rates up again to cool down economy, 08/2006

BIZCHINA / Top Biz News

Interest rates up again to cool down economy, 08/2006

By Zheng Lifei (China Daily)
Updated: 2006-08-19 09:11

China's economy grew 11.3 per cent in the second quarter, the fastest
pace since 1996, prompting economists to call on the government to take
stronger macro control measures to cool it down.

"It (the rate hike) comes as no surprise, actually it should have come
earlier," said Yuan Gangming, an economist with the Chinese Academy of
Social Sciences.

"The first rate increase (in April) largely failed, as shown by robust
investment and credit growth in the last two months. This indicates the
central bank should have moved much earlier."

The central bank has increased the reserve ratio the proportion of
deposits a bank is required to have with the central bank twice this year
in a bid to curb rapid credit growth, a policy that some economists say
is ineffective.

"Rate hikes are more effective than increasing the reserve ratio," Yuan
said.

The increase for both the long-term deposit and lending rates is larger
than that for short-term deposit and lending rates, a move that the
central bank said was designed to curtail fixed asset investment and
long-term lending demand.

The five-year deposit rate is up by 0.44 of a percentage point to 4.14
per cent, while the rate for loans over five years or longer has been
raised by 0.45 of a percentage point to 6.84 per cent, the central bank
said.

1 2

(For more biz stories, please visit Industry Updates)

Related Stories 

� Economist: Another interest rate hike is necessary
===========================================================================

Chinese Online Class